Obama 5 Public 4

The US Supreme Court ruled in Obama’s favour today by endorsing his controversial Health Care Bill.

The Court’s Ruling has 4 major implications:

First, it represents a major victory for this Democratic President – one that will rejuvenate his campaign in regard to the coming November Election. It could even propel him into office for another four (4) years;

Second, it will launch an avalanche of expenditure at a time when the United States of America does not have a spare penny to spend. Its economy will suffer even more.

Third, it represents another example of the Courts’ progressive bent. Simply stated, the hard issues are being dealt with by a small select group of judges and not by the peoples’ elected representatives. - and -

Fourth, the decision will place American Health Care on the same road as followed by we Canadians. In other words, on the road of middling care.

The Health Care Law will now become the major issue for this fall’s election and in that regard, I would like to deal with implications numbers two and three.

We are all familiar with what is transpiring in Europe and things there continue to worsen given the fact that France just elected a Socialist President. His motto for Europe is to spend its way out of the economic crisis. Germany, in contrast, wants to proceed frugally and move toward balancing the European Books. Until the recent French Election, both France and Germany stood together in that, in a common front. Now they are at odds with one another and the chances of success have greatly diminished even though they were never all that great to begin with.

And we here, across the pond, are not immune from the European contagion.

The United States has been propped up by investors fleeing Europe and looking for a safe haven. They may think that they have found one in America and yet that is only an illusion. Their last two Presidents have piled on the debt to the extreme and the new American Health Care Law will greatly add to it. It will also result in greater unemployment as employers cut their workforces to avoid the new steep health care levies.

The day is quickly coming when it will be evident, even to those panicking Europeans, that there is no safe place to hide their money.

My advice, stay clear of Stock Markets.

The other implication I would like to spend a few words on is number 3 – the rising power of the Courts. It is not just in the USA that this is happening – it is, as you know, also going on big time here at home. Politicians like to deal with trivial matters and leave the heavy lifting to the Courts.

The Courts should occupy themselves with interpreting the Law as produced by the Legislators rather they use their powers interpretation to extend the Law beyond its intended meaning e.g. expand the definition of marriage to include gays.

There is another way they can extend the Law and that was evidenced in today’s decision. The Court endorsed Obama’s Health Care Bill which was clearly Unconstitutional, especially as it pertained to the Bill’s requirement that all Americans must take out mandatory health care coverage or face sanctions. If government / courts can order individuals to contract for health care – what is left that cannot be imposed upon the hapless? Forced purchase of broccoli?

That said, it is most sad to see that the American Courts – once the guardians of fundamental freedom – have also been drinking the progressive cool aid. I have said on earlier occasions that the USA is our last hope to see freedom prevail. Canada I believe is split one third true conservative and two thirds leftist. The US is in my opinion is split right down the middle – 50/50.

But sadly, I think the pendulum is ever moving toward the progressives. Today’s Supreme Court Decision is but another indicator of this gradual movement left.

As I see it…

‘K.D. Galagher’

THE CULPRIT IS NOT AMORTIZATION …

 

Rather it is interest rates – they are too low- but due to the fact that Western Nations find themselves on life-support – interest rates are untouchable.

In the face of this reality though, Finance Minister Flaherty has done it again – he has dropped the amortization period for residential mortgages in Canada from 30 years to 25 years having just recently reduced it down from 40 years.

It gives the impression that the Government is serious about tackling a perceived housing bubble and dealing with the issue of too much household debt.

It does neither.

In the past, when governments needed to deal with these issues they simply raised interest rates. I am in an exclusive class in that I can not only recall, but dealt with, rates that reached a staggering 22% back in the 1970s.  Can you younger ones just imagine – on your $300,000 to $400,000 residence - you would be expected to pay over $60 to $80 thousand just in annual interest charges alone.  Makes one pale – n’cest pas?

But as I said at the beginning, rates are untouchable due to the fragile state of Western Economies – Canada’s included. So you can relax.

Maybe?   You need only look to Europe where rates are rising despite the best efforts of their elected officials.

But rates aside, Governments cannot help themselves – they must be seen to do something even if the “something” makes little or no sense.  So in our case, Canada reduces the amortization period from 40 years to 25 years.

And all that does it adversely affect affordability.  In other words, it prevents prudent folks from qualifying for mortgages they would otherwise be able to manage.  And, in the case of the less wealthy, reduced amortization periods can shut the door entirely on home ownership.

