Busy Wife, Mom of Two, Thinking Member of Community

Today I'm inclined to revisit severa news items this week that have managed to stick with me. For whatever reason I cannot let them go. And I suppose that's the explanation for the label in my title: 'thinking member of community'. I have been chewing and rolling over in my mind several things either which I can't grasp (and here willing to own that it's likely my own ignorance - so school me) or which I cannot help but feel indignant about (again, which may be due to my ignorance so, again, school me). And, frankly, I find I do this more often than not, so one blog day might have to be dedicated to airing my thoughts and concerns (as politely and respectfully as possible, of course).
So, to restrain myself from rambling, I'm gonna bullet point and lay out my observations, thoughts and even a few questions. I'm curious if anyone else has thought or wondered these same things. I'm also curious if my thoughts, concerns or emotions are misguided due to misinformation or emotional 'life-filters'. Lastly, I'm always open to input, with the caveat that we all play nicely, children.

The points that struck me most:

* L.A. based Egyptian-born filmmaker Nakoula Besseley Nakoula, creator of the anti-Islam film that is said to have contributed to the violence in Lybia and Egypt, was using the pseudonym 'Sam Bacile'. I don't know about you guys, but when I say that name it brings to mind the word 'imbecile'.  Am I the only one who wonders if that was the film-maker's point?

* The Federal Reserve has launched a bond buying program that commits to buying $40B worth of mortgage-backed securities each month, 'until the labor market improves' ('Fed Launches Bond Buying Program; Stocks Surge'. Salzman, Avi.  blogs.barrons.com. September 13, 2012). I didn't study economics, only business. And even that education was only enough to merit a 'minor' for a college degree. So I don't understand a whole lot about the ins and outs of the grander scheme of things when it comes to the American economy. With that acknowledgement out there on the table, here are my thoughts. Mortgage-backed securities (MBS) are a business tool that I find highly complicated and difficult to understand. 

In trying to wrap my brain around it, here's what I think it's supposed to be. MBSs exist so to help lending agencies (in this case, a mortgage company. More specifically Fannie Mae and Freddie Mac. Maybe even a little Ginnie Mae... didn't know there was a third sibling, did you?). The lending agency (read mortgage company) fast approaches a point where faced with no longer being able to lend out money to new customers because it's pretty much lent out all the freed up cash it had and hasn't been able to collect enough back from everyone it's already lent to. So, in order to have some more cash freed up to lend out to someone else, the lending agency (with this MBS set up) is able to sell some of these loans (mortgages) to a willing investor/purchaser in the form of bonds. A bond is a form of lending where typically a later 'maturity' date is stated wherein the bond holder (or, lender) is guaranteed to receive the money it paid out, plus a little interest (that would have been agreed upon before hand).

At first I was up in arms over this whole scenario because, without even vaguely understanding what an MBS is, I was only hearing "The Federal Government is going to start buying up mortgages!!!". I think any rational adult would have responded with the same "WHAT THE HECK?!!?" as I did, if under that same impression. 

But even with this new found, somewhat on target feel for how MBSs work I'm still not so sure I feel any better about this set-up. In this scenario, the Federal Reserve is the 'purchaser' and three siblings (Freddie Mac, Fannie Mae and Ginnie Mae) are the mortgage agencies in question. Our government is willing to take on more debt to give government-run mortgage companies more liquid assets so they can lend more money out for more mortgages. This when existing mortgages are, by all admissions, having a hard time being collected upon? And by encouraging more Americans to take out more loans and have debt burdens they might not be able to repay, the Federal Reserve feels confident that the Mae's and Mac will be able to honor their bond commitment how? This will stimulate the economy, both short and long term how?


It all feels like an incredibly risky gamble with stakes that are much higher than are being conveyed and with odds overwhelmingly not in our favor.

* Mitt Romney got a lot of flack this week for his comment about the middle class. You can visit ABC News' site, George Stephanopoulos' page to be exact, in order to see the full play by play of what was said. Two different issues arose in my mind. 

The first actually has little to do with Mitt's awkward citation of what the upper cap of the middle class income range is. What it does have to do with is something only few have pointed out. I'll start off saying that the term 'average American household' has been thrown around a lot. I'd like to know exactly what that means. Is that per individual? Is that per couple living in a household together? Is that a couple in a household with one child? Two? Four? For the purposes of my stream of consciousness, I'm gonna hold to the assumption that an 'average household' consists of two adults and two children. In which case, a household of four that earns less than $30K/year is, according to the government's guidelines, in need of and therefore eligible for public assistance. If you earn less than $23K/year, you can legitimately say your living 'in poverty'. 

