Dave Gonigam – May 10, 2012
- Nice work if you can get it: But if you can’t become a congressman — with a $1,285 a month car lease — you can still make money like one…
- QE3 predictions start crawling out of the woodwork: Why Marc Faber isn’t on board… and the event he says would set up a 1987-style crash
- China bails on eurozone government debt: Chuck Butler on why this is bad news… for the dollar
- Canceled fireworks… revived bake sales… the ultimate in arbitrary revenue-grabbing law enforcement… and more!
There’s no occupation like it: For starters, a salary more than three times the median household income.
Plus benefits described in one media account like this: “A generous guaranteed pension, great health benefits, including on-site care, lots of free travel and an expense account that could make a corporate titan drool.”
A few people who’ve landed this cushy gig appear to have guilty consciences. Thus one of them proposed last week to “reduce congressional salaries by 5%, as well as eliminate the automatic cost-of-living adjustments that members of Congress receive annually.”
The man with the guilty conscience is Rep. Kevin Yoder (R-Kan.). Perhaps he’s the designated fall guy this congressional term. Two years ago, it was Rep. Ann Kirkpatrick (D-Ariz.). Then, the idea went nowhere. We’re certain it will meet the same fate this time.
(Ironic footnote: For all the nobility of her gesture, Kirkpatrick lost her bid for re-election that year.)
For the record, members of the House and Senate make $174,000 annually.
For comparison’s sake, U.S. median household income in 2010 was less than a third of that figure — $49,445.
The number fell 1.6% between 2007-2010, according to the Census Bureau. That’s before you adjust for inflation. Take the cost of living into account and the median U.S. household brought home less in 2010 than it did in… drum roll, please… 1997.
Between 1998-2009, Congress never went more than two years without a pay increase.
Members haven’t tried raising it since the current level kicked in on Jan. 1, 2009. Something about “pitchforks and torches in the middle of a recession,” we suspect…
But salary doesn’t begin to tell the story. “It would take more than a 5% pay cut to scale back the regal lifestyle of America’s elected representatives,” The Fiscal Times reported when Rep. Kirkpatrick floated the idea.
Among the perks they get…
- A pension twice as generous as the typical defined-benefit pension plan in the private sector
- A “thrift savings plan” that matches contributions at a rate twice as generous as the typical private-sector 401(k)
- Health insurance on a par with those offered by big companies; the government picks up about 70% of the cost
- Free parking at the Capitol and at D.C.-area airports, subsidized gym membership and subsidized day care. In addition, members can collect a $3,000 tax deduction to write off living expenses when away from their home district or state.
And then there’s the travel allowance. In addition to taxpayer-paid travel between home and Washington, D.C., “there are lots of ways you can globe-trot on somebody else’s dime,” says The Fiscal Times.
“Join a committee, for example, and you can participate in fact-finding trips all over the globe.” The 2009 climate change summit in Copenhagen cost taxpayers $550,000 — which works out to $2,200 per person, per day.
One example of the perks: Retiring Rep. Ed Towns (D-N.Y.) dipped into his congressional office budget to lease a high-end Mercury model for $1,285 a month. Which we suspect is rather more than his typical Brooklyn constituent could afford.
The New York Daily News says the lease “breaks no rules”… but it does look bad. After the TV tabloid Inside Edition made the lease public, Towns downgraded to a Lincoln MKZ Hybrid, leasing for a more modest $957 a month. Bummer.
Further, his wife, Gwen, drives an Infiniti leased for $602 a month. That money comes from Towns’ campaign fund.
“Election campaign rules give a congressman very wide discretion on what falls under ‘bona fide campaign expenses,’” says Meredith McGehee of the Campaign Legal Center, “but having your wife run around in a campaign car could push the boundaries of creative interpretation.”
“A Towns campaign spokesman could not say if Gwen Towns was reimbursing the campaign for the vehicle,” reports the Daily News. We won’t hold our breath to find out.