I can hear you now –” Galagher isn’t that exactly what happened in the real estate meltdown south of the border – poor people qualifying for mortgages they could not afford and this resulted in the house of cards collapsing”?  Pardon the pun – but no, it is not the same thing.

In the States you are correct in saying that mortgages were given to those who should not have qualified for them in the first place. On top of this, these deadbeat mortgages were then securitized and sold as valuable bonds which greatly exacerbated the problem.  The Rule of Thumb was that if a prospective Mortgagor could ‘fog a mirror’ – then he or she qualified for a mortgage.

But I am not talking about deadbeat mortgagors – I am speaking about those folks, like you and me – rich and poor who have good credit ratings, a regular income and can well afford a house purchase if provided the right conditions.

So let’s look at an example, beginning with a quick review of the 30% Mortgage Rule – i.e. that principal, interest, and realty taxes should be no more than 30% of one’s gross income – 35% tops.  Banks use this Rule in deciding who can qualify for a mortgage. 

So we have Mr. and Mrs. Smith applying for a mortgage.  Their combined gross annual income is $100,000.  The 30% Rule indicates that they can afford mortgage payments upwards of between $30k and $35k per year.

They find a home costing $350,000 which by the way is the average cost of a home in Canada.  They are able to contribute a down payment of $50,000 which means they are in the market for a $300,000 Mortgage.  Given the Smiths’ good credit rating and steady annual earnings, the Bank qualifies them for a five year fixed interest rate of 5% calculated over an amortization period 25 years. (the 5% rate is the rate currently offered by the big 6 Banks in Canada)

Their annual payments will be $20,937.72 for principal and interest plus an additional $3,500 for realty taxes for a grand total of $24,437.72 per year. This amounts to 24.43% of the Smiths’ gross annual income,well within the 30% Guideline.

But the Smiths decide they want to pay off their mortgage more quickly and opt for a 15 year amortization – increasing their annual payment to $31,872.44 which is slightly above the 30% rule but still below the 35% maximum. They are happy with their choice since it allows them to save thousands in interest payments.

Conversely, the Smiths want to have oodles of children and decide to go with with a 40 year amortization which means their annual payments for Principal, Interest and Taxes will be only $20,736.92 – some $11,135.52 less than the 15 year amortization and $3,700.80 less than the 25 year amortization which is now legislated by the Federal Government.  

I can hear some of you saying that 40 year amortization periods increase the mortgagor’s exposure to interest rate increases.  Well so do 15 and 25 year amortization rates – all leave plenty of time for rates to increase, decrease or stay steady.

So dear reader, what amortization periods do, is provide consumers with choices in affordability. 

They do not increase debt nor do they contribute to a housing bubble.

Interest rates do both.

As I see it…

‘K.D. Galagher’

HE’s COME UNDONE …

 

Dalton McGuinty that is.

How else does one explain his recent threat to call a Summer Election with his Party trailing both the Tories – in first and the NDP, a close second.

I think being Premier is wearing thin on him and I believe it has little to do with his Party’s minority status.

If you have a better explanation, I would be happy to hear it.

The one that constantly comes up though is that he wanted an Election so he could resign after it and run for the Federal Liberals.  The problem with this explanation of course is that given their 3rd place standing in the polls, an Election would likely result in his defeat.  Ergo, the Federal Liberals would not be too keen to have a defeated Premier as their new Leader.

I also discount the minority status as the reason for his erratic behaviour – first, parties naturally cling to power regardless of whether they enjoy a full majority.  Second, if McGuinty really wanted a majority – he could easily have one.  The recent resignation of Elizabeth Witmer proves that in spades, as does the near Speakership of Frank Klees – two of the most stalwart Tories. Think how little it would take to get a low profile PCer or NDPer to cross the floor.

So if it is not the Federal Liberal Leadership, nor the current Minority Status causing McGuinty’s bizarre behaviour – I go back to my original premise that it is due to the fact that Premiership of Ontario is no longer the fun post it used to be.

Let's just look at one issue to see the truth in this.  In his first two terms, McGuinty bought and paid for Labour Peace – the Teachers, the Nurses, the Doctors, and the Bureaucrats, but now his even minimalist steps to address the deficit have caused those groups to turn against him.  Talk about fair weather friends.

With the recent downgrades in the Province’s credit rating, McGuinty knows that the jig is up. The days of spend, spend, spend – are over; and with them, has gone the joy of office.

It is a lot more fun to spend than to save and McGuinty is quickly tiring of the latter.

