Misplaced Priorities and Misguided Decisions

Yesterday my assistant Tito missed an important late afternoon meeting because the train he was on from NYC was delayed by more than 3 hours. The train slowly crawled north on tracks that were in too poor condition to support a higher speed. This is a regular occurrence on this line. Perhaps a few tens of millions would be required to bring these tracks up to something other than third-world condition. That money does not exist at the moment, so they will be “repaired” all the way back to “almost functioning,” just like last time.

Meanwhile, the Treasury made this announcement today:

WASHINGTON (Reuters) - The U.S. Treasury Department will on Tuesday tap a $50 billion housing rescue fund to pay off mortgage investors and reduce monthly payments for millions of borrowers, said a senior administration official.

That, in a nutshell, displays our nation’s priorities. Another $50 billion to pay off mortgage investors, yet no money can be found to repair critical existing infrastructure.

This program is being sold as though it is “helping homeowners,” but, in fact, the program directly funnels money to the companies that made poor lending and investing decisions. No cash goes directly to homeowners, it only flows to mortgage investors. While it’s true that some homeowners will have reduced payments, it’s important to note that cash is only flowing to companies, not homeowners.

Day after day we are reminded that protecting mortgage investors is our nation’s highest priority. At least that’s where we are putting tens of billions, without any sign that there’s some sort of limit as to how far we’re willing to go, and no indication that perhaps mortgage investors deserve to lose their money.

After all, the types of mortgages being fixed here are not primary liens, but secondary liens, and the originators and purchasers of these types of loans should have known better:

"It will be a shared effort with lenders, investors, borrowers and the government to ease or extinguish second-lien mortgage payments," a senior administration official told Reuters.

During the height of the housing boom, some borrowers were able to buy a home with no downpayment by adding a second lien, and many of those loans are now failing as the economy and housing market struggle.

The especially grating part of this story is that these second lien mortgages were used to enable borrowers to buy houses with no money down; an action that was widely known at the time to be an especially foolish and risky business decision.

I want to contrast the eager and unlimited desire to bail out mortgage investors with a troubling story I recently heard.

This weekend at Lowesville, one small business owner recounted that their decades-old family business was facing extremely trying times. The people in their employ had been working there for years, and so this small business owner described a tale of burning through cash reserves to try and keep their staff employed during exceptionally lean times.

This is the type of company that needs and deserves help. Instead, they are now struggling with the latest outrage, a recent change to the COBRA laws that now require (force) small businesses owners “to ‘front’ the subsidy by paying the full premium and obtaining a reimbursement via a later payroll tax offset.

Did you follow that? As part of the 2009 stimulus bill, the US government decided to provide a COBRA “subsidy” by covering 65% of the cost of post-employment health care coverage to the newly laid off.  That's certainly admirable, I suppose.

But the government did not provide cash for this “subsidy,” opting instead to require businesses to come up with the actual cash to cover the cost.  These out-of-pocket business expenses are going to then get ‘reimbursed’ sometime later, via a payroll tax offset.

In other words, cash flows out of businesses for COBRA payments, never to return. All that potentially ‘comes back’ later on is a reduced requirement to send cash to the government in the future.

Now, imagine that you are a struggling business, where your survival or demise is a narrow margin of cash flow. What good is a future payroll tax offset if COBRA payments drag you under today?

This is happening even as you read this.

How can Washington be this tone-deaf?  Are they not aware of how many small businesses are struggling to survive and that cash flow issues are the #1 cause of business failure?  Perhaps this is what happens when lawmakers lack actual business experience in their background.

We can speculate as to why this approach was taken with small businesses when so many hundreds of billions are immediately available to protect the poor investment decisions of mortgage speculators and large banks, but I am unable to think of a good reason for this discrepancy.

It bears noting that small businesses are the lifeblood of our economy and that all recoveries are built upon the backs of small businesses, which are the first to return to health and hiring following a recession.

Instead of helping them and punishing the improvident, the exact opposite is happening and we are left to wonder why.

One could be forgiven for surmising that the government is finding what few pockets of solvency that remain (i.e. small business cash accounts) and using those to fund the recovery because the government itself is out of cash.

This seems like a terrific way to ruin a nation.

It would seem that our national priorities are still not in the right order.

