The Post Office Has Lost More Money than JP Morgan Chase

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In Heritage Work

In the world of finance, simple mistakes can turn into big financial losses. Headlines this week report on JP Morgan Chase’s $2 billion loss from a failed hedging strategy.

But this loss pales in comparison to the U.S. Postal Service’s $3.2 billion loss just in the most recent quarter.

The Heritage Foundation’s Mike Brownfield compares the two losses in today’s Morning Bell:

While JP Morgan’s loss represents a clear failure of management, it’s not a systemic problem that requires or would be fixed by additional regulation. For starters, JP Morgan is a $2.3 trillion bank with a net worth of $189 billion, meaning that this loss reduced the bank’s capital ratio from 8.4 percent to 8.2 percent. In other words, the bank can absorb the loss, and it’s nowhere close to needing any form of federal intervention.

Some more perspective could be gleaned by examining the $3.2 billion loss the U.S. Post Office experienced in the most recent quarter, or the billions lost on risky green energy bets made by President Obama and Energy Secretary Steven Chu. Only those losses weren’t incurred by private investors, but by you the taxpayer.

Tell us in the comments: with the government’s track record of running a business like the Post Office, what do you think the government’s role should be in our market economy? 

France’s Newly Elected Socialist Leader

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In Heritage Work

The people of France elected Socialist Francois Hollande as president, dealing a blow to those urging European governments to get their runaway spending under control.

“Decades of big government policies have now brought several European economies to their knees,” The Heritage Foundation’s Nile Gardiner argues. “Soaring taxes, spiraling unemployment, mountains of red tape, stifling labour regulations, and ruinous levels of public spending needed to fund vast and unsustainable welfare states and entitlement programs have created a perfect storm of economic malaise.”

Heritage’s Mike Brownfield explains Hollande’s campaign promises:

[Hollande] promised to raise taxes on big corporations and wealthy individuals, implement a top rate tax of 75 percent, increase public spending by 20 billion euros, raise the minimum wage, hire 60,000 more teachers, and lower the retirement age from 62 to 60 for some workers.

France’s new policies reflect Hollande’s belief that government stimulus spending will restore France’s economy. But by drastically taxing corporations and job creators, France is removing the incentive for self sufficiency and creating a nation even more dependent on big government programs to provide for their basic needs.

Continue Reading »

Why We Should Eliminate Fannie and Freddie

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In Heritage Work

Lawmakers should phase out government-backed housing giants Fannie Mae and Freddie Mac, according to a new Heritage Foundation analysis.

Eliminating these agencies would reestablish market forces, allow housing prices to fall and even lead to lower interest rates in the medium to long term.

Heritage visiting scholar Nahid Anaraki explains that Fannie and Freddie contributed to the financial crisis in 2008. They

fueled an excessive expansion of credit in the housing sector, shifted the demand for real estate to the right, and caused home prices to overshoot their underlying market equilibriums. Although these government-sponsored entities (GSEs) were established with the primary goal of developing a secondary mortgage market to increase homeownership among low-income groups and underserved areas, they became involved in profiteering and mortgage-backed securities (MBS), which left them far behind their primary goals.

Heritage’s Mike Brownfield explains the positive effects of eliminating the programs:

Eliminating Fannie Mae and Freddie Mac, in fact, will help more Americans afford homeownership. Since these institutions increase demand — thereby increasing home prices — it becomes increasingly difficult for lower-income Americans to afford to purchase homes without subsidized interest rates.

Read the full report here.

What do you think? Should the federal government be involved in the housing market?

Seven Ways America Should Respond to North Korea’s Missile Test

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In Heritage Work

To great ceremony, North Korea launched its Unha-3 missile last week only to watch the missile fail just after liftoff.

While the test was unsuccessful and the missile was not militarized, the technologies tested could also be used in ballistic missiles.

The Heritage Foundation’s Michael Brownfeield explains what this means:

The launch comes as the rogue nation is continuing its transition to new leadership under dictator Kim Jong-un, who replaced his father Kim Jong-il after his death in December. In addition to the missile test, it has been reported that North Korea may also be in the “final stages” of preparations for another nuclear test, leading to escalating tensions that could spur Jong-un to undertake more provocative military actions.

North Korea launched the missile despite being in violation of U.N. Security Council Resolutions which strictly ban its use of ballistic missile technology. South Korea called for a meeting of the U.N. Security Council to hold North Korea accountable for their actions.

