Timothy Kline: Thoughts and Reflections

When Benjamin Franklin wrote the words, “‘In this world nothing can be said to be certain, except death and taxes” I seriously doubt he would have known that in time we’d have to tack on “fees” to his infamous phrase. But there’s no question that “fees” are the new taxation system of our time.

Taxes are something that our government imposes on us, usually backed by some obtuse law and the assurance that the imposition will result in some sort of benefit for us—well, at least some of us. But taxes are the sole jurisdiction of government. At least that’s how I understand it.

And that’s what makes all of these fees so maddening. Clearly, they are really a tax. They just can’t call them taxes because they aren’t imposed by governmental bodies. One of the most laughable yet stupefying “fees” that these fee-collectors enjoy inflicting on us is the fee to pay the bill that they send us. They aren’t content to collect the money that we owe—no, they insist on charging us to pay it. Most places call it a convenience fee—and they’re absolutely right about that: it’s a pure convenience that they get to charge us that extra bit of money every time we go to pay their bill.

One such case is my electricity and natural gas provider here in Michigan. Originally, they charged $5.25 if I paid my bill. Now, they charge $6.25 every time I do. Now, from what I have been able to find out through online resources, they have around 1.8 million consumers. That means that they have the potential to earn over $11 million in additional revenues—just from people paying their bill. That’s every month. Result: an extra $135 million every year.

Now, I say that they have the potential to earn that—which would certainly explain why they are pushing so hard for everyone to pay the same way! But, at this point, everyone isn’t on the same pay method. So, for the sake of argument, let’s say that 1 in 4 pay like I do. That still amounts to nearly $34 million annually, doesn’t it? That’s above and beyond the profit they are earning from their rates.

But it doesn’t start there. Examining my bill, I see a mind-boggling array of other “fees,” such as “Delivery Surcharge,” “Securitization Charge,” “Securitization Tax Charge,” “Elect Interim Surcharge,” “Energy Optimization Charge,” and, of course, “System Access Charge.” And that isn’t even all of them!

Did I mention that’s just ONE monthly bill.

Check your telephone bill, your cell phone bill, your cable/satellite bill—you’re going to see a lot of “fees” that are above and beyond the charges you owe for the service you are subscribed to. And to add insult to injury, even my own mortgage company charges me $9.95 to pay my mortgage payment every month!

Everywhere you turn, we are being hit by fees, surcharges, and charges in order to compel us to pay monies above and beyond what we owe. But since they don’t call them taxes, they are legally able to continue the practice unchecked.

Just try to argue with them about your obligation to pay one of them, and see what happens. A good example is the monthly fee that most telephone companies charge you in order to “protect” your phone number so that if you move, your phone number can go with you. Most bills list it as a “portability” fee. Call your phone company and tell them that you do NOT want that service and that you want it removed and you’ll see how it feels to bang your head against a brick wall. And what’s even more inane is that they won’t port your number to whereever you move if it’s to anywhere except within your current town/city. Nor will they refund your monies you paid in for portability service when they can’t fulfill their end of it—even after collecting the money from you month after month, year after year. At that point, it’s free money to them.

And I didn’t even touch on the fees imposed by our banks, credit unions, and other financial institutions just so we can keep our money in an account!

No taxation without representation. That’s what Benjamin Franklin would have said. And the same should be true of all these pseudo-taxes: No fees without representation.

It's business as usual in America

Newspapers across America yesterday published the latest news on the financial world. Citigroup, another financial corporation deemed “too big to fail” by the federal government, was promised $20 billion of our tax dollars while at the same time guaranteeing access to hundreds of billions of our tax dollars in the event of potential (some say probable) losses that Citigroup may suffer.

Wall Street’s response to this latest move on the part of the U.S. Government was one of absolute elation as the stock market leapt with joy some 400 points. President George W. Bush used the opportunity to indicate that there may be other “rescues” made.

And once again, that ambiguous expression, “Too big to fail” played in the American conscience. AIG and Citigroup, Fannie Mae, and Freddie Mac are now household words, synonymous with $700 billion bailout. And that isn’t even to mention the other financial and banking institutions that have been or will be helped.