As usual when we offer up a laundry list of outrages like this… you can get mad, or you can get rich.
Fact is, members of Congress employ one means of lining their pockets that’s completely legal… and accessible even to you, the peon taxpayer.
Jim Nelson and our income-investing desk turned up some interesting figures in the course of researching this method. They didn’t even start out with the intention of pursuing a political angle. But they found it readily enough.
Check out what some leading members of Congress have earned using this intriguing investing trick…
“In fact,” says Jim, “my research uncovered at least 94 different congressmen doing this…for a total of at least 6,224 congressional paydays just in the last year alone.”
President Obama and former President Bush do it too — each to the tune of five figures.
These are investments you can put in your own account, today… and because the most powerful politicos in Washington own them too, you can be sure those politicians will go to bat to protect the income streams these investments deliver.
“All 12 of these plays,” says Jim, “are in very influential politicians’ own portfolios. We found all of them completely independently…each based on their own merits and ability to grow our income. But having a few policymakers on our side certainly doesn’t hurt.”
Jim lays out all 12 in a new report he’s prepared for every new member of his entry-level newsletter, Lifetime Income Report. Get the scoop right here.
The euro-scare is taking a breather today: Major U.S. stock indexes are up modestly, a little under half a percent as of this writing.
The Dow is back within reach of 12,900. The S&P’s at 1,360.
The QE3 guessing game is suddenly back in vogue.
Pimco chief Bill Gross tweeted yesterday that the Federal Reserve is “getting closer” to another round of Treasury purchases — or what you and I might call money printing.
Ditto for Goldman Sachs chief economist Jan Hatzius. “In such an uncertain environment,” he writes in a new report, “taking out a bit more insurance still looks like the sensible choice for U.S. monetary policy makers.” The Fed’s next meeting is June 19-20.
Gloom Boom & Doom Report editor Marc Faber isn’t so certain: He says it depends on what happens to stocks from here.
QE3 would “definitely occur” if the S&P drops another 100-150 points from current levels, he tells Bloomberg TV. If it bounces back to 1,400 it looks less likely.
And if the S&P indeed can top 1,400 again… Faber says that greatly raises the odds of a 1987-style crash.
“I think the market will have difficulties to move up strongly unless we have a massive QE3,” he said. “If the market makes a new high, it will be a new high with very few stocks pushing up and the majority of stocks having already rolled over.”
“If it moves and makes a high above 1,422, the second half of the year could witness a crash, like in 1987.”
This forecast will no doubt make Dr. Faber’s appearance at the Agora Financial Investment Symposium especially timely. He speaks at events all over the globe, but he considers ours “among the very best, anywhere in the world.”
For a full speaker lineup, and access to a significant discount off the regular registration fee, please review this invitation. We’d love to see you this July in Vancouver.
After a two-day drubbing, gold is trying to get its bearings again. The price is holding steady a little below $1,600. Silver’s stuck at $29.26.
Oil, however, is recovering a bit; at last check, it’s $97.14.
This week’s “mock trade” suggested by Abe Cofnas will be a nail-biter. The price needs to pop to $98.25. If it does, it’s a four-day payout of 108%. Stay tuned…
After three days of volatility, the currency markets are settling down. The dollar index sits just above 80. The index’s biggest component, the euro, is at $1.296.
And that’s despite one of the more hair-raising headlines from Europe all week.
China’s sovereign wealth fund has halted its purchases of eurozone government debt.
“We still have our people looking at opportunities in Europe, even though we don’t want to buy any government bonds,” said Gao Xiqing, president of China Investment Corp.
“The eurozone is China’s largest export destination,” says EverBank’s Chuck Butler by way of background. “Did that surprise you? I bet you thought it was the U.S. But no, it’s the eurozone.”
“Obviously, China has bought enough European sovereign debt (ESD) to fill their desires. If The Chinese SWF can back away from its biggest customer, then it should have no problem backing away from its second-biggest customer (the U.S.).”
