If John McCain wants my vote he must dump Sarah Palin and fast. Judging by the latest polls showing Barack Obama moving ahead and gaining traction, I'm not the only one that feels this way. The outcome of the election is key to investors worried about a range of issues including the $700 billion federal bailout of Wall Street.

Obama may lack the experience I would hope to see in a presidential candidate but to quote a friend and fellow McCain supporter "Sarah Palin is an idiot and the only way she should be allowed in the White House is if she buys a tour ticket." This is not a unique sentiment given the Sarah Palin must go stance taken by conservative columnist Kathleen Parker of the Los Angeles Times. She says her cringe reflex is being exhausted.

I do not like Obama's proposals on capital gains taxes, a windfall oil profits tax, new government programs and several other issues, but the idea of Palin being second-in-command is a joke. And speaking of jokes, if I have misjudged, and McCain and Palin win the election, then Oprah will be surpassed as the wealthiest female in the entertainment industry. The new titan will be 30 Rock and former Saturday Night Live star Tina Fey who will be racking up fat paychecks based on the never ending material supplied by Palin.

Could the financial crisis result in the United States losing its status as the world's financial superpower?

Indeed it could, Germany's Finance Minister Peter Steinbrueck told MarketWatch.com.

"The United States will lose its status as the superpower of the global financial system, not abruptly, but it will erode," Steinbrueck said, MarketWatch.com reported. "The global financial system will become more multi-polar."

However, Steinbrueck clarified his statement in subsequent remarks to FT.com. "When we look back 10 years from now, we will see 2008 as a fundamental rupture. I am not saying the dollar will lose its reserve currency status, but it will become relative," Steinbrueck told FT.com. Further, Steinbrueck repeated Germany's refusal to allocate public funds to acquire distressed/bad assets, arguing that the crisis is mainly hitting the United States.

The U.S.: a decade of descent

Economist Richard Felson concurred with Steinbrueck's analysis for the most part, but added that the U.S.'s decline, more accurately described as "a descent," is not irreversible.

"Globalization has played a role, but much of the U.S.'s descent in the past decade stems for policy mistakes, basically policies that didn't and don't work. The nation cut taxes before it went to war, creating a large budget deficit. A lack of a forward-looking energy policy helped balloon the trade deficit. And inadequate investment in infrastructure, education, and basic research is depressing economic growth below what it should be," Felson said. "The latter resulted in far fewer jobs begin created in the decade than what's required, leading to all sorts of problems, including the housing sector's implosion. The result has been a weaker U.S. economy with more structural problems, and an inability to project economic power. Meanwhile, the economic power of China, Russia, India, and Brazil has increased. I don't think that's what policy makers intended at the start of the decade, but that's been the result."

With the U.S. Treasury's $700 billion intervention bill -- commonly called the bailout bill -- nearing President Bush's desk for review and signature into law, a compelling question has risen in economic and taxpayer circles.

Given that the U.S taxpayer is funding the recovery, if not the bailout, of financial institutions and banks, are banks and financial institutions doing enough to show their gratitude to the people of the United States, the banking sector's lender -- and investor -- of last resort?

One standpoint argues they aren't, so says economist Richard Felson, and here's what Felson would like to see: In addition to equity stakes in each company that receives taxpayer assistance, the U.S Congress should require the company/bank to pay an annual fee to fund the administrative costs of a bank for low-income citizens and senior citizens.

There is a well-known joke in political science that shows an elected public official sitting in his office, suddenly running to his balcony when he hears a large group of citizens heading off to a rally in the distance. He looks at them and says: "There go my people. I better go out there and lead them."

If the initial analysis of the U.S. Treasury's $700 billion bailout plan is any indicator of public sentiment, it looks like the people may be way ahead of their public officials -- or public officials are way behind -- depending on your perspective.

There's a sense that the people who will pay for the potential bailout/intervention -- typical citizens -- aren't getting enough in return. These critics say the U.S. taxpayer should get an equity stake as collateral for the loans they may make to various banks/companies, and that the taxpayer should also share in the profits, should they occur.

Further, some question why the taxpayer is being used to bailout the very institutions that were factors in the start and growth of the financial crisis in the first place.