Heritage’s Bruce Kilingner suggests seven steps the U.S. should follow in the wake of the North Korean launch: Continue Reading »

A Grim Future for Tax Day

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In Heritage Work

Today is is Tax Day, when Americans hand over their hard earned money to Uncle Sam. Today is also Tax Freedom Day, the day when Americans earn just enough money to pay off the federal, state and local tax bill.

The Heritage Foundation’s Mike Brownfield elaborates:

For the first 111 days of the year, everything you earned went straight to Uncle Sam. Compare that to back in 1900, when Americans paid only 5.9% of their income in taxes and Tax Freedom Day came on January 22.

Each year, it takes hard working Americans longer and longer to earn enough money to pay their share of taxes. And the future is grim. Continue Reading »

Hispanic Voters Are Critical in the 2012 Election

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In Heritage Work

As America turns its attention towards the election in November, candidates are turning their attention to a key voting block: Americans citizens of Hispanic descent.

In the 2008 election, 9.7 million Hispanics voted. Estimates for the 2012 election suggest that number could grow to 11.8 million.

President Obama has a history of actively courting the Hispanic vote. This key group, however, has been some of the hardest hit by his economic policies.

The Heritage Foundation’s Mike Brownfield explains:

From 2005 to 2009, median household wealth among Hispanics fell by 66%, compared with a drop of 53% among blacks and 16% among non-Hispanic whites; the unemployment rate among Hispanics in March was 10.3 percent, compared to 8.2 percent among the broader population; and between 2006 and 2010, the poverty rate among Hispanics increased more than any other group, from 20.6 percent to 26.6 percent, all according to the Pew Hispanic Center.

Continue Reading »

No April Fools’ Joke: America Has the Highest Taxes in the World

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In Heritage Work

The joke is on the American people. As of April 1, the U.S. corporate tax rate of 39.2 percent became the world’s highest.

Japan fell from the top position by lowering its top corporate rate from 39.5 percent to 36.8 percent.

Ever-increasing tax rates are causing U.S. companies to move their production elsewhere, taking away American jobs.

Anheuser-Busch, for example, is an iconic, American-owned company. That was until Brazilian-Belgian company InBev initiated a takeover of the brewer, leading to more than 18,000 layoffs. More such takeovers are looming in the near future.

Heritage Foundation tax expert Curtis Dubay explains why these high rates punish American firms: Continue Reading »

Obamacare Hearings: The Waiting Game Begins

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In Heritage Work

The Supreme Court has concluded three days of hearings about the constitutionality Obamacare. Now the American people await the decision of the nine justices.

“Now that the dust has settled,” The Heritage Foundation’s Mike Brownfield argues, “it appears more than likely that President Obama’s signature health care law is on the verge of being struck down — perhaps even in its entirety.”

Heritage experts are providing up-to-the-minute coverage of the case at www.heritage.org/obamacare

Here’s a recap of the week’s debate: Continue Reading »

The Obama Administration’s Plan to Defend Obamacare

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In Heritage Work

The Heritage Foundation has obtained a four-page memo outlining the strategies and messaging the White House and its liberal allies will use to defend Obamacare.

The federal health care takeover was enacted two years ago next week, and recent polling shows support for the law dwindling.

The public relations strategy arrives just as the Supreme Court is gearing up to hear oral arguments on the bill’s constitutionality, according to The Heritage Foundation’s Rob Bluey.

Bluey provides the full text of the memo on The Foundry, explaining that “it includes a day-by-day breakdown of how the White house and liberal advocacy organizations want to frame the coming debate.” Continue Reading »

China Grows its Military as America Cuts Back

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In Heritage Work

China's military continues to grow.

While President Obama plans to cut military spending, China’s military is growing steadily stronger and larger.

The proof is in the pudding: China announced this week that its new defense budget would total $106 billion- an 11.2 percent increase over its previous budget. China now spends more on defense than all other Asian nations combined.

The Heritage Foundation’s Mike Brownfield elaborates on the American cuts:

        Under President Obama’s budget, the U.S. military will shrink dramatically, and the President makes defense the lowest budget priority among the major categories of spending in the federal budget. All told, the President would slash military spending by $487 billion over 10 years – and that’s on top of the $500 billion in cuts ushered in by the sequestration process under the Budget Control Act. The effect of all those cuts? A military that is woefully unprepared to execute its constitutional duty to protect America.

The administration, instead of preparing to counter the Chinese threat, is degrading the military’s capabilities to protect against foreign enemies.

“A strong military inspires respect abroad, while a weak one invites aggressions,” Brownfield concludes. “If America is to secure its independence, it must maintain a military capable of keeping that promise.”

Do you think that China’s growing military strength possess a threat to the United States?

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