Corporate Welfare Costing Taxpayers $100B a Year

by Gerri Willis

Everybody needs a little help now and then, right?

Consider the case of a retailer intent on occupying one of the most high-profile spaces in New York City -- the balcony of Grand Central Station where tens of thousands of commuters pass through every single day.

That retailer wanted a little help from taxpayers to make it happen -- $2 million to reimburse it for the money it spent getting the previous tenant to leave.

That retailer is Apple. A company that makes $2 million every eight minutes. A company with $110 billion in cash on the books. A company that has a market cap over $547 billion, which makes it the biggest company in the world - more than the entire economy of Sweden. A company that will rake in hundreds of millions of dollars annually at that single new location.

The good news is that Apple's effort to get money from taxpayers didn't work.

The bad news is other companies are way, way more successful.

You think the abuse of Medicaid and food stamps is bad?

Corporate welfare in the federal budget costs taxpayers almost $100 billion a year in direct subsidies, tax breaks, and all kinds of creative loan programs.

Sometimes the money gets paid back, sometimes it doesn't.

You've heard us talk about the Department of Energy's failed green energy program -- remember Solyndra? -- but that's the tip of the iceberg, according to a new study from the Cato Institute.

Take a look at these other government programs offering a hand to companies.

There's the Michigan brewer that gets a $220 thousand block grant to expand its brewery from the Department of Housing and Urban Development.

The farm subsidies that go to large corporations and celebrities. By the way, some of these subsidies continue long after the land is no longer used for farming.

Then, there's the wineries that get marketing grants from the Department of Agriculture.

Since when should tax dollars go for wine ads?

Oh how this money is misused!

A new study shows subsidies to promote the expansion of broadband internet services in rural areas tend to go to areas where there is already service.

You get the point.

But I have to share this example with you:

One company managed to finagle nearly $4 billion in financing from a bunch of federal bureaucracies -- the Export Import Bank, the U.S. Trade and Development Agency and so on and on.

$4 billion to Enron -- the company that became the poster child for accounting fraud.

The company that at the time was the biggest corporate bankruptcy ever.

The company whose collapse sent 21 people to prison.

So not only are these companies sucking up as many tax payer dollars as they can but the government isn't too good at figuring out who deserves the dough either!

If we take the cleaver to entitlement programs this fall, these programs should take cuts too!

Obama's Decoy Bailout... To Distract You from the Real Crisis

by Gerri Willis

Warning: Bailout alert! The Obama administration has decided it's time to spread the wealth some more, just in time for the election. Who's getting it this time? Broke college grads. Obama's team wants these borrowers to be able to wipe out their private student loans through bankruptcy. Again the administration is forgetting there's no such thing as a free lunch. If lenders know their risk is higher, they'll raise rates making college even more expensive. Of course, the President wants to ignore the real crisis, which is the government's own loan program. Uncle Sam -- and thus taxpayers -- back more than 90% of student loans - nearly $900 billion dollars' worth.

Don't get too attached to that money though. The White House's own budget forecasts as many as 25% of federal loans issued next year will end up in default. That means defaults could cost as much as $20 billion dollars. That's a program in dire need of reform. The crucial point the President just doesn't seem to grasp is making student loans easier to get only ends up hurting these kids. When the money's easy to get, schools are free to jack up prices. It means students end up with massive debt they'll have to work for decades to pay off, and that's if they can get work.

I guess the President thinks bankruptcy is a cure-all? Here's some perspective: In the last 20 years, tuition costs have risen 184%, and that's adjusted for inflation, but the pay of college grads has only risen 9%. One of the education industry's favorite statistics has been that college grads will make a million dollars more in their lifetimes than folks with just a high school degree. But recent studies show that's no longer true. Today, a degree means your lifetime earnings will go up by $300K - $600K. On average that works out to be less than 4.5% return on your investment.

That's not bad, but a degree just isn't the ticket to breakaway success it once was. Despite this, more and more students sign up ever year, and many of them won't even be prepared for a job! A study finds half the graduates of four-year colleges don't have basic reading and math skills, like the ability to understand a credit-card offer or an editorial from the newspaper. For far too many grads, that diploma is just proof of debt, not employability. But there is hope for a real solution. Last year the University of the South - a private school - cut its tuition and fees by ten percent.

And it's paid off for them: They've gotten a huge boost in applications, and the quality of applicants improved too, allowing the school to become more selective. So schools are capable of holding down costs, and providing a better value. The last thing we need is more government interference, making it easier for students to run up a mountain of debt they can't afford, and piling more risk on the taxpayer's back.