Still others argue why the U.S. Treasury is clamoring to secure hundreds of billions of taxpayer money to prop-up financial institutions and isn't doing more to help homeowners refinance their mortgages to lower rates, and in the process prevent foreclosures that were a major factor in the development (and continuation) of the financial crisis.

And others are wondering why CEO/executive salary caps can not be put in place. If a CEO or an executive doesn't want to participate in the bailout program for fear of not getting a large payout or golden parachute, even though it's in the public interest to do so, why should it be in the public interest to grant his/her company a loan?

The New York Times reports that Wall Street investment banks -- including UBS AG (NYSE: UBS); whose vice chairman, Phil "Americans are Whiners" Gramm resigned as chief economic advisor to John McCain -- have been helping foreign hedge funds dodge U.S. dividend taxes. The good news is that the amount of lost taxes looks to be in the "mere" hundreds of millions -- a tiny amount when you consider the record $490 billion deficit we face for 2009.

The tax dodging scheme -- dubbed "dividend enhancement" -- is complex and UBS was not alone in pushing it. The New York Times reports that Morgan Stanley (NYSE: MS), Lehman Brothers (NYSE: LEH), Deutsche Bank (NYSE: DB), Merrill Lynch & Co., Inc. (NYSE: MER) and Citigroup, Inc. (NYSE: C) joined UBS in this scheme to sell complex financial products that enable offshore hedge funds who get dividends from U.S. stocks to dodge the 30% dividend tax.

But UBS is continuing to look more and more like a shady enterprise. First, it gained notoriety for its brazen policy of dumping Auction Rate Securities (ARS) from its own books into the accounts of its unsuspecting "private banking" clients. It has since settled those charges. And now it stands accused of helping a hedge fund, Maverick Capital, bilk the U.S. government of "$95 million in dividend taxes from 2000 through 2007," according to the Times.

"A billion here, a billion there, and pretty soon you're talking about real money."

To paraphrase the late Senator Everett Dirksen (R-Illinois), if a couple billion is real money, what's $400 billion amount to? Fiscal trouble for the United States, says an economist.

The U.S. federal budget deficit will double this year, to $407 billion, from $161 billion last year, the Congressional Budget Office announced Tuesday, in its revised baseline projection report (pdf).

The CBO said a weakening economy, spending for the Iraq and Afghanistan Wars and the War on Terror, higher entitlement spending, and a slowing growth rate in federal receipts are among the factors that will push the deficit to 3% of GDP this fiscal year, which ends September 30.

The deficit will rise to $438 billion next year, fiscal 2009, remain roughly at that level, $431 billion, in fiscal 2010, before tapering to $325 billion in fiscal 2011.

The CBO also expects U.S. GDP to grow just 1.5% in 2008 and slow to 1.1% in 2009.

Economist Glen Langan said the multiple $400 billion deficits are bad enough, but they could rise considerably, if the U.S. Treasury's bailout of Fannie Mae and Freddie Mac does not go well. "If the housing market does not stabilize in the year ahead, Treasury could end up spending tens of billions more per year," Langan said. "Nearly all of that cost would be born by the taxpayer, which means the deficit will increase."

Bloomberg columnist Caroline Baum gently reminds us that not every tax cut achieves its intended effect.

Case study: The 2001 Bush Administration federal income tax cut, which included a cut in the marginal tax rate to 35% from 39.6%. The Bush Administration touted it as a tax cut that would increase incentives to invest, save and work.

The result? The tax cut didn't work: saving and investment have been "anemic" during the Bush years, Baum said, citing data provided by Paul Kasriel, chief economist at Northern Trust Corp. in Chicago. Business investment is down, the savings rate is at a post-World War II low. Further, the labor participation rate has declined.

No guarantee tax cut would be invested in U.S.

But why didn't cutting the top marginal rate do all of the good things the Bush Administration touted? Economist Peter Dawson said the reason is the tax cut's inherent flaw.

"The tax cut contained the mistaken belief that rich taxpayers would invest their money and invest in the right way, in the U.S., to increase GDP," Dawson said. "There was no guarantee that they would do that. Someone who is rich could invest the money in Brazil or India, with little benefit for the United States."

New York Times columnist Thomas Friedman, who perhaps most-accurately conceptualized the revolutionary production shifts implied by globalization in The World Is Flat, has a 'radical' economic prescription for the United States, as it moves toward the second decade in what is quickly becoming the century of change.