This is a companion discussion topic for the original entry at https://peakprosperity.com/misplaced-priorities-and-misguided-decisions-2/

businessweek just ran an excellent article on their economic insider page (james cooper).
business (big and small) is making the necessary adjustments to "correct" their surplus inventory through liquidations, writedowns, and fire sales. companies are taking the pain on their balance sheets right now, especially small business. to strap small business with anymore pain would be a fatal blow, such as the COBRA subsidy.

the govt (through ignorance or malice) is not allowing the pain to be felt where the open sore has occurred, in the banking and investment sector. i understand the need to prevent a collapse so i understand the knee jerk reactions but it’s coming at the expense of the businesses that took on calcluated risks and are immediately making the ajdustments necessary to have a prosperous future. small biz is too busy trying to survive while big biz is making the appropiate legislation to take out the legs of the small guys. we’ll be left with a landscape of nothing but massive players and no chance for our voice to be heard.

there is a centralization of power occurring on a magnitude that should have everyone a little frightened…


It is quite sad to see our rail infrastructure crumbling. By some estimates, the energy intensity (per pound per mile cost) of shipping goods on rail is a tenth of the intensity that it is for trucking (I’d appreciate any more data on this if anyone has it!). What a fabulous opportunity to reduce energy costs and increase the productive capacity of our nation. If the professional politicians that we have insist on running deeper deficits, let’s make a true investment in an infrastructure system that at least offers the chance of paying dividends…Instead, I suppose Wall Street will now have the opportunity to remodel their offices and have more corporate cocktail parties while Joe Taxpayer is ground under their collective heels.

Chris, thank you for all of your efforts.  As we continue your mission of educating the public to reach a critical mass, the snowball that is our descending republic continues to gain mass and velocity in a downward direction.  Recognizing the phenomenal platform you have created, there is tremendous potential for action that is not being harnessed and time is a critical determining factor in the mass and velocity of that snowball.  As we "educate" the masses we are losing time for removing the political elite from office who aren’t/can’t/won’t be changed.  Yes, I have given up hope on the sunk cost that is our current political establishment. 
Under your leadership, the CM community could organize petition signings, organize community building (in the form of relocation such as with the free state project), coordinate permaculture classes, layout/sanction a blueprint for a sustainable society construct for folks to commit to, endorse political leadership, and ultimately take specific concerted value-added action.  But this unity of effort can’t, won’t be achieved within your forum until that next step is taken which is you exerting your leadership.  So my question to you is, when (under what criteria) are you going to step out and try to break that snowball by facilitating your site visitors to take action beyond the self assessment you’ve provided?  The reason I ask is because your personal writings (save the crash course) are not focused on sustainable living but what some would call "the oligarchical fascism that was our republic."  I fail to see how your recommended actions in the self assessment while admirable and advisable have any direct influence on slowing down the snowball you vent upon.  The reality is what it is and when I read what you write above or the article from MISH below, I am at a loss for any tactical or strategic actions to improve the situation save this plea for you to TAKE A STAND in the political arena so that this community and likeminded others can form some measurable influence.  

I know enough to take action for those things readily within my control and influence like this writing for instance, but these efforts aren’t without frustrations.  I’ve put in a 12’X24’ garden in my 24’X30’ backyard, solar water heat is next, but I feel as though my participation in tea parties (for the right reasons) is falling on deaf ears as the MSM pollutes the message.  My numerous emails/phone calls to congressman concerning policy decisions do nothing but elicit an automated response if that.  My discourse with neighbors and family results in the "it’ll come back, it’ll get better, human ingenuity has always found more energy."   These frustrations would be less if I didn’t feel as though I was the only one doing them and if I experienced more success.  I hope success can be achieved by pulling together the folks from your community with whom I generally identify and influence the snowball.  

I do hope exerting political influence is within your eventual vision because that is one of the ways meaningful change to sustainability will occur, if not then I will need to joust windmills elsewhere.

Warmest regards,



With respect to another MISPLACED Priority and Misguided Decision

from Mish: globaleconomicanalysis…
Deal Recap
If the deal goes through as currently proposed…

  • The Treasury (taxpayers) would be stuck with 50% of GM’s equity (currently worth $625 million) in exchange for forgiving about $10 billion in federal loans.
  • The UAW would get 39% of GM’s equity (currently worth $488 million) in exchange for giving up $10 billion in health care benefits
  • Corporate bondholders would get 10% equity (currently worth $125 million) in exchange for giving up $27 billion in bonds.
    Under the above agreement there is still a missing $10 billion piece of the puzzle: "The government wants the union to accept company stock to finance half of G.M.’s $20 billion obligation for retiree health care as noted above."
    What happens to the other $10 billion? Does it vanish into thin air? My guess is this would be dumped on taxpayers via the Pension Benefit Guarantee Corporation (PBGC)
    Everybody loses but the credit default swap holders. Now who might that be? JPMorgan, Goldman Sachs, and/or Citigroup by any chance?