But I’m afraid people just won't listen to reason. Even the guy who researched this very piece is leaving his steady job this week to go back to school and run up his very own mountain of debt.

He will be missed.

Obamacare's Most Crowd-Pleasing Parts Are Actually the Most Disastrous

by Gerri Willis

I've had my share of criticism of Obamacare - well, maybe more than my share - but now we're beginning to find out even the parts of the law people seem to like are just creating new problems.

Take the part that would let kids stay on their parent's health plan until age 26. Despite what the administration thinks, that coverage isn't free.

According to the Department of Health and Human Services, the cost is as much as $3,400 per kid each year.

Insurers just pass that back onto the companies giving their employees benefits. What's the outcome?

Employers stop offering it.

One of the largest union-administered health insurance funds is now dropping dependent coverage for 30,000 employees. That's thousands of children that are losing insurance, all thanks to Obamacare's "expanded coverage."

So maybe the college-age kids should turn to their schools' student health plans, but that's turning into another disaster.

Colleges across the country are giving up their student health plans.

They've calculated the higher levels of coverage required by Obamacare would increase the cost of premiums by as much as a thousand percent.

And students at some Catholic universities are losing all their insurance because the schools have a moral objection to the requirement they offer contraceptive coverage.

Think you can just buy an individual plan for your kid? Think again.

The ban on discriminating against children with pre-existing conditions has been driving insurers out of the market.

Insurers in 20 states have given up offering child-only insurance plans.

So government regulations meant to protect kids are now punishing them.

And what about the promise that insurance would be cheaper?

The Cato Institute calculates Obamacare has already added 2%-3% to premium prices, and we're just starting to see these policies go into effect.

It's only going to get a lot worse. In the next four years, individuals will see their premiums go up 19% to 30%.

This estimate doesn't come from opponents of the law.

This is the updated projection from the MIT economist who designed the law.

Talk about unintended consequences.

The common thread in all of these Obamacare disasters is they're the result of the President promising us something for nothing.

But there's no such thing as a free lunch.

Someone has to pay, and it's us.

The rising cost of health care is one of the country's biggest problems, but it should be obvious making insurance more expensive isn't a solution.It’s just a bigger problem. 

Obama's Big Deception

by Gerri Willis

As we've been reporting on our show, the Supreme Court will issue its ruling on Obamacare this Thursday.

The President says he's “confident this will be upheld because it should be upheld,” meaning the High Court will uphold it because he says it's the right thing to do.

But the American people disagree. A new Reuters poll shows 56% of people are against the health-care overhaul. Among independents, that number is much higher, 73%!

It's easy to see why public opinion is solidly against it.

People are beginning to realize they were sold a bill of goods - none of which is turning out to be true.

As we wait for the justices' decision, it's important to remember many of the deceptions and accounting tricks that got us to where we are today.

Remember then-House Speaker Nancy Pelosi saying this when Democrats were trying to gain up support for the bill's passage:

“We have to pass the bill so that you can – uh - find out what's in it, away from the fog of controversy.”

The fog has lifted and we know exactly what's in it. Here were the main selling points on Obamacare:

First, it would bring down the cost of health care. The President said families would save on average $2,500 a year on their premiums.

We now know that's not the case.

According to the “Kaiser Family Foundation,” Obamacare has already increased the cost of health care even though most of the law hasn't even gone into effect. Kaiser says 6 out of 10 Americans will see their premiums go up with the average cost for families being $1300 a year.

Costs going up, not down.

Here's the second big lie. You can keep your own insurance and doctor... remember when Obama said this?

“If you like your doctor, you will be able to keep your doctor, period. If you like your health care plan, you'll be able to keep your health care plan, period. No one will take it away, no matter what.”

Wrong again.

The latest report from “The Congressional Budget Office” and “The Joint Committee on Taxation” says up to 20 million Americans could lose their employer-provided health insurance - a direct result of Obamacare.

The other big lie was the price-tag.

The CBO says the health-care law will cost $1.76 trillion over a decade - that's double what the President said it would cost. He's off by about $800 billion - not even close enough for government work.

We were even promised Obamacare would cut the deficit! Harry Reid said it wouldn't add a dime to the deficit! There are many more of course… including the 'no new taxes' pledge.

The Supreme Court decides on Thursday if Obamacare lives or dies.

Until then, I agree with Vice President Joe Biden when he said,

“This is a big f**king deal.”

That's just the problem – it is big, and the American people can't afford it and don't want it.

Europe's Been in Denial for 30 Years, But Now They're Blaming the USA

by Gerri Willis

Blame America.