That McGuinty has come to his senses and called off an Election is but a temporary pause for him.  I believe we will soon see McGuinty step down and leave it to someone else to clean up the mess he has made over the course of the last decade.

For Ontarians this will be good news since their current Premier does not seem to have the heart to do what is needed.

As I see it …

‘K.D. Galagher”

We Are Most Fortunate

 

Too often we get caught up in the negatives that surround us and I am as guilty (more guilty?) as anyone.

We tend to overlook how blessed we all are in our day to day lives:

• clean drinking water
• lots of healthy food
• good shelter
• good health care
• a world class education system
• an enviable economic system
• excellent policing
• fire protection
• good roads
• sewers that work
• regular garbage pick-up
• income support
• abundant freedoms
• stable governments

The list goes on and on.

It is Father’s Day 2012 and the sun is shining.  A good time to reflect on these positives.

And, in that respect, I am even more fortunate since I have a wonderful family to love.

Last week Anne and I celebrated our 40th Wedding Anniversary where family and friends came together to share in our celebration.  When all is said and done, this is what life is about and when combined with the above, we have truly attained Bliss.

As I see it…

‘K.D. Galagher’

A Requiem For Bob Rae

 

As I begin this Blog I have no idea – beyond a vague sense – of what it will contain.

So here goes…

First off, Bob Rae had baggage – he single handily damaged Ontario’s Economy during his tenure as Premier – albeit not to the extent done by the Office’s current holder and he jumped parties – NDP to the Liberals.

These two transgressions would not nor should not be forgotten.

But the guy has class and as such, stands head and shoulders above just about everyone else currently on the political scene.  That he decided to not seek the permanent Liberal Leadership, is a death blow for that Party.

Two main reasons for his decision have been bandied about – first that he believed he could not beat young Trudeau and second that he was losing heart in trying to revive a dormant party.  Personally I put little faith in the former explanation but I think that the second is more apt to contain the truth; he was getting increasingly tired of beating a dead horse.

Many pundits like to say the Liberals must “reinvent themselves” as if that was saying something profound.  But I, like you, have no idea what that truly means and I suspect that many of them do not as well.

But I do know the Liberals too have a great deal of baggage that they must distance themselves from if they ever hope to regain a modicum of Electoral Success:

•  Official Bilingualism has been an abject failure, it has pitted French against English, Quebec against the Rest;
• Multiculturalism too has been most divisive and we are now seeing the spoiled fruits of that vision, coming home to rest;
• The Charter of Rights has taken away democratic power from the people and handed it to the Courts; and finally,
• The out of control spending evidenced by successive Liberal Regimes – plus Mulroney’s, from the 1960s onward.

How does a Party “reinvent” itself when it sees the above as Pillars of Greatness? 

The fact is, it cannot but unless it does, it is doomed and I believe Rae, of all people, understood that.

That said, the Liberals still have an Ace up their sleeve and that is Tommie Mulcair.  I have predicted great bungling on his part and so far he has not let me down.  I continue to have a great faith that he will continue in this vein.

I said when Mulcair ran for the NDP Leadership that he would in all likelihood win but that would be the worse thing that could happen to his Party.

The same holds for the Liberals – albeit in reverse – Bob Rae not taking over their permanent leadership is the worse thing that could happen to them.

All eyes are now on young Justin – but he is no Pierre and if he does decide to run – which he shouldn’t – and wins – which now is likely (although Rae would have whooped him) – he will be just an airhead fighting along with Mulcair for the rights of Quebec.

That’s it.

As I see it…

‘K. D. Galagher’ 

 

A Small (Ka-ching) Severance…

 

Two Acres to be more specific.

My wife and I own 35.5 Acres in Rural Ottawa and a small section of our property, not much more than 2 acres in size, would make a wonderful building lot – at least on paper. It is located on the extreme north-west end of our holdings, bordered by a creek and invisible from the balance of our property.  An ideal spot for a home.

I checked the Zoning and yes, our property qualified for a severance of 2 acres as long as the remainder contained at least 25 acres.  So I did the math – 35.5 acres minus the 2 acres to be severed, leaves 33.5 acres remaining.  Slam Dunk.

So I went to review this with the City Planners just to be sure I had not missed anything. 

• Do you have at least 27 acres?  “Yes I do – I have 37.5”
• Is there a road?  “Why yes, how else would a buyer gain access to their new home”?
• Well you have to factor in a set-back from the road.
• Is there a creek?  “Why yes there is – why do you ask”?
• Another set-back.
• A barn – do you have a barn?  “An old log barn not in use – don’t tell me this requires another set-back”?
• It sure does.