At the same time, there is a rising discontent in the American conscience as to bailing out industrial and manufacturing institutions. The Big Three automakers, Ford-General Motors-Chrysler recently campaigned in Washington D.C. to try to secure some $25 billion or so, in addition to the $25 billion that they had already had promised by Congress in September to help them towards developing and manufacturing hybrid and alternative energy vehicles. Apparently, Congress is not interested, instead choosing to interrogate, grill, and skewer the Big Three executives—while financial giants were simply written a check.

It seems that financial conglomerates’ welfare far outweighs the needs of those who work in industrial and manufacturing areas of American capitalism. In simpler terms, Congress seems more interested in protecting the U.S. dollar than they are the people who earn those dollars (overpaid execs and CEOs notwithstanding).

There is a definite, even staggering duplicity here. On the one hand, when the Big Three came to Washington D.C. to secure assistance, they were harangued and demanded to show what changes they would make to show the investment would be worthwhile. At the same time, not a single AIG, Citigroup, Fannie Mae, or Freddie Mac executive underwent the same interrogation before funds were given. Yet nobody seems to be asking why that is. Further, when the money was given to the financial institutions, they were also guaranteed against any and all losses that would subsequently result in their corporations.

As if that is not enough insult to Americans who are struggling with home foreclosures, rising health insurance costs, rising costs of fuel, food, and overall living, today’s headlines have President-Elect Obama and the democrats already planning a $500 billion program that they plan to enact as soon as possible in 2009.

That brings both the current Wall Street bailout and the intended “stimulus” package to a whopping $1.2 trillion dollars.

What thinking Americans should be asking is where all of this money is coming from. We already know that it will be coming from taxes. The tax-paying American will be footing the bill for this “generosity.” What nobody is discussing, however, is that it will have to be taxes above and beyond what already must be paid in to the governments in order to keep the U.S. political machine running. Even with program cuts, we’re now talking over a trillion additional dollars in funding.

That does not even take into consideration the guarantees that the federal government has now put into place, should the financial giants have further losses of untold millions and billions of dollars.

It does not take into consideration the millions of jobs that will continue to be lost, or the fact that lost jobs means lost revenue for the government. It does not take into consideration the 10.1 million unemployed Americans who cannot find a job that will earn money that can be subsequently taxed by the government, a number by the way that includes only those who are entitled to unemployment benefits (typically, six weeks)—the actual number of unemployed Americans is far higher.

It doesn’t take into consideration the 2.2 million men and women who are confined to prison and thus are not in a position to hold jobs and have their income taxed—not to mention those living in jails, mental institutions, and similar residences.

It does not take into consideration the 3,500,000 (estimated) homeless Americans who don’t even have a place to live or food to eat, and are jobless as well.

It does not take info consideration the 50,000,000 Americans currently supported by the Social Security system, a program itself supported by taxpayers’ dollars and exempt from taxation.

And, last but not least, it does not take into consideration the 45,528,000 Americans who live at or below the so-called line of poverty (an income of $19,157 or less, annually) in the United States (according to studies, a family of four requires a minimum of $35,000 just to have their basic needs met!). That means that some 45,500,000 Americans can’t even meet their basic needs currently, much less have their minimal income taxed to pay for the plush lifestyles of the rich and famous on Wall Street.

Out of the remaining 107,600,000 Americans not mentioned above that do NOT earn or have access to $100,000 or more of annual income—who are facing foreclosures, dwindling savings and mounting expenses, decreased hours at work and increased insurance and health premiums, we are the expected source of revenue to fund these bailouts.

But if the financial institutions of Wall Street and America are considered “too big to fail”…  what about us?

Last night, like millions of others, I watched the carefully-scripted speech from George Bush as he did little more than repeat information that the rest of us have already been hearing. I may not be a financial expert, but I do know that I can think and reason through things. Because of that, I’d like to go over what President George Bush said to us last night, with a fine-toothed comb.

Transcript: President Bush Address to the Nation on Economic Crisis.
White House, September 24, 2008

Good evening. This is an extraordinary period for America’s economy.

This was, at best, an overstatement of the obvious.

Over the past few weeks, many Americans have felt anxiety about their finances and their future. I understand their worry and their frustration.

Somehow, I seriously doubt that this president really understands our worries and frustrations. For one thing–and this will become more obvious as we continue to plod our way through this speech, George Bush never includes himself in those affected by the growing financial calamity. For example, he speaks of “their worry” and “their frustration.”