That's the game being played by European officials at this week's G20 meeting. In fact, the President of the EU Commission, Jose Manuel Barroso, had some choice words for us.

“This crisis was not originated in Europe. Seeing as you mention North America, this crisis originated in North America, and much of our financial sector was contaminated by, how can I put it, unorthodox practices from some sectors of the financial market.”

It's worth noting before Barosso was President of the EU he was Prime Minister of Portugal, a country with a GDP roughly the size of Connecticut. An experienced hand at running global economies? I don't think so.

And, to his point that it's all the Americans' fault, I'm sorry, but did Wall Street force Europe to do all that spending? Did America design your half-baked currency union?

This is awfully arrogant for a guy leading a European union where country after country needs a bailout.

Really, Europe’s responsible for a host of -- how can I put it -- unorthodox practices that we can be thankful never spread here.

Let's look at France.

They brought the world the government-enforced 35 hour work week. Work more than that and you're entitled to overtime. France even put in a limit on overtime. 220 hours a year.

That works out to a little over 4 hours a week.

Would you want to hire a new employee if you were banned from getting a normal 40 hour work week out them?

France has loosened those restrictions, but with policies like that, is it any wonder that unemployment is 12 percent or higher for a third of Europe?

Did you ever think our eight percent unemployment would seem low?

But how about Spain?

Creators of the Siesta. A three-hour break in the middle of the day when businesses shut down so everyone can take a nap. Sounds nice. Doesn't sound productive.

Which will take us to Greece - really the pioneers of unsustainable government spending where nearly one in five work for the government, where even hairdressers get to retire early because it's defined as "hard labor."

Look, Europe’s problems have been around for 30 or 40 years. They're paying for a welfare state and entitlement programs they can't afford anymore, and nobody wants to lend them money.

But if you listen to the EU Commissioner, it's clear they haven't got the message.

“ Frankly we are not coming here to receive lessons in terms of democracy or in terms of how to handle the economy, because the European Union has a model that we may be very proud of.”

Sounds like Europe’s in a state of denial. If it's going to get out of this mess, it's going to have to reform itself. Pointing fingers isn't going to help.

They Control the Nation's Purse Strings - Can They Balance Their Checkbook?

by Gerri Willis

You know the last year was a rough one for the economy. If your finances took a hit, you're certainly not alone! Not even our most powerful politicians were spared.

That's according to the latest financial disclosures from Congress.

One of the hardest hit? Nancy Pelosi.

The House's top Democrat saw her reported net worth shrink by eight and a half million dollars in the last year, but you don't have to feel bad.

Her net worth is still nearly 26 and a half million dollars!

And while her disclosures show her investments overall lost money, here's one healthy part of her portfolio.

Pelosi made at least $50K selling the grapes harvested at her Saint Helena, California vineyard.

That's as much as ten times what she sold two years ago!

But real estate doesn't work out for everyone. Senate Majority Leader Harry Reid is the proud owner of 160 acres in Bullhead City, Arizona. Now valued at $250K. But just two years ago it was worth a cool million.

In all, Senator Reid saw his minimum net worth drop $800K last year.

Really, things look better for leadership on the other side of the aisle. Speaker of the House John Boehner did see his net worth drop $400K, from over two million to $1.7M, but the man carries no debt, and most of his money is invested in an I.R.A.

That's what I call fiscally responsible!

Here's the great thing about these financial disclosures. It's a window into the financial acumen of the people in charge of the national check book.

Check this out. A number of lawmakers took advantage of record-low mortgage rates, and refinanced on million-dollar properties, saving themselves a bundle.

In fact, Senator Lamar Alexander refinanced four mortgages in Nashville, worth at least three and quarter million.

However, when you consider the size of our national debt, I don't think you'll be surprised to hear a number of legislators seem to have a problem with credit card debt.

New York Congressman Steve Israel has at least $60K in credit card debt.

Alabama Congressman Joe Bonner has $45K.

Senators Cantwell and Cornyn both fessed up to $15K.

And for Senator Cornyn, he's paying a 17% interest rate. Ouch!

But we don't have reports for everyone on Capitol Hill. 89 House members and 17 Senators got extensions to file their disclosures, including many of the richest. From Darrel Issa to John Kerry.

But based on what this group reported last time, I don't think we have to be worried about them going hungry anytime soon.

If you're anything like me - sick and tired of the government getting in the way of your business, sticking its nose where it doesn't belong - these disclosure records are your opportunity to get some revenge.

Log on and take a close look at your representative.

Happy snooping!

