Stealing the stimulus

Why the Democrats’ pork-stuffed stimulus package won’t help the economy

By Alyssa A. Lappen
FrontPageMagazine | Feb. 6, 2009

When are earmarks not earmarks? When Congressional Democrats add them to New Deal-style legislation.

According to Congressional Democrats, “there are no earmarks” in the American Recovery and Reinvestment Act of 2009, the massive $1.1 trillion stimulus bill under debate in the Senate this week. In fact, there is little except earmarks in the pork-laden legislation the Obama administration is marketing to skeptical Americans as the urgent cure for the country’s ailing economy.

As things now stand, less than 10 percent of the stimulus bill’s proposed projects could be expected to generate real economic uplift, mostly through tax credits and infrastructure funds. On the other hand, more than 90 percent of the bill would channel taxpayer funds to “special-interest earmarks,” state-level bailouts, and “permanent spending” increases for what will in effect be social engineering by the federal government.

Pork abounds in the bill. For instance, there is $88 million for a new Coast Guard polar icebreaker, $13 billion to repair and weatherize public housing, $2.25 billion for national parks, and $1 billion for the National Railway Passenger Corp. (Amtrak), which hasn’t earned one red cent since its original 1971 government rescue from Penn Central’s ashes. And that’s just the beginning.

The Senate bill greatly expands welfare spending. There are $13.3 billion earmarked to raise health insurance for unemployed workers, $27.1 billion for increased unemployment benefits, and $11.1 billion for “Other Unemployment Compensation.” Another $20 billion will go to raise maximum Supplemental Nutrition Assurance Program benefits (i.e., food stamps).

Elsewhere, the bill looks like a vehicle for Barack Obama’s campaign plan to foster a national “green economy.” To that end, there is $18.5 billion set aside for energy efficiency and renewable energy programs, another $2.4 billion for demonstrations of how to safely remove atmospheric greenhouse gas, $2 billion for a Matoon, Ill. FutureGen near-zero emission power plant, and $600 million for federal government employee hybrid vehicles.

Despite its grand billing as a national life preserver, House Speaker Nancy Pelosi, in a telling demonstration of what Democrats once called “the politics of fear,” had earlier warned that “five hundred million” Americans would loose their job each month if the stimulus package were not passed…,” the bill is increasingly becoming liberal politics by other means. All in all, the bill packs in $136 billion for unproven ideas to create 32 new open-ended federal programs—most of which failed close inspection in earlier Congressional sessions.

While the bill will vastly increase the federal government’s reach, it is noteworthy that the government has never profitably managed a single enterprise. A by-no-means-exhaustive list of government failures might include mortgage giants Fanny Mae Freddie Mac, the mismanaged Federal Reserve Bank and US Postal Service, and the insolvent Social Security, Medicare, Medicaid systems. They’re all bankrupt, as are 40 of the 50 states, each of which is now begging for handouts from a federal government effectively just as bankrupt. As pundit David Coughlin asks, “Why do we think the people who caused these problems are able to fix them …?”

The stimulus bill amounts to a major opportunity missed. Bankruptcy—not a government bailout—is often the road back to solvency. Consider that six major airlines—including United, Delta, Northwest, and Continental—all filed for Chapter 11 and emerged with real hopes for profit. Such large and small steel companies as National Steel, Bethlehem Steel, Wheeling-Pittsburgh, Kaiser, Bayou, Weirton Steel, and many others have leveraged Chapter 11 to emerge as stand-alone companies—or to sell a leaner version of themselves to competitors. Pacific Gas & Electric and Kmart are healthy again, too, following their Chapter 11 filings.

No surprise, then, that over 100 economists are petitioning the Senate against the stimulus and 200 oppose financial bailouts in general. The public seems to agree. Support for the Senate stimulus plan has plummeted to just 37%, according to Rasmussen. Cooler heads are even starting to prevail in the Senate. President Obama called “centrist” Maine Sen. Susan Collins to the White House this week to discuss cutting the plan’s price tag to $700 billion, and to focus on tax cuts and spending to specifically generate jobs. That means spending of dubious stimulative potential—$780 million to prepare for a flu pandemic, for example—may soon be trimmed from the bill.

Still, it’s too bad that no one has managed to convince President Obama to eliminate the idea of “stimulus” spending all together. The U.S. already has squandered nearly $1 trillion in bailouts, to no avail. We got here “by spending and investing money that didn’t exist,” notes Oklahoma Sen. Tom Coburn. As a good physician, Coburn wisely prescribes treating the disease, not its symptoms.

