The Democrats and Barack Obama are committing political suicide

Do me a favor. Grab your wallet or purse real quick and take out a dollar or a bill of any amount. Do you know what that bill is worth? One dollar, five dollars, twenty dollars? No, it is worthless! It is a piece of paper. The only reason that this small piece of paper has any value is because our government uses it as a promise of value. They back that bill and guaranty that you can exchange it for goods and services.

So, what is my point? My point is that the U.S. government has the power and authority to make something worthless have value by just saying they will back it. This is where the title of this post, "The Democrats and Barack Obama are committing political suicide", comes from. The Democrats are trying to push through a bill that spends $700 billion of tax payers money. The plan the Democrats are backing has been trashed by economists across the country. The House Republicans have offered an alternative that will spend less of the tax payers money by using the same power that the U.S. governments uses to make that worthless piece of green paper in your hand, worth something.



Before I go on let me explain why there needs to be action in this crisis and what are the mechanics of this issue. The $700 billion plan was proposed because some think we need to buy up a lot of assets from the financial world that have lost their value and cannot be sold. What happens with these real estate assets is that a company takes individuals' mortgages, bundles them, and then sells them to other companies for a profit. The purchasing company then sales those same assets to another company trying to make a profit. This passing on of these assets goes on and on like a game of musical chairs. What has lead to this crisis is that everyone found out that a lot of these assets were very risky or even worthless. This led to a drop in real estate prices that led to more real estate assets being devalued. Very quickly a lot of companies found themselves with real estate assets that they could not get off their books so they could free up money to buy and trade other assets. Basically when the music stopped a lot of companies got caught without a chair to sit in.

The solution to this problem is to get the game of musical chairs going again. How do we do that? The $700 billion plan says that the American tax payers should buy all of these bad real estate assets from these companies so the game can start again. The House Republican plan says, no, neither the federal government or the tax payers should buy or own assets in such huge quantities. The Republican plan admits that there are some real estate assets that are so bad that there is no alternative but for the tax payers to buy them and hold them until their value returns. Unlike the $700 billion plan, the Republican plan says, in addition to having to buy the worst assets ($100 to $200 billion), that the market can correct itself without such a huge burden on the American tax payers. How is that?

1. The government will use the same power that makes paper money valuable to fix this problem. The government will have Wall Street, and these companies that are hurting, pay for insurance on these assets. In return the government will guaranty a certain value for each of the real estate assets being held by these companies. By doing this the government has given those worthless real estate assets value, the same way it gives our money value. Those assets can now be entered back into the game of musical chairs and the market can start working again.
   
   
2. The House Republicans are also asking for a reduction or elimination of the capital gains tax. The capital gains tax is the tax paid on money made in the stock markets. A reduction or elimination of this tax would make money start to flow into the market at an incredible rate thus giving the struggling companies liquid assets to use. The market would pull itself up and the American people would not be paying a dime after the original purchase of assets. Retirement plans and 401Ks would shoot back up in value as the market rose from the influx of cash. Companies would have money to expand and hire new people. Basically this would be a stimulus plan that actually works.

The Democrats and Obama would reply to my assertion, that they are committing political suicide, by saying the $700 billion plan was George Bush's idea. Are you serious? The Democrats are going to use Bush for political cover? They are going to pass a bill that Bush presented that his own party does not like not to mention almost 90+% of Americans do not like? If they keep going down this path of saying that they had a deal on this $700 billion plan until John McCain screwed it all up...they are committing political suicide. If 90+% of Americans do not like this plan then anyone who slows it down or knocks it of track will be a hero. The Democrats are making the 90+% of Americans, who hate this plan, see John McCain and the House Republicans as the voice of reason!