Bain Blame Game

by Gerri Willis

The race to November is on, and President Obama is launching a new ad campaign, trying to score votes by blasting Mitt Romney and his tenure as the head of Bain Capital, a private equity firm.

“Bain capital was the majority owner. They were responsible. Mitt Romney was deeply involved in the influence that he exercised over these companies. They made as much money off it as they could, and they closed it down, they filed for bankruptcy without any concern for the families in the communities. Like a vampire. Came in and sucked the life out of us. It was like watching an old friend bleed to death.”

Calling this ad an attack is, if anything, an understatement. Even prominent Democrats are coming out against it for being over the top.

But it does raise some interesting questions.

Is Bain or private equity investing in general morally bankrupt? Is Romney a corporate raider more ruthless than Wall Street?

To answer that, you first have to understand what private equity is -- which the critics clearly don't.

Private-equity firms look for companies that have lost value. They buy those companies, and then invest more in them. That means everything from new strategy to new equipment to new paint on the walls. That investment costs more money, and usually that leads to borrowing, but that's funding the company could never have gotten on its own.

Consider Axle Tech - a manufacturer in Michigan that supplies our soldiers in Afghanistan. The Carlyle Group took over the company in 2005. With their backing, Axle Tech was able to double both production and employment.

Likewise the "victims" of Bain were out of favor and performing poorly. Which is to say, if Bain hadn't come along these companies might have closed their doors and shut down entirely. Not a recipe for job gains.

What about the charge Bain was a hit and run investor - in it for a quick buck?

Not if you look at the facts. The Wall Street Journal analyzed 77 of the companies Bain invested in - their relationship lasted as long as eight years.

That ain't short term to me.

Look, the real critics of private equity seem to believe these failing companies would have been better off struggling along on their own.

But doesn't it make more sense to turn a business around, rather than watching them hang on by their fingernails and hoping things get better? That's really what the critics are talking about. Wishing, hoping, and waiting.

Now the charge private equity firms fire people is true. Often the first out the door though is senior management. And if the company is dying, everyone's losing their job anyway. But if the firm is successful, more people are hired.

Even the federal government knew they had to slim down the automakers when they bailed them out three years ago, pressuring them to trim their bloated dealership networks. Slashing thousands of jobs.

It is fair to look at how well Bain performed - 22 percent of its investments went belly up.

But the firm also launched Staples, Dominos Pizza and Sports Authority.

Today those companies employ a total of nearly 116,000 people. And Bain investors tripled their money.

Other companies that have benefitted from private equity investors include a couple you might have heard of: GNC, Burger King, and HCA.

So was Bain greedy? Maybe.

Ruthless -- well -- in their quest for profits, yes.

But many people benefitted from their efforts. In other words, companies like Bain do more good than harm.

Not to mention: It's tough for the President to be too hard on so-called "vulture capitalists." after all, he took three and a half million dollars from private equity executives in the last election. And you can bet he'd like even more this time around.

Mortgage Money Misspent

by Gerri Willis

California Governor Jerry Brown has a secret weapon in his fight to close his state's $16 billion budget gap.

Yes, he's doing the usual things politicians do. He's raising taxes; he's making some budget cuts. But to make ends meet he's tapping into a $400 million slush fund provided by the nation's biggest banks.

Of course, that's not what that money was meant for.

Earlier this year, the country's five biggest banks reached a $25 billion settlement with the 50 states over abuses in their mortgage and foreclosure processes. Remember robo-signing?

Most of the settlement money is coming from writing down mortgage debt, but two and half billion is cash, earmarked for the states to prevent foreclosures, investigate fraud, and lessen the impact of the housing crisis.

California's not alone in this. Only half the states - 27 - are using these funds as intended.

The other 23 have found this windfall too tempting to pass up and are dipping into it, like California, to plug holes in their budgets.

Some states are getting creative.

Georgia plans to use its share - $99 million dollars - to attract more businesses to the state. The Georgia Governor's Office saying job creation is the best way to save honest homeowners from foreclosure.

But then there are states like Missouri. The "show-me” state should change its name to the shameless state. Its $40 million payout is going to make up for cuts they previously made to higher education.

Virginia using most of its $67 million to bail out local governments deep in debt, while Texas is depositing its $125 million straight into the general budget.

This is the states' second-largest settlement in history. Payouts like this don't happen every year.

Instead of using this money as intended, to shore up the nation's troubled housing market, politicians are exploiting it so they can put off making tough budget decisions. What are they going to do next year? Hope it's someone else's problem, I guess.

