A Different Kind of Blog

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Stimulus Package and the Average Joe

Posted by lawman2 on February 11, 2009

How does the Stimulus Package affect the average American?

cartoon_joeplumberropeline

The American economy is deteriorating.  For the first time in our history a stimulus package geared toward reforming our economy, to avert deterioration where profit and money has gone away.  Trying to redirect the economy and how it functions here in America.

The average American will notice some effects after the bill passes directly, like the extra &20. or so on each paycheck as the government limits tax with holding.  They will also notice more tax credits. (Mr. Obama’s signature tax cut would provide