Friedman suggests that the United States try nation-building....at home.

Moreover, Friedman makes the case for nation-building as good for U.S. business - - a much-needed shot-in-the-arm for the U.S. economy.

U.S.: inadequate infrastructures for a major power

Friedman's main concern: the U.S.'s inadequate infrastructure (electric grid, roads/bridges/rail network, air travel system, hospitals, among others), which is antiquated compared to the infrastructure of the U.S.'s chief economic rival, China. Friedman has just attended the 2008 Olympics in Beijing and its clear China's public investments - - better airports, roads, parks, to go along with the sports venues - - have impressed him.

It's also clear to Friedman that the U.S.'s period of underinvestment is holding the nation back economically, and that has to change if the U.S. expects to remain commercially competitive on the global stage. Economist David H. Wang told BloggingStocks he agrees, for the most part, with Friedman's analysis, but adds that the journey to a better infrastructure is not a strictly an economic equation.

The following is a Q&A with Director of Zacks Equity Research Dirk van Dijk, CFA.

We're doing a rather last-minute interview here for publication Thursday morning (the 28th). What is on your mind to talk about?

Well, with the Democratic National Convention underway and therefore political season in full swing, lots of claims and counter claims will be made about taxes. Amid all the spin, careful analysis often gets lost. The Tax Policy Center (TPC), a non-partisan group, sat down with the top economic advisors for both campaigns and attempted to sort out just what the implications are from the proposals of each side would be.

And what is the verdict?

Well first of all, I strongly urge all readers who care about the long-term fiscal health of the U.S. Government to read the report.

But to my mind, given the massive size of the deficit this year and projected for next year, both McCain and Obama are being too "generous." Still, the charge of "tax and spend" is absurd if applied to either candidate, while the charge of "borrow and spend" is valid for both of them.

Warren Buffett is becoming concerned that the national debt may present a crisis much greater than the one roiling the credit markets. In a forum with other economic experts, he expressed doubt the U.S. could handle the $53 trillion it has committed to spend.

According to Reuters, the group said that "the United States has become too dependent on foreign investors to buy its goods and its publicly-issued debt." Most of America's debt commitments are for Social Security and Medicare.

Buffett may be wrong. It may just be the recession talking. The government's ability to pay its own debt is dependent, to some extent, on the size and taxability of the nation's personal and industrial earnings base. During a slow economy, that pool drops.

One of the most obvious solutions to the problem is to get large companies to pay more taxes. Many move money overseas to nations with lower tax bases. Legislation should be passed to stop that.

As the economy moves back to growth, tax revenue will increase on its own and Buffett may be able to sleep better at night.

Douglas A. McIntyre is an editor at 247wallst.com.

Few would deny that the new U.S. president, Democrat or Republican, will face a plethora of concerns and problems after reciting the oath of office in January 2009.

One issue that sort of presents the 'problems panorama' in a snapshot has, curiously, received light news coverage lately -- is the U.S. budget deficit.

Time was, just a short decade ago, the federal budget was in surplus. However, in 2001 a federal tax cut occurred. That fact, combined with required spending for the war on terror / Iraq War, and the absence of a tax increase to pay for that increased spending, has primarily led to a projected $553 billion deficit for fiscal 2008, which ends September 30, 2008, and a $403 billion deficit for fiscal 2009, which begins October 1, 2008, according to Congressional Budget Office research (pdf).

Three factors that could balloon the deficit

In the view of many, the existing deficit is large -- but still manageable -- in the context of a $2.9-3.0 trillion federal budget. However, three factors could markedly increase the budget deficit in the immediate years ahead, and in doing so add to the new president's woes, economist Richard Felson told BloggingStocks.

First, there's the U.S. economy. If it falls into a recession (if it hasn't already), federal receipts (such as corporate and individual income taxes) will decline from current projected levels, and social program costs will increase, "adding $20-$50 billion to the deficit," Felson said.

Want a classic example of how the real estate slump is affecting not only the construction industry and home owners, but also states and municipalities, as well?

Consider the plight of the nation's largest city, the City of New York.

Wall Street's mortgage losses have ballooned to such a degree that some firms may pay small or no taxes for years, Bloomberg News reported. That's right: no taxes for years.