We’ve seen triple-digit swings in the stock market. Major financial institutions have teetered on the edge of collapse, and some have failed. As uncertainty has grown, many banks have restricted lending, credit markets have frozen, and families and businesses have found it harder to borrow money.

This is a natural occurrence, but George Bush doesn’t go into that. Instead, he shows a preference to generate more fear and more uncertainty, and he does this throughout his speech. I say it’s natural because we naturally react to the loss of money by holding more tightly onto the money that we still have. Only gambling addicts keep going. For example, if you are a normal person going to the casino with a hundred dollars, hoping to make that hundred dollars into more money than when you started–at some point during the time that you are losing that hundred dollars, you decide it’s time to cut your losses and you don’t give any more of your hundred dollars to the casino. On the other hand, a person who is willing to go the distance on the slim chance that he’ll make it all back (and more), who then loses the entire hundred dollars, and then goes to his family and cries for money so he can go back and try to get his hundred dollars back has a problem–but it is not the problem of the persons he wants to get money from. It is his problem.

If banks have restricted lending, why are we being told that that is a problem? The fact is, we, as individuals and families, restrict our lending based on the principle of whether we can afford to lend money or not. If we don’t have it, we don’t lend it. We should expect a bank to restrict lending in order to protect the funds that they hold for their clientele. Bottom line: that bank is acting responsibly when it does that.

He also told is that “credit markets have frozen.” Again, why is this a problem? It’s a simple matter of fiscal responsibility: if you can’t afford to extend credit–then, don’t! And a rule of thumb that I learned in my life is to never loan what you can’t afford to lose. In other words, if you loan money to a friend or family member, you do so with the presumption that you may not get that money back. If you do get it back, great. In fact, you may have even made some money in the process, if you charged interest. But the reality is that you don’t loan someone money that you cannot afford to lose or not have. It doesn’t make sense to do otherwise.

Bush went on by saying, “families and businesses have found it harder to borrow money.” Again, this is a natural occurrence. In tough financial times, there is less money available, and it’s harder to justify one’s being able to lose the money that we do have. It’s called fiscal belt-tightening. It doesn’t make sense to, in the face of a tightening financial market, go out and get a loan to buy a new car. Yet that is what we’re supposed to do, according to the pundits. We should be able to buy that new home, even if the one that we have right now is sufficient until things pick up again in the economy. We should be able to get that new big-screen television, even though we don’t have the money to pay for it because our work hours have been reduced.

This whole idea of encouraging us to live beyond our means through an addiction to credit has been going on for a long time; but more so in the past decade. I’m not talking about those instances where you have an unexpected emergency and need to take out a loan against the equity in your home to pay for a home repair or medical emergency. And I’m fairly certain that this is not the type of borrowing that is being talked about by Bush. I suspect that it’s in reference to starting up new businesses, buying new homes, new cars, new personal loans, etc. In fact, Bush touches on that further on in his “speech.”

We’re in the midst of a serious financial crisis, and the federal government is responding with decisive action.

Again, he’s stating the obvious. In fact, he’s saying what he said at the beginning of his speech, but changed up the words a bit. Unfortunately, it then gives him an opportunity to speak in generalities. For example, he says “the federal government is responding with decisive action,” but then doesn’t really specify what that action is.

What makes this even more interesting is that all of this is made to sound as though it’s a sudden emergence, a surprise development that must be met with hasty response. But isn’t this the same president that told us not very long ago that the financial system is “fundamentally sound”? In what way is it sound, Mr. President? In theory? And if it’s “fundamentally sound,” then why are you calling for an emergency injection of $700 billion dollars into the sustention of Wall Street? Clearly, things are not as sound as you would’ve had us believe. Worse still, experts are in full agreement that this situation has been some two years in the making, so it came as no surprise to anyone except you, Mr. President.

We boosted confidence in money market mutual funds and acted to prevent major investors from intentionally driving down stocks for their own personal gain.

“We” boosted confidence? The last time I checked, it was Congress that took that extraordinary action. What most Americans don’t seem to realize that is that once the door was opened by the government, everyone on Wall Street was going to try to walk through the door for a handout.

Most importantly, my administration is working with Congress to address the root cause behind much of the instability in our markets.