Just my differing view here, but if the diversity of political opinion that was present at the recent Lowesville Seminar is any indication, the moment Chris took a political stance, half the people on the site would leave.

The fact that for three days, the Lowesville bunch was a true community and politics never came into play speaks volumes.  We can and will get this done despite the politicians, not because of them.

Dear CM and CM viewers,
As someone who has taken out equity in my primary residence and built a small  and until recently, thriving, business, I just want to remind everyone that not everyone who has…

A. taken equity from their home

B. has an adjustable mortgage

C. at the end of all this mess may lose everything

should be considered someone who made "poor investing decisions", etc.  I personally know 12 (or if I ponder longer, maybe 20) people who created a small business (remember, part of our country’s "life blood") from the equity in their primary residence and one family who planned and prepared for two years for their small business, took equity from their primary and just this winter pulled the plug on their plans for business. 

My business today has half the sales of last year, we blew through a huge amount of cash keeping it going this last winter and we continue to hope for a better tomorrow.  Like my dad used to say "hind sight sure as hell better be 20/20"  and for me it is but please keep us little guys in mind when you are bashing the home owners who took out equity because it’s just not that simple.


I couldn’t agree more. . . . perhaps it would be in order to entertain a bit of speculation about where all this is going . . .

I have the opportunity to take the train to work and I take full advantage of it. One night, I was coming back from NYC late at night, (trains run only once per hour after 9PM and the last one to leave NYC leaves at 1:30AM) and so I asked a conductor on my train about expanded service at night. He told me that because the railroad unions are so much smaller than the road building unions, that most of the public transit money goes towards roads and not the rails. We’re stuck between a rock and a hard place. Sigh

Dogs, I am fortunate to get a response from you.  Thank you for sharing as I was unable to attend…that whole 9 to 5 thing.  I think we are in agreement and the miscommunication arises from the word "politic." I am refering to politic in the classical/literal sense of the word where specific policy (law, regulation, statutes, etc) are created/adjudicated.  Would your agree with these clarifying statements? 
95%+ of the people at Lowesville agreed on a preponderance of what Chris and others on this website have identified as problems that need to be solved and hoped to share in those mutual concerns because they want to change the current course of their lives and ultimately of our society.  These agreements can become the platform.  Decoupling the "problems/opportunities"  from the espoused solutions allows higher levels of agreement to be obtained within the community and these agreements allow a unity of effort that creates synergy amongst all our individual voices.  Levels of agreement and disagreement will vary greatly between perceived problems and hypothesized solutions, however, there is agreement and there is power (potential to do work) in that.

For example while Chris Kesser makes a great post about doing work to further "transtion" https://peakprosperity.com/forum/transition-town-training-may-30th-31st-oakland-ca/13011 I don’t see his efforts being as successful as they could if Chris’s team were to promote it.  Lost opportunity?

Some of the potential platform elements I have gleaned from the site are:  "the next twenty years will be drastically different from the previous twenty," "We need to live within our means," our current political system is broke because the government of the people is not for the people, the TARP bailout was wrong, and large institutions that are too big to fail are too big to exist.  There are many observations we agree upon.  There are going to be ACTIONS (including in the political arena) that we can agree upon as well.  Unity of effort allows us to accomplish more.  I think that these potential actions need to be sanctioned by Chris as leader of the site because the snowball is growing and the trend of his recent posts attest to this.  Now if the strategy is to just let it all collapse and pick up the pieces then I want to know that, but I feel the need for unity of effort to stem the tide or pick up the pieces.  Reading about all the stuff wrong with the world in Chris’s and Davos’s blog is great but I want a mechanism where I can change things and as Chris’s recent posts point out, the arena where we need the most change is in our political establishment. 