The generic term for raising holdings in a tanking stock is “doubling down.” But great investors only do that for successful companies. The stimulus bill is something else entirely. If the Senate passes this “stimulus,” it would merely be doubling down on legislative pork. In the end, not even calling such proposals “job-creating investments” can disguise the fact that the bill won’t actually create jobs.

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Investing in Jihad

The hidden perils of shari’a finance

By Alyssa A. Lappen
FrontPageMagazine | Feb. 4, 2009

Indonesian sukuk buyers may sink in the same ship with the dupes heeding Western headlines and Islamic gurus since the Bernard Madoff scandal broke last December. These financial product pushers have increasingly exaggerated the “safety” of Islamic finance securities to offset “the cancer of interest-bearing debt.” Investors are now snapping up three-year Indonesian bonds that will supposedly hold their full value and make money—an astronomical 12%—while paradoxically avoiding speculation, alcohol, gambling, interest, and other “haram” activities forbidden under shari’a law.

Granted, Bernie Madoff’s “hedge fund” investors did not expect to be robbed blind. But they knowingly exchanged high risk for high returns. Indeed, alternative funds are so risky that U.S. securities laws limit their sale to investors with at least $2 million in financial assets—in other words, enough to protect them against being totally wiped out.

But even folks who should know better don’t grasp the risks of Islamic finance. London’s Financial Times, for example, touted the Amana Trust “Islamic” Income fund, based in Washington state, for “losing only 25.8 per cent” in 2008… half [sic] the average 44% loss for US stock funds.” Likewise, an SEI Investments company analyst recommended Islamic mutual funds as protection from the stock and bond markets’ “extreme ups and downs,” despite their substantial losses in the last quarter of 2008.

Odds are, the average Muslim “Mohammed Sixpack” doesn’t understand the financial risks of 12% Indonesian sukuk bonds either. High yields—for example 12%, when the U.S. Federal Reserve lends “overnight” to banks at rates close to zero—are usually called “junk.”

Unfortunately, these bonds are also backed by “assets” carved up like pie and “securitized.” Meaning: they can head south in a hurry, just like the sub-prime mortgages that sank the U.S. economy, which were also also backed by assets and securitized, not to mention the mortgage-backed issues that unraveled dozens of huge bond, pension and public institutional funds in 1994. In 1637, Dutch tulip bulb contracts sold for over 20 times the annual wages of a skilled craftsman—until their “solid” value withered overnight in the first financial crash in recorded history. [1]

Islamic finance carries many other risks besides.

The Thomas More Law Center in Ann Arbor, Mich. in December sued former Treasury Secretary Henry Paulson and the Federal Reserve Board to stop $40 billion in U.S. bail out aid from reaching American International Group (AIG). The insurance giant devotes an entire division to shari’a finance products, which Thomas More considers unsafe, unconstitutional and anti-American.

The suit zeros in on statutes fundamental to shari’a law, such as funding jihad warfare. It also focuses on AIG’s “supervisory committee” members—Bahraini Sheikh Nizam Yaquby, Saudi Mohammed Ali Elgari and Pakistani Muhammed Imran Ashraf Usmani, a “devoted disciple” of his father Mufti Taqi Usmani. The latter Shari’a-compliant finance authority directs Western Muslims to aggressively pursue violent jihad against the their governments.

AIG is not alone.

As I’ve often previously noted, the shari’a finance boards setting “Islamic banking” standards themselves employ highly objectionable “authorities.” Both the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and Islamic Financial Services Board (IFSB), for example, include many representatives of nations, banks, and organizations implicated in terror-funding.

Atlas Shrugs recently comprised a more inclusive list of hot shot shari’a personalities. Apart from Taqi Usmani—a Pakistani shari’a court justice since 1982, shari’a director of the Saudi Al Baraka Investment Corp. implicated in 9/11 financing and until recently an advisor to Dow Jones Islamic Indexes—shari’a boards include other graduates of the most radical Saudi and Pakistani Islamic universities and madrassas that duplicate Usmani’s wish to impose shari’a law globally.

Shari’a finance still retains Western adherents. A Jan. 16, 2009 Hedge Funds Review article for example advises forlorn, out-of-work money managers, “Don’t forget Islamic finance.”

Several readers disagree. “Forget Islamic finance…. It won’t make it through the crisis,” a private equity venture capitalist comments. Islamic finance itself is “flawed in principle,” since “charging more than you loaned is called ‘interest’,” adds an investor relations man. As these Hedge Funds Review subscribers avow, the industry cannot possibly elude the financial risks that now face every other bank and investment house in the world.