“The Chinese have become the world’s financier, taking that away from the U.S., and they have also made big inroads to removing the dollar as the settlement mechanism — in terms of trade — by signing currency swap agreements with a boatload of countries.”
That includes Iran, as we spotlighted in yesterday’s 5.
Meanwhile, the Federal Reserve has approved an application by a major Chinese bank to acquire retail bank branches in the United States.
The Industrial and Commercial Bank of China (ICBC) will pay $140 million to acquire an 80% stake in Bank of East Asia USA.
“It’s a foot in the door,” says Chuck. “And just another baby step for China to remove the dollar as the reserve currency of the world.”
Another year, another round of Independence Day fireworks ceremonies that are fizzling.
The town of New Rochelle, N.Y., has canceled its July Fourth festivities; the $75,000 line item was removed from this year’s budget. So were the Memorial Day and Thanksgiving Day parades, at $30,000 a pop.
“New Rochelle has asked for donations to help save the holiday celebrations,” reports WNBC-TV, “and so far, enough money has been collected to hold the Memorial Day parade.”
And yes, trivia fans — New Rochelle was the place Rob and Laura Petrie called home on The Dick Van Dyke Show. Suburbia ain’t what it used to be…
“A growing number of states are taking aim at the driver’s licenses of motorists who refuse to pay [parking fines],” according to USA Today — capturing the desperation on the revenue side of local government ledgers.
As of next Wednesday, Michigan will suspend driver’s licenses after three unpaid tickets. Up till now, it was six.
New York, New Jersey, Illinois and Wisconsin are among the states where blowing off a parking ticket can ultimately cost you your license. Other states simply refuse to renew your license. Still others will refuse to renew your vehicle registration.
“The driver’s license has become more and more a hammer the courts use to get people to comply with whatever they need,” according to Sheila Prior with the American Association of Motor Vehicle Administrators.
“The impetus behind the laws is money,” the paper says. The change in Michigan was spurred in part by Detroit – where drivers have racked up $30 million in unpaid tickets.
And in the ultimate combination of a revenue grab and petty tyranny… pedestrians in Fort Lee, N.J., will soon be fined for using their mobile phones in an unapproved manner.
Exactly how, however, is unclear.
“Fort Lee’s police chief has seen his share of careless pedestrians texting or talking on the phone,” reports WCBS-AM. “He said he has counted 23 pedestrian accidents since January, ranging from minor bumps and bruises to three fatalities. After trying pamphlets and brochures, he’s ordering his officers to ticket careless pedestrians on the spot.”
Now… short of keeping your phone in your pocket the entire time you’re out on the street — which rather defeats the purpose — how would you avoid breaking the law?
You can’t.
“Unlike careless driving,” the radio station says, “there’s no specific charge for being a careless pedestrian, but Chief [Thomas] Ripoli said his officers are watching, adding they’ll know it when they see it.”
Just great. Life is now a moving violation… and at $200 per offense, no less.
As Addison has been saying for well nigh a year now… when the mother of all financial bubbles pops, you’ll feel it on the local level first. If you don’t see it around you yet, rest assured you will. Here’s how to get ready.
Regards,
Dave Gonigam
The 5 Min. Forecast
P.S. Lest we leave you on a downer, we see the Massachusetts legislature has overturned state regulations that would have banned school bake sales.
The “cupcake crackdown,” as it was labeled by the Boston Herald, aimed to have only “healthful” foods sold outside the lunchroom from 30 minutes before the school day until 30 minutes after.
“That is the stupidest thing I’ve seen in my career,” said state Rep. Cory Atkins. “Talk about hitting the nerve of government reaching far into people’s lives.”
As we’ve seen in the case of the federal Stop Online Piracy Act, public outrage can make the bureaucrats back off… only to come back with something different, or stealthier. Stay tuned…