My objection to the settlement is this: It delayed any recovery in the housing market because banks didn't want to lend without knowing how much they'd be on the hook for in a settlement.

Just as bad, a slew of folks who should have lost their homes because they weren't paying their mortgage were able to squat for months and months - living rent free.

None of this helped the average homeowners who were faithfully paying their mortgage. Because there was no recovery in housing prices and the market seized up, sellers and buyers alike stayed home.

Here's the real problem with the management of this settlement: Nobody here seems to be looking out for the homeowner.

And I mean the homeowner who is paying his or her mortgage and owes more than their home is worth.

This is a tragedy.

Get government out of the way and let the market recover.

One Nation Under Debt

by Gerri Willis

Our debt crisis reminds me of this moment from Gulliver’s Travels:

Gulliver is us – literally hamstrung by debt carried away by our own spending!

Think about it. Our country has the biggest economy on the planet. We're a giant, but we're held down by trillions of tiny obligations.

The problem with this is that it limits what we can do.

It means some things are just off the table.

What if, for example, Hurricane Katrina happened right now? That’s a $135 billion tab for clean up and rebuilding.

Or what if the devastating Japanese earthquake and tsunami occurred in California instead of Japan?

That was over $300 billion in damages.

And it's not just natural disasters that sport these big tabs for government.

What about war?

We paid $823 billion for the Iraq war in actual expenditures between 2001 and 2012.

The Afghanistan war - $557 billion during the same period, and oh, remember we fought these at the same time!

Look, I’m not saying we should create a budget for the next war. But we have to be flexible enough financially to underwrite one.

What if Iran bombs us tomorrow?

It's the same reason you get insurance - just in case something happens.

Then there are the projects you do because you want to - the ones that make your heart soar.

Remember this?

John F. Kennedy on May 25, 1961: “I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to the earth. No single space project in this period will be more impressive to mankind or more important to the long-range exploration of space. And none will be so difficult, or expensive to accomplish.”

Just eight years later, man walked on the moon.

President Kennedy set that goal, and we achieved it.

And it was expensive.

The Apollo program that took us to the moon cost over $100 billion in today's dollars.

But last July we saw the space shuttle blast off for the last time.

NASA's been grounded. Today the shuttles are sitting in museums because the President doesn't believe we can afford to dream.

It's appalling.

We need to constrain spending on the things we aren't so keen on bankrolling - Solyndra, the GSA's Vegas vacation.

So we can pay for the things we truly need and want.

Now that the fight over the debt limit is heating up again, Speaker of the House John Boehner gave us this perspective today:

“We shouldn't dread the debt limit. We should welcome it. It's an action-forcing event in a town that has become infamous for inaction.”

This debt fight has been playing out for a year. All we've gotten is gridlock, and short-term solutions.

It's time for Washington to realize now is the time for action.

Go big, and go bold.

Obama Campaign Gone Wild

by Gerri Willis

The Obama administration trying to pivot back to the economy today after spending a week talking about social issues.

The campaign has just launched a new wave of attack ads against Mitt Romney. This latest ad says Romney is a job killer. The ad blames Romney for the closing of GST Steel and the loss of 750 jobs.

Here's the real story:

The struggling steel maker was bought by Bain capital in the late 1990’s. Romney approved of the deal at the time.But the factory eventually went through bankruptcy, and closed.

This is a critical narrative for the Obama campaign as it seeks to paint Romney as vulture capitalist - a job killer - not a job creator.

The problem with the ad is Romney had already left Bain capital to go run the Salt Lake City Olympics in early 1999. The bankruptcy and layoffs at GST Steel happened after that in 2000 and 2001.

Even the President's traditional allies in the national news media say the claims Romney was responsible for closing the plant were flat out false. The Washington Post's fact checkers giving the ad three Pinocchios!

On one of the morning shows today, car czar Steve Rattner called the claims "unfair".

But it's not just calling Mitt Romney a job killer - where the Obama campaign stretches the truth - it also does it when claiming the President himself is a job creator.

On Friday we told you about how the Obama administration claims to have helped a man get a job. The only problem is, it looks like the guy wasn't unemployed in the first place!

ABC News first reported the story of Brian Slagle - an auto worker in Ohio – who was scared to death when he lost his job - until President Obama helped him get it back.

Only problem is... Slagle has apparently been employed ... Since 2006!

The Obama campaign dodged questions on the issue and Slagle isn't talking either.

Both of these ads are part of a multi-million dollar TV ad blitz in several key swing states. And we are about to be hit in coming months with all kinds of ads as the campaign continues to heat up.

They should come with a disclaimer: Viewer discretion advised.


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