I too agree that "traditional" politics of Red vs. Blue and a tremendous NEGATIVE.  It turns me off and is one of the reasons why I !  I am suggesting that a political platform be set even if it is to declare issues like abortion for instance, while important, a non-issue for this community.  I think we need to take a stand on specific policies because if we don’t we significantly marginalize the potential that exists here. 

Any political stance the CM community takes must continue to transcend the main stream media political landscape, but positions ought to be taken and if so it is incumbent upon us as community members to ensure that we act accordingly.

Very Respectfully

mcafee -
Your clarification of "politics" changed the framing of my thoughts on your first post.  Give me some time to digest your post a bit - my sense is we are on two slightly different paths to the same desired end state.

I’ll be back to you on this one…


There is a way to avoid having to pay COBRA: discontinue health insurance for your employees. It happened where I work; they gave us a $500 per month raise and said "go find your own." Even though it was a slap in the face, nobody quit to try to find more benefits. That was a few months ago, and honestly, it’s probably what’s kept them in business.
I wonder what the Feds will do at the prospect of businesses discontinuing health insurance? Will they try to make its provision mandatory (ala HillaryCare or the State of Mass.)? Or perhaps, will it be the final straw that galvanizes enough broad-based business/consumer support for a single payer system? Watch and wait.

  Thank you for the incredible article.  Just when I had about given up hope that anyone at all cares about small business unless you have one, you listened!

  One of the several points you made at Lowesville was that all the protest, no matter the number of people at the protest, seem to be ignored by Washington DC so a grass roots effort is needed.  You, Becca, your family and your website are providing that.  It was evident at the seminar.  Education seems to be the key along with caring about our country.  You do an excellent job in providing the education in explaining issues that are clear and easy for all of us to understand.

  Small business owners work long hours, pour their hearts and money into their business.  As I’ve said for many years, we need people that have business experience or owned their own business and know how to operate within a budget to run our country.  I wish I could run our businesses like the government with endless money and no regard to overspending without a consequence.  Where’s our Tarp, Talf, bailout?  We continue to be riddled with additional paperwork and laws that do not help produce a profit so we can expand and hire more people.

  Sorry, have a tendency to get started on my rant about all this!

  Thank you, your family and staff for everything.  Teresa




Once again, the information and articles I find here help me to personally understand the "issues" to be able to sift through the mountain of sound bites from the MSM and arive at my own conclusions, and take actions that are appropriate for me and my family. I continue to return to this site every day because I have come to expect high quality information that is clear, to the point and timely. The site passes my "Trust but verify" attitude and the information fiter in my brain. Keep it coming CM and Brigade members.


There is a way to avoid having to pay COBRA: discontinue health insurance for your employees. It happened where I work; they gave us a $500 per month raise and said "go find your own." Even though it was a slap in the face, nobody quit to try to find more benefits. That was a few months ago, and honestly, it's probably what's kept them in business.

I wonder what the Feds will do at the prospect of businesses discontinuing health insurance? 


I think the Administration wants businesses to discontinue health insurance.  They want a national health care system like Canada, England etc. What do you think will happen when they roll out their national health care system? Employers will will drop health care coverage and tell employees to get the national coverage.  They say everyone will have the option of keeping their current insurance.  But the reality is the current insurance system will disappear. One of the biggest supporters of the national health care program is WalMart.  Wonder why?  

I've been covered by national health care for most of my life through the military.  Trust me, you won't like it.  Long waits for appointment or procedures. Limited choice of providers.  Restricted ability to see a physician (normally seen by a physician's assistant or nurse practictioner).  Restricted availability of certain drugs.  Just ask someone from Canada or England about their national health care systems.  You'll get an earful.  



I’ve been covered by national health care for most of my life through the military.  Trust me, you won’t like it.  Long waits for appointment or procedures. Limited choice of providers.  Restricted ability to see a physician (normally seen by a physician’s assistant or nurse practictioner).  Restricted availability of certain drugs.  Just ask someone from Canada or England about their national health care systems.  You’ll get an earful.  



I have heard it is a mixed bag. Apparently you are not pleased with your insurance through the government (V.A.?) In a way it doesn't surprise me, considering how we treat veterans in this country.

My friend from Toronto says she's quite pleased with her state health care arrangements. She is also relatively healthy. She says there are waits; about 2 weeks for an average visit. Unless it's an emergency, in which case you go to the hospital, fill out a short form (note: not short here) and see a doctor. In terms of restricted physician access, that is a reality for many with decent insurance already, myself included.