Middle class is a group that's hard to sum up in a short definition, but one phrase on Wikipedia's page "American Middle Class" says, "Middle-class persons commonly have a comfortable standard of living, significant economic security, considerable work autonomy and rely on their expertise to sustain themselves." Certainly for me, the term middle class begged the assumption of financial stability and relative freedom from worry, the 'significant economic security'. I think it's safe to say, then, that if you have to apply for public assistance, you're not feeling all that economically secure in your ability to sustain yourself.  So, it's reasonable, then to identify a salary of $30K/year as the bottom end of the middle class economic spectrum.

So, Romney's identified the top of the scale as $200-250K/year. Let's say $250K for argument's sake. The bottom of the scale is $30K/year. The average American household earns $50K/year. What bothers me most is not Romney's flub. It's the fact that most 'average' folks in the US are just a hair above being essentially upper-lower class, not middle class. If the average household income was more like 100K/year, I'd not be feeling so concerned. But most of us are hovering just above the need for public assistance. That's an awful lot of people who might potentially need a handout if things don't get better/do get worse. Fed, you sure you want to be tying up $40B/month to buy MBSs?

The 100K/year comment I made above leads me to the second issue I had, which is definitely with Romney. Here's a portion of the interview that burns my biscuits:


Democrats say Romney’s plan would cause a $2,000 tax hike on the middle class - something Romney disputes and points to a number of studies that say his plan to cut taxes will not increase the deficit, including one by Harvard professor Martin Feldstein.

Feldstein says Romney’s math will work, but he would have to eliminate the home mortgage, charitable, state and local tax deductions for incomes greater than $100,000.

When I pressed Romney on that point, he conceded that he actually hadn’t read the Feldstein report that he and Paul Ryan cite on the campaign trail.

“I haven’t seen his precise study,” he said. [emphasis added]

“I said that there are five different studies that point out that we can get to a balanced budget without raising taxes on middle income people.  Let me tell you, George, the fundamentals of my tax policy are these.  Number one, reduce tax burdens on middle-income people.  So no one can say my plan is going to raise taxes on middle-income people, because principle number one is keep the burden down on middle-income taxpayers,” he said.

Romney defined middle income as $200,000 to $250,000 a year and less.

“Number two, don’t reduce the share of taxes paid by the wealthiest.  The top 5 percent will still pay the same share of taxes they pay today.  That’s principle one, principle two.  Principle three is create incentives for growth, make it easier for businesses to start and to add jobs.  And finally, simplify the code, make it easier for people to pay their taxes than the way they have to now,” he said.


So, Romney says the first fundamental of his tax policy is to REDUCE the burdens to middle-income people.

What is middle income, Romney? Do you mean middle class?

If 'middle' means the equidistant halfway mark between two points, his term could be meant to identify $250,000/year as the half way point between the lowest paid and highest paid American. Since the lowest paid would be $0 and the highest paid is a billionaire, that can't be true, because the number would actually be much higher. And, since Romney's a money man, we know he's not that dim. So obviously this isn't what he meant by 'middle income'.

 If we take another approach to his definition: the word 'average' in math indicates a number that marks the 'middle' or 'typical' number of a data set.  Meaning, of all the numbers crunched and worked through, the resulting number is right in the 'middle'.  This would mean the average American household income of $50,000 could also very truly and fairly be called middle-income. But this also, obviously isn't the case, since he clearly indicated that his idea of middle-income is actually $250,000 or less.

I'm left assuming he is using the term 'middle income' interchangeably with the term 'middle class'. Add my little caveat to his cap, and the middle class income range we're talking about is between $30,000 and $250,000. He clearly states to Stephanopoulos that "principle number one is keep the burden down on middle-income taxpayers." 

 So he uses the term middle income instead of middle class, which to me muddles the clarity just a little bit. I could let bygones be bygones and chalk it up to semantics. But add that to his admission that he didn't even read the report that he keeps fall back upon to support that his idea will work, and I feel like the sucker at the card shark table actively watching the shyster go down. No, he won't raise taxes. But he'll implement a plan that the report he falls upon clearly states will require him discontinuing multiple tax deductions for people who earn $100,000 annually or more. Uh, so wait a minute. No, you won't be literally 'raising' taxes, but that sure sounds like a potential whole lot more tax burden to the middle class to me.

And it's this obfuscation and acknowledgement of glossing over the details that alarms me the most. I'm not pro- or anti- anybody right now, though I know this last commentary may seem to show otherwise. At the same time, as a voter, if you're trying to motivate me to entrust you with the security of MY life, liberty and pursuit of happiness, I need to feel like you're actually gonna take the time to read and digest the full text of the Constitution, not rely on Cliff's Notes and respond to the points that best serve your latest interest...