Making Unique Observations in a Very Cluttered World

Sunday, 2 August 2009

Tim Geithner Won’t Rule Out New Taxes for Middle Class

Reading - Tim Geithner Won’t Rule Out New Taxes for Middle Class http://tinyurl.com/xiam007-8

To get the economy back on track, will President Barack Obama have to break his pledge not to raise taxes on 95 percent of Americans? In a “This Week” exclusive, Treasury Secretary Tim Geithner told me, "We’re going to have to do what’s necessary.”

Geithner was clear that he believes a key component of economic recovery is deficit reduction. When I gave him several opportunities to rule out a middle class tax hike, he wouldn’t do it.

“We have to bring these deficits down very dramatically,” Geithner told me. “And that’s going to require some very hard choices.”

“We will not get this economy back on track, recovery will be not strong and sustained, unless we convince the American people that we are going to have the will to bring these deficits down once recovery is firmly established,” he said.

While Geithner told me, “There are signs the recession is easing,” he warned that, “We have a ways to go.”

“I want to emphasize the basic reality that unemployment is very high in this country,” the secretary said. But, he underlined that the administration is “going to do what is necessary to bring growth back on track.”

Turning to the bank bailout, he told me it is “quite unlikely” that the U.S. Treasury will go back to Congress to ask for more funding for the financial rescue package.

"We do not plan to ask for more money and I think it’s quite unlikely that we do," Geithner said in his most blunt language to date on TARP funding. The secretary said that today the TARP has roughly $130 billion, in part due to more than $70 billion that has already come back into the government.

Geithner also strongly endorsed legislation currently pending in the House that would increase the power of the SEC and give shareholders more rights to vote on executive compensation. He insisted that Republican criticism that the government is overly involved in the financial system is unfounded.

"Everybody understands that we cannot have our financial system go back to the practices that brought this economy to the brink of collapse," he told me. "It is going to take fundamental reform."

Click HERE for the full transcript of my interview.

U.S. Marshals Seize Sanitizer Made by Utah Company

Reading - U.S. Marshals Seize Sanitizer Made by Utah Company http://tinyurl.com/xiam007-7

WASHINGTON — Officers with the U.S. Marshals Service have seized all skin sanitizers and skin protectants, including ingredients and components, at Clarcon Biological Chemistry Laboratory's facility in Roy, Utah, the Food and Drug Administration said.

The FDA also warned the public Saturday not to use any Clarcon products because they contain harmful bacteria and are promoted as antimicrobial agents that claim to treat open wounds, damaged skin, and protect against various infectious diseases. No cases have been reported to the FDA.

Clarcon voluntarily recalled the affected products, marketed under several different brand names, in June 2009, following an FDA inspection that revealed high levels of potentially disease-causing bacteria in the products.

The inspection also uncovered serious deviations from the FDA's regulations, including poor practices that permitted the contamination. The FDA's seizure of these products, along with their ingredients, occurred after Clarcon did not agree to promptly destroy them. The FDA said it is protecting the public by preventing these products from entering the marketplace.

"The FDA is committed to taking enforcement action against firms that do not manufacture drugs in accordance with our current good manufacturing practice requirements," said Deborah M. Autor, director of the FDA's Center for Drug Evaluation and Research Office of Compliance.

Clarcon produced and distributed over 800,000 bottles of these products in multiple regions of the country since 2007. Consumers should not use any Clarcon products and should dispose of them in their household trash.

Analyses of several samples of the topical antimicrobial skin sanitizer and skin protectant products revealed high levels of various bacteria. Some of these bacteria can cause opportunistic infections of the skin and underlying tissues. Such infections may need medical or surgical attention and may result in permanent damage, the FDA said.

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

Reading - Cash for Clunkers May Cost Up to $45,354 Per Vehicle http://seekingalpha.com/a/39zh

The "Cash for Clunkers" program has been a "great success", at least according to the government, and the auto industry. Within days of its kickoff, all $1 billion allocated to the program has been used up by Americans who have eagerly lined up to trade their clunkers for new vehicles.

Some refreshingly honest reporting has come from Edmunds.com, a car buying site that is telling the truth, in spite of benefiting from an increase in business and site traffic, due to the program. According to Edmunds, about 200,000 old low mileage cars would normally be traded in, every 3 months, in exchange for more efficient higher mileage cars, without this program.

The highest rebate is $4,500, and the lowest is $3,500. If everyone qualified for $4,500 per vehicle, about 222,000 vehicles would have just taken advantage of the government's money. At $3,500, 286,000 vehicles will have been sold.

I assume that, given all the raving, the government will eventually get around to assigning more money. It will take at least 2 or 3 months for the legislation to work its way through Congress. Meanwhile, if all buyers have qualified for the higher $4,500 rebate, the "cash for clunkers" program will mean a marginal increase in car sales of 22,000 this quarter. $1 billion divided by 22,000 means a net cost to the government of $45,354 per car.

If all buyers only qualify for the $3,500 rebate, it means a marginal increase in sales of about 86,000, or a net cost to the taxpayers of $11,628 per vehicle. In all likelihood, however, there will probably be a mix of vehicles qualifying for various rebates between $3,500 and $4,500. Based upon that assumption, Edmunds.com estimates that the average cost to the taxpayer will be about $20,000 per vehicle.

Even most of the marginally extra sales really represent people who were going to buy a new car eventually anyway. They are just buying a bit sooner than they expected. Old clunkers don't last forever, and they are almost all eventually replaced. The government is shifting tomorrow's demand to today, stealing from tomorrow to pay for today, but at great cost to the taxpayer.

The "cash for clunkers" program is yet another boondoogle - an expensive waste of precious taxpayer dollars. Government spending should be reined in, in light of the multi-trillion dollar unsustainable deficits that this nation now faces. However, if we must increase government spending, the money would be better spent on infrastructure and education improvements that might help bring jobs back to America, and encourage long term growth, rather than cosmetic improvements to the short term earnings of makers of high mileage automobiles, many of which are foreign companies.

This government is, unfortunately, a reflection of the current state of economic immaturity that prevails in America. The vast majority of people, including most people in Congress, do not understand the forces that drive the real economy, and see only the short term view. That is how they get manipulated into allowing the Federal Reserve to behave like a slush fund for big banks, passing programs like TARP into law, and enacting programs like "cash for clunkers" which all abuse the taxpayers.