The problems I see with the health care industry in America is our catering to entrenched business interests while simultaneously involving government more and more. The mixture of public and private moneys and interests forms some weird mutant organizations. The unfunded mandate CM talks about is just one facet of this dynamic. The very idea that insurance needs to exist with government subsidies of health care is ludicris. But then one must realize, the same people that run the insurance companies also run investment firms. It's how they make money between your payment and their eventual payouts. And we all know what a soft spot politicians have for investment firms. That their services are useless at best, a racket at a minimum and parasitic at worst is irrelevant to TPTB.


I've been covered by national health care for most of my life through the military.  Trust me, you won't like it.  Long waits for appointment or procedures. Limited choice of providers.  Restricted ability to see a physician (normally seen by a physician's assistant or nurse practictioner).  Restricted availability of certain drugs.  Just ask someone from Canada or England about their national health care systems.  You'll get an earful.  


Purple -

In the interest of providing a counter opinion - trust me, you will like it.  I have been retired from the Navy for 7 years and have zero complaints with my national retired Health Care.  I typically see my doctor within a day or two of a phone call out of the blue.  Referrals to specialists take no more than a week. to be seen.  Same with my family and they have a different primary care manager MD than I do.  I am under continuous care by a cardiologist - they call me for my 6 month check-ups.  My co-pays are minor and I have 6 military pharmacies within 15 miles to  get all of my and my family's meds for free.

One data point does not a valid sample make.

Neither does two - but the military Tricare model works better than 99% of the HMO and other medical insurance plans I checked out prior to retiriing.

 One data point does not a valid sample make.



Neither does two - but the military Tricare model works better than 99% of the HMO and other medical insurance plans I checked out prior to retiriing.


I am happy it works for you.  Maybe it's location dependent.  Last time I needed to be seen, I waited 36 days for an appointment.  My primary care provider determined I needed a minor surgery procedure.  That was six weeks ago.  I checked Monday and I am fourth on the list. Maybe another month.  Last Rx  I needed wasn't available from the military pharmacy.  I could go on, but I think you get the point.  If you're happy with your care, great.  But, if you're not, then what?  Can't change doctors, can't change clinics, can't change pharmacy.  You're stuck with it.  


Maybe someone from Canada could chime in here.  


Anyway, my main point was the fact that IMHO, the Administration doesn't want employers to provide health care.  They want to take it over. All of it. I think the CORBA payments issue is a subtle way to get employers to drop health insurance.  

Honestly, socialized managed care would have to be pretty darn horrific to be worse than what my family has now. When you live as close to the financial precipice as we do, it doesn’t matter how "good" your insurance is if you can’t pay the co-pays and deductibles for routine care and chronic conditions. I hate to say it, but socialized medicine would probably be better for routine care and minor chronic illness, because, for a lot of us, any care would be better than none at all.
I’d rather pay the same amount in taxes that I pay in insurance premiums, because health care that’s simple, slow, basic, and free, is better than health care that’s complicated and uncertain–with high deductibles, hidden costs and "gotcha" clauses–that I don’t dare use.

I didn’t used to think this way… then I got married and had a baby.

It may be - we are in the Tidewater area of Virginia - and going back to '98 when I was still Active, we’ve had the same PCM and very good treatment when needed.

Hope it works out for you.

As a small biz owner (along w/Mrs. S) I can attest that we are battening down every hatch we have (and creating additional hatches simply so we can then batten them down) and we’re still likely going to have to close 1 of our 2 locations to reduce overhead.  The second location was part of our growth plan but right now survival’s the name of the game.  
We just gave ourselves pay cuts so as to reduce the outflows from the biz.  And we’re reducing every expense we have in our personal lives to accommodate that.  There’s just about no fat left.  (Hmmm…I guess there’s always a liiiittle more fat but…dang)

My only encounter with nationalized healthcare was as an exchange student in NZ.  Had a nastily-infected ingrown big toenail.  My host family took this Yank to the doc, who cut that puppy in half, pulled the bad half out, scraped and cut the necrotic flesh out (sorry if you’re eating dinner at home, folks [wry grin]) and then zapped the root of the toenail on that side.  Dished me a scrip for some antibiotics, charged me zilch and sent me on my way.  

No wait for the appointment.  He was really nice.  The toe got better.  OH, the antibiotics did cost me about NZ$6.  FWIW.

Viva – Sager