What started out as a small severance of but 2 acres had now swelled to between 9 and 10 acres in size.  The good news was that I still retained at least 25 acres – just, that is – so a Severance was still doable.

How much, I asked?

‘The application fee to the city is only $2,000 – you are lucky – it would cost you more if you lived in the city proper.  I felt most fortunate.

That is until the Conservation Chaps came out to our property to review our plans given that a creek – one that nearly dries up in summer – was involved.

“You’ll need a bridge” they said.  “At what cost” I asked – up to $50,000.  “Wow” I said.

In spite of this, we went ahead with the application.

It was at this point that a few other costs were disclosed to us:

1. The lands – both severed and retained would have to be surveyed – $5to $6 thousand – Ka-ching;
2. Parkland would need to be dedicated to the City – “Park Land” I asked?  “The property is not big enough to dedicate parkland”.  No problem, I was told, just pay $4,000+ in lieu of actual parkland.  Ka-ching
3. Oh and by the way, you must prepare an Environment Impact Statement because of the “significant valleylands".  “What significant valleylands” I enquired – “our property is flat”.  “Our maps show that valleylands exist and accordingly you will need to have an EIS – prepared – bureaucrats love initials.  “How much will this cost, I asked?”  “You will have to make your own arrangements with an independent professional”.  Ka-ching
4. And the folks from Conservation returned – “we need a plan of your proposed bridge prepared before we will okay your severance application”.  My pleading with them that I had no idea what the bridge would look like fell on deaf ears.  From my perspective – the bridge design would and should be determined at a future date by whomever purchased the lot and would be building on it. I considered getting the plans for the Brooklyn Bridge and submitting those to them but thought better of it.  Ka-ching
5. Plus a well needs to be drilled in advance.  “Where exactly would I put such a well considering the fact that severance approval was not guaranteed, and even if it was, I had no idea where a family home would eventually be built.  “Good points” – however…. Ka-ching
6. It was at this point that I contacted our family lawyer since he would have to prepare the legal papers should the severance go through – another Ka-ching.  It was during this meeting that he advised me that upon selling the severed lot, we would be responsible for paying Capital Gains Tax to the Government and possibly – HST to the Province – Ka-ching, Ka-ching.
7. He also advised that if we or whomever were to build on the severed lot, there would be Building Permit Fees payable of around $20,000.  Ka-ching.  

I figure if we were able to sell this 9 – 10 acre lot – assuming of course that we were eventually successful in obtaining severance approval – we’d need to sell it for something approaching $1 million if only to breakeven.

As I see it…

‘K.D. Galagher”

Tea Party … One….

 

Wall Street Occupiers … Zero.

In the run-up to this year’s Presidential Election.

As you will know, I have absolute confidence in the fact that Mitt Romney will beat Obama at the Polls this coming November.

No President to date, has piled on the debt as has the current occupant of 1600 Pennsylvania Avenue.

Yesterday, the Republican Governor of Wisconsin – a traditionally democratic state, was returned to power after the Unions successfully brought about a recall election.

The Unions were upset by the fact that Governor Walker had stripped the State’s Public Servants of the right to join them.  It is a position that I too support and would like to see implemented here in the governments of Ontario and Canada.

Simply stated, no one represents the taxpayer in government labour negotiations.  Unions want the moon – the politicians want labour peace  – and the money both are dealing with, is not their own.  It is and has been a recipe for disaster.

But let’s get back to Wisconsin.  Governor Walker was surprisingly elected in 2010 when the Democrats suffered a massive electoral reversal right across the country.  Pundits credited the Tea Partyers for seeing this reversal come about.

At that time, Governor Walker and his fellow Republicans found a State running an annual deficit of some $3.6 Billion Dollars.  Less than two years later, Wisconsin’s annual budget is now running a significant surplus.

The Unions, the Democrats, the Occupiers were livid.  Power was being taken away from them.  A Recall effort was launched and a sufficient number of signatures were secured, resulting in yesterday’s election.

The Left pulled out all the stops to see their vote turnout.  But so did the Tea Partyers.

When the dust settled – Walker was re-elected by a significant margin – and this, as mentioned, in an historically democratic state.

The moral of the story – if in an Election Year, the Democrats cannot maintain power in one of their own states – their chances of taking needed swing states, will be all the more difficult.

Bottom line – the writing is on the wall for President Obama.

As I see it…

‘K.D. Galagher’