Bankruptcy Is Not An Option

"Should taxpayers in Indiana who have paid their bills on time, who have done their job fiscally be bailing out Californians who haven't?" House Budget Committee Chairman Paul Ryan, R-Wisc., asks. "No. That's a moral hazard that we are not interested in creating." - Fox News Blog

So the financial wiz-kid of the Republican Party believes that we are just a group of states that happen to share borders but have no inherent connection to one another? It is this type of rhetoric and mentality that fosters the divisions that keep us from moving forward as a nation. This simplistic view of the economy shared by the wing-nuts and tea-baggers makes it difficult to take any of their proposals seriously. We are not talking about some teenagers who have overspent their allowance and so the answer is to send them to their room with no dinner. We are talking about our fellow countrymen who just happen to live in another part of the country, our country. We already know that being born in Hawaii makes you a foreigner, but this is ridiculous.

The fact that these clowns speak about morality just demonstrates their own immorality. Is it a moral hazard to watch our fellow countrymen suffering because the wealthy in this country decided they needed another transfer of wealth through market manipulation? What is a moral hazard is that we have seen the biggest financial theft of our economy in history and no one was prosecuted, no one was so much as even charged. Has our definition of morality been so corrupted that it is morally right to give billions to millionaires and billionaires, but immoral to give support to the elderly, unemployed, and mentally ill?

As long as we continue to allow these snake oil salesman to advocate their bad medicine we will continue to focus on cutting out our safety nets so we can continue to provide tax breaks to the wealthy. I’m sorry I obviously missed the memo that stated paying taxes in a democracy is optional. It’s amazing how all of the tea-baggers want government services, but they don’t want to pay for them. The wing-nuts want wars, nuclear arsenals, and government bail-outs they just don’t want to pay for them. There is a reason we pay taxes. There are certain things we have decided as a society that are important enough to share the costs. The problem arises when one segment of the population is paying more than their share.

One of the challenges we will face as a country is how do we make the tax code more progressive and more balanced in the face of this anti-tax and cut spending at all cost false meme being promoted by those who have demonized the very concepts that have made our country great. Shared sacrifice, social safety nets for the needy, and a common sense of fairness are concepts that make a nation strong. We can no longer continue to allow the corporate interests and money changers to undermine and tear at the fabric that makes us a nation. This idea of undermining the middle-class and the poor is nothing new to America. From the Hooverites, to the greed of the 80’s, to the butter and war rhetoric of the last administration we have been under assault it seems with every generation. And every generation has had to reconfirm our commitment to what makes America great.

Unfortunately with the decline in liberalism and the ascension of conservatism and it’s everybody for themselves mentality the very underpinnings of our society are at risk. Programs such as Social Security, benefits for the unemployed, and funding for education are now bargaining chips, but what are not on the bargaining table are tax-cuts for the wealthy and military spending. What type of society is willing to defund the programs for the middle-class and poor to reduce the taxes of the wealthiest among them? I could understand if the tax burden for the wealthy and the corporations were oppressive but under our current tax system the secretary of a CEO will probably pay more in taxes than her boss. To argue that our current tax system is unfairly slanted towards the wealthy is an understatement. To present Mr. Ryan, as a voice of reason in the deficit conversation when he is saying that everyone is on their own is like saying that a secessionist was a voice of reason during the civil war.

We are a country; we are a diverse nation that still manages to share some common threads. We should not allow those common threads to be unraveled for the benefit of a small group who value profits over national interests or their own citizenry. It’s amazing to me how the media and the pundits criticized the Chinese when their president was visiting, but no one has found it necessary to criticize the very American business people who have handed the keys to the American economy over to the Chinese and the Indians. Mr. Ryan doesn’t want to bail-out the states but he doesn’t have any such misgivings about bailing out the folks who have put the states in dire straits.

“Corruption and hypocrisy ought not to be inevitable products of democracy, as they undoubtedly are today” - Mahatma Gandhi

The Disputed Truth

The Corporate Debt Swamp, Or Do Republicans Read the Business Section?

What a week it was and it's only the sixth full week of 2009 but don't look now, corporate defaults for 2009 have already reached 25% of the total $157 billion of high-yield-loan and bond defaults in all of last year. As of February 6th, 21 US companies had defaulted on $43.1 billion of high-yield bond and bank debt. But let's add Paul Allen's Charter Communication, the nation's fourth largest cable company, to the list. $8 billion, cha-ching. At the beginning of the week, Muzak Holdings LLC, known for producing background music, and packaging company Pliant Corp. sought Chapter 11 protection. Muzak missed a $105 million payment. Pliant's restructuring plan hopes to eliminate $674 million in high-yield debt. On Thursday, Cleveland-based Aleris International, which produces aluminum products, and the US operations of Midway Games Inc. also ran for Chapter 11 cover. Aleris' liabilities total $3.98 billion but the company secured debtor-in-possession financing that will allow the company to remain operational. As for Midway, it has $281 million in liabilities. In December, the company laid off 25 percent of its work force, or about 180 people even as it negotiated a sale of the company.

According to Moody's, the US is entering a period likely to feature the most corporate-debt defaults, by dollar amount, in history. By various estimates, US companies are poised to default on $450 billion to $500 billion of corporate bonds and bank loans over the next two years. In percentage terms, the credit rating agencies expect defaults on non-investment-grade debt to triple to 15%.

Now connect the dots. The coming default wave is another source of trouble for the global financial system, which already is grappling with hundreds of billions of dollars in defaulted mortgages, credit-card debt, student loans and other consumer debt. Corporate defaults threaten to hurt banks, pension funds and private-equity funds, which in recent years gobbled up high-yield corporate debt and pieces of bank loans. When companies default, it is the shareholders that get wiped out first. Surely, this is common knowledge.

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