Notably, Stern School economics professor and former Treasury Department and White House advisor Nouriel Roubini, the publisher of Roubini Global Economics Monitor (RGE Monitor), also considers Islamic finance to be risky. The Islamic finance reliance on debt issues backed by assets exposes the business and investors both to “devaluation” of underlying assets (hyperbolically speaking, like wilting tulips) and the overall freeze in normal capital flows, or liquidity. The level of new Islamic bond issues worldwide fell 60% from January through October 2008, to only $15.2 billion, against that of the first 10 months in 2007. Low oil prices and Middle East liquidity troubles could also hurt demand for shari’a finance instruments throughout 2009, Roubini posits, according to the Asian Energy blog.

Yet the greatest, albeit hidden, risks of shari’a finance are unseen by even the most astute economists. By investing alone, non-Muslims actively participate in what former Malaysian Prime Minister Mahathir Mohamed calls “a jihad worth supporting,” namely an effort to impose “universal Islamic banking.” Islamic banking is not an ancient religious tradition, but a 20th century invention of the Muslim Brotherhood and their spiritual chief Yusuf Qaradawi. It was developed to subsume capitalism with Islamic finance—a prospect neither safe nor mere fantasy.

Furthermore, shari’a investors may also inadvertently support economic jihad, as mandated by Qur’an 49:15: “Strive with their wealth and their lives for the cause of Allah,” and reiterated in 61:10-11: “Shall I show you a commerce that will save you from a painful doom? …strive for the cause of Allah with your wealth and your lives.”

Shari’a funds collect at least 2.5% of income, wealth and profits, plus arbitrarily determined “purification” levies on profits derived from those Islamically forbidden, or “haram,” activities. The Standard & Poor’s Islamic indexes do list some companies that get revenues from “non-compliant activities” totaling under 5% of their gross corporate sales. In those instances, S&P applies what it calls a “dividend purification ratio,” dividing “non-compliant” revenues by the total revenues of the index. The thing is, S&P doesn’t specify exactly what activities or other attributes constitute “non-compliant,” much less how or to whom it distributes zakat and purification levies. [2] Continue reading “Investing in Jihad” →

Jihad in Gaza’s history

By Andrew Bostom and Alyssa A. Lappen
American Thinker | Feb. 1, 2009

Victor Sharpe’s interesting discussion of Gaza’s history omits any discussion of the impact of its brutal jihad conquest for the native vanquished Jewish (and Samaritan) and Christian populations, or the chronic, oppressive imposition of dhimmitude in all of historical Palestine, including Gaza, during more than 13 centuries of Muslim occupation. For additional analysis about the historical plight of the subjugated dhimmis, see this essay at The American Thinker, both parts 1 and 2. Below are some relevant details about the initial Muslim conquest and colonization.

Moshe Gil’s monumental study of Muslim subjugation and rule of historical Palestine (from 634-1099 CE) elaborates on the initial wave of jihad conquests (during the fourth and fifth decades of the seventh century, CE), and details the lasting destruction they wrought (cited in my Legacy of Islamic Antisemitism, pp. 79-80 )

…at the time of the conquest, Palestine was inhabited by Jews and Christians….The Arab tribes were to be found in the border areas, in keeping with arrangements made with the Byzantine rulers….one can assume that the local population suffered immensely during the course of the war [i.e., jihad conquests] and it is very likely that many villages were destroyed and uprooted in the frontier regions, and that the lot of these local populations was very bitter indeed. It appears that the period of the conquest was also that of the destruction of the synagogues and churches of the Byzantine era, remnants of which have been unearthed in our own time and are still being discovered. The assumption is based both on what is said in a few Christian sources…and on Muslim sources describing ‘Umar’s [Umar b. al-Khattab] visits to al-Sham. There is no doubt that one of the main purposes of these visits was to establish order and put an end to the devastation and slaughter of the local population…Towns in the western strip and the central strip (the region of the red sand hills and the swamps) in the Sharon, decreased from fifty-eight to seventeen ! It is estimated that the erosion of the soil from the western slopes of the Judaean mountains reached – as a result of the agricultural uprooting during the Muslim period – the gigantic extent of 2,000 to 4,000 cubic meters….We find direct evidence of the destruction of agriculture and the desertion of the villages in the fact that the papyri of Nessana are completely discontinued after the year 700. One can assume that at the time the inhabitants abandoned the place, evidently because of the inter-tribal warfare among the Arabs which completely undermined the internal security of the area.

Moreover, with regard to the conquest of Gaza, specifically, the Muslim chronicler Baladhuri maintained (The Legacy of Islamic Antisemitism, p.79) that 30,000 Samaritans and 20,000 Jews lived in Caesarea alone just prior to the Arab Muslim conquest; afterward, all evidence of them disappears.