Everyone already knows what the “root cause” is. It was greed. Simple, uninhibited greed. In an attempt to generate cash flows for board members and stockholders, someone came up with the brainchild of the ARM scheme: make buying a home so easy that even the poorest of Americans could own a home–the American dream fulfilled. And when the enticing 2-year fixed rate was up, the new homeowner could simply refinance their mortgage. Or so they were told. But those who signed on the dotted line for what we call “subprime” mortgages suddenly found themselves without the ability to refinance into another mortgage. Suddenly, their fixed-rate mortgage became an ARM which could increase every six months. And suddenly, rather than paying what they were when they started, they had to come up with $200-$500 more every month, with the potential to see even that increase again in six months when the ARM was reconfigured.

It was greed that kept the mortgage companies from working with the homeowners to come up with an extension on the fixed-rate mortgage until things got better. It was greed that made the mortgage holder think that throwing the homeowner out into the street and reclaiming the house rather than settle for what they had been getting up until the ARM kicked in.

But it didn’t end there. The mortgage holder thought that they could simply resell the repossessed home to someone else for its original value, and thus continue their tidy sum of monthly earnings. The reality was, however, that other mortgage holders were going into the same mindset, and the realty market became glutted with vacant homes with nobody either interested in going into a new mortgage, or unable to because “subprime” mortgages were no longer the latest fad for Wall Street. Now, these mortgage companies were sitting on empty houses and unpaid mortgages.

Financial assets related to home mortgages have lost value during the house decline, and the banks holding these assets have restricted credit. As a result, our entire economy is in danger.

Bush confirms what we already knew. And having already covered the details above, I won’t go back over it here.

So I propose that the federal government reduce the risk posed by these troubled assets and supply urgently needed money so banks and other financial institutions can avoid collapse and resume lending.

This is where thinking Americans get a little miffed. They get angry because when they lost their homes, nobody came forward to help them. It was just the “free market” at work, and apparently it was okay, as immoral as it was. And yet now that the mortgage holders are on the verge of losing their collective “homes,” the U.S. government is falling over itself to help them. And to add insult to injury, American taxpayers who are already struggling to make ends meet, including their mortgages, are expected to also foot the bill of their mortgage companies, in effect, paying twice. Bush and his administration has tried to sweeten the bitterness by saying that it comes down approximately $1000-2000 per person. Doesn’t sound so bad, does it? Except that we thinking common folk know that not every person pays taxes. Our children, for example. So, for the single mother, working two jobs at minimum wage, with three children, will not only have to pay her mortgage, insurances, utilities, personal expenses, transportation costs, income tax, food expenses, but she will also have to shell out the theoretical $4000-8000 that will cover her family’s “fair share” of this Bush solution.

And she wouldn’t be the only one.

This rescue effort is not aimed at preserving any individual company or industry. It is aimed at preserving America’s overall economy.

Should I be comforted in being told that this is not aimed at preserving any individual company or industry? What about us, the citizens? I mean, I’m thrilled that you are wanting to preserve companies and industries and the economy, but it’s just too obvious that we don’t fit into the big plan here.

It will help American consumers and businesses get credit to meet their daily needs and create jobs. And it will help send a signal to markets around the world that America’s financial system is back on track.

Again with the generalities. How will it help? And since when did it become necessary to have credit in order to meet daily needs? Isn’t credit something that we need in unforeseen situations and unexpected expenses that are outside of the ordinary daily expenses? We take out a home improvement loan when we need to repair our roof, for example. That makes sense, because we don’t typically include in our housing budget “roof repair” since we can pay for that from the equity we’ve built up in our home itself. But needing credit to meet our daily needs?

Bush also touches on businesses that apparently need to get credit in order to create jobs. I would hope that in tough economic times, businesses aren’t interested in seeking out credit in order to expand. They need to operate by the same principle that we, the common man, operate under: if you can’t afford to, don’t. If the only way that a business can create jobs is to get credit and spend funding that they didn’t have to begin with–in the hopes that they’ll make that money back along with a profit, then they’re fundamentally wrong. A business should create jobs when its current workforce is insufficient to meet the demand. And if the demand is that high, then they are already generating the income anyhow–they just need the workers to fill the orders–regardless of whether they invoice clients or ask for the funding upfront.

Apparently, this putting every American–man, woman, and infant–individually under a further debt of $1000-2000 will convince the rest of the world that “America’s financial system is back on track.” That is such an unbelievable claim, that I’m not even going to bother responding here. You can think that one through, right?

I’ll address more in my next entry.