The “No Sugar-Tax” Ad Shows We’re Not Pure Libertarians

Have you seen it? It’s the series of ads with the “average mom” walking into a home concerned that raising the price of sugary foods will break the family budget. If you haven’t seen it yet, check it out below:






The ad is run by the Americans Against Food Taxes, with a mother agonizing against taxes on sodas and juice drinks, as if it’s the only beverages available at the store. (Full disclosure—AAFT is a consortium of mostly large convenience stores and fast food places that depend on sugar for revenue.) If times are tough, maybe it will require us to cut back on the sugar, you know? I’m pretty agnostic on the issue—if the taxes go up on soda from 1.50 to 1.75, dah well.

I see why the government has decided to propose “mini-taxes” here and there. I’ve never really been anti-tax, but the taxes have to be sensible. If you’re simply raising my taxes to build a monument in your district, then no dice. However, if we’re trying to come up with a way to keep me from paying far higher taxes down the road, then I’ll listen to you.

We as a society don’t fully subscribe to the “live and let live” mantra politicians put forth. We’ve decided that we’re not going to let people die in the street if they didn’t save enough for retirement, or if they are strung out on drugs, or if they don’t keep themselves healthy. Most of us have a rugged individualist streak, but when things go wrong, we turn to others to bail us out of bad lifestyle choices. And now that the economy has gone sour, people are looking to the government, which means they (read: WE) will foot the bill for expensive health-related problems, and entitlement programs like Social Security and Medicare. It’s a choice that we’ve implicitly made.

Such choices have to be paid for—and people are living longer (but not necessarily healthier), which taxes the entitlement systems which is growing to include near-universal health care. We can talk all day about prevention and education on the dangers of consumption of unhealthy foods and drinks in excess, but as the folks over at the Radical Rationalist say:

For some reason, logical arguments based on medical facts do not convince Americans to curtail economically disruptive, physically harmful or just plain stupid activities. What works? Money.

Pretty much.

Discuss: Putting Too Big to Fail..out to Pasture..

The more I learn about the too big to fail mentality in our culture, the more I get confused about what to do. Both arguments for and against this concept can be are summarized below and are both quite compelling. Maybe you readers can help me get a grip.

Many Americans subscribe to down with Too Big to Fail (TBTF) and use a straightforward, populist argument. The free market is designed to weed out companies that are inefficient. They believe that the Obama Administration and the last one went too far in using taxpayer funds to bailout banks, car companies, insurance companies, etc. deemed TBTF by the government.

Then, there are others who take the I know, but… approach with TBTF. Their reasoning? Many of the companies bailed out were so large and had their reach ingrained into the economy so far that to turn a blind eye would affect more than the direct company. Take the US Automakers, for instance. Letting GM and Chrysler fail would not only affect those who work for the company, but your local GM and Chrysler car dealerships would disappear. So would those who supply them. Auto part stores would be severely threatened with the decrease.

A similar fate would affect the troubled banks, but it’s scarier because most people don’t know who is managing their 401(k) plan. Generally, unless you work for a financial-services firm, your company outsources the managing of your 401(k) funds to an external company (which is a good sign too, because it means your company is focusing its resources on what they do best.) Could you imagine turning on the news one day and finding out some obscure financial management company is on the fritz only to find out that they've been gambling with your money that you've dutifully saved paycheck after paycheck, year after year?

I think the best way to eliminate TBTF is to keep companies from getting too big to begin with. I realize the dangers of this though—what’s too big, and who decides? As a believer in market capitalism, I’d like to say we can let the companies police themselves, but let’s be honest—they won’t until they get caught. And in my recent foray into competition (anti-trust) law, companies collude all the time without the government knowing at all until it’s too late. Everybody is against bailouts of course until it’s their future at stake. Then they want to government to “act up(!!)” So breaking up banks and spinning off car companies into smaller units is the idea. And I’ll leave how they do that up to the experts—but what do you guys think?

Where I've Been

Wealth Weekly Readers,

As you can see, we haven't had a post since June 25th. I've had some surgery this summer and was away from computers and this site for quite a while. Let me tell you--there's nothing like the irony of laying in a hospital bed for nearly a month watching people yell talk about health care. I'm hoping to get back into the groove very soon and get back to posting regularly again now that I'm sitting at the computer again. Thanks for reading in the past and I hope to see you in the future.

Oh, How Quickly We Forget

One of the biggest contributors to the downfall of the housing market was the fact that there were too many houses on the market--we were saturated we people who bought houses that they weren't ready to afford yet. Then, when they vacated those homes, property values fell..for almost everyone.

That led to people leaving houses that they could pay for but chose not to because they were upside down on it. (In other words, if they took out a 200,000 mortgage and the value of the house fell to 125,000 they would still owe the 200,000 but would instead balk on the deal, even if they could afford the monthly payments.) This would cause a larger inventory of empty homes, and prices would fall further.

Well, one lesson we definitely learned from that was to tighten up lending standards so that people that bought property were really going to be able to handle the responsibility. We learned that, right? Clearly, Washington lawmakers won't do something crazy like convince two of the biggest lenders in the country to relax the rules again, right?

Uhhh...

(Reuters) - Two U.S. Democratic lawmakers want Fannie Mae and Freddie Mac to relax recently tightened standards for mortgages on new condominiums, saying they could threaten the viability of some developments and slow the housing-market recovery, the Wall Street Journal said.

In March, Fannie Mae (FNM.N)(FNM.P) said it would no longer guarantee mortgages on condos in buildings where fewer than 70 percent of the units have been sold, up from 51 percent, the paper said. Freddie Mac (FRE.P)(FRE.N) is due to implement similar policies next month, the paper said.

In a letter to the CEO's of both companies, Representatives Barney Frank, the chairman of the House Financial Services Committee, and Anthony Weiner warned that a 70 percent sales threshold "may be too onerous" and could lead condo buyers to shun new developments, according to the paper.

The legislators asked the companies to "make appropriate adjustments" to their underwriting standards for condos, the paper added.

OK, any takers seeing something good come out of this? I give it 3-5 years before we start seeing craziness happen again. What say you?