Rising tax revenues, no more

For much of the current decade, indeed for much of the 1990s as well, the city could count on rising tax revenue from Wall Street firms -- based on increased securities industry business -- as a starting point for the city's budget. Not now: the city, which derives about 20% of its revenue from Wall Street businesses, is projecting a decline in revenue from Wall Street firms -- a contraction that is expected to widen the this year's $1.5 budget deficit in fiscal 2009 to $2.3 billion next year, fiscal 2010, and then to $5.96 billion in fiscal 2011 budget deficit, Bloomberg News reported. The city's budget for fiscal 2009 is $59.1 billion.

The Wall Street recession has put the social service goals of Mayor Michael R. Bloomberg on hold, for the most part. Bloomberg has already asked city department and agency heads to implement a 6.4% spending cut; he will likely ask department heads to identify other cost savings of up to 3%, should revenues continue to come in below projections.

At first glance, word that the number of so-called primary government securities dealers decreased to 19 from 20 last month, may seem like a fairly esoteric concern that's removed from the typical investor and taxpayer.

But, in practice, it isn't that removed because fewer dealers means fewer firms bidding for U.S. bonds - - a circumstance likely to increase government (read: taxpayer) borrowing costs, Mark MacQueen, money manager of Sage Advisory Services told Bloomberg News Monday.

The number of authorized bond traders who make markets in U.S. Government debt decreased to 19 when the Bank of America (NYSE: BAC) acquired Countrywide Financial Corp., Bloomberg News reported. It will drop again, to 18, after J. P. Morgan Chase (NYSE: JPM) completes its takeover of Bear Stearns.

Economist David H. Wang agreed Monday that the bidder math is not running in the U.S. Government's favor at this juncture. "We know from basic economics that, historically, if the number of market makers declines, auctions will not be as efficient, and this will lead to higher financing costs for the U.S. Government," Wang said.

Another factor likely to drive up U.S. Government borrowing costs: the size of the U.S. Government's budget deficit, Wang said. The Congressional Budget Office projects that the Fiscal 2009 deficit will total $500 billion, up from $470 billion in Fiscal 2008, the current fiscal year, which ends September 30, 2008. (pdf)

The lowdown on the high and rising U.S. budget deficit for investors and readers? A triple whammy: higher prices for imported goods, higher interest rates, and higher taxes, among other negative consequences.

The budget deficit is expected to increase to $490 billion in Fiscal 2009, which begins October 1, 2008, Bloomberg News reported Monday. The increased shortfall is due to a worsening U.S. economy, which lowers government receipts, and spending increases for the wars in Iraq, Afghanistan and the housing bailout, among other spending responsibilities.

Increased spending to pay for the housing bailout, including assistance for Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) will further increase U.S. Government borrowing, and the supply of dollars, "which almost guarantees that the dollar will fall more," so says currency trader Andrew Resnick. As a result, companies exporting goods to the U.S. are likely to raise their prices, a cost increase Americans will feel keenly.

However, Resnick said the dollar is likely to fall less, if the U.S. government increases taxes or the Fed increases short-term interest rates.

As Washington legislation goes, the housing bailout bill that the U.S. House and Senate passed last week and that President Bush is expected to sign this week, is omnibus in scope and, ultimately, in budget and economic impact.

Economist Glen Langan told BloggingStocks Monday the bill's two key components are the assistance to Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), and a new Federal Housing Administration program. The former, Langan says, "represents an implied guarantee" of Fannie and Freddie by the U.S. Government, which should restore confidence in each, and in the secondary mortgage market. Banks and other mortgage lenders, he said, "will now be more willing to write conforming loans, knowing that Fannie and Freddie will have the funds available to purchase and back these loans."

The latter, a Federal Housing Administration program that enables banks to sell to the U.S. Government mortgages unlikely to be repaid, "will help stem the tide of foreclosures that's plaguing the housing sector," as well as "relieve banks/lenders of less-than-stellar to non-performing assets," Langan said.

Beginning of the end of the housing slump?

Some House and Senate Republicans, and a few Democrats, among others, have chaffed at the bailout bill's cost and ultimate impact on the U.S. taxpayer. House Republican leader U.S. Rep. John Boehner, R-Ohio, told Bloomberg News the bill did not reform Fannie and Freddie enough, and will leave taxpayers with a bill for "billions and billions of dollars." Langan said Rep. Boehner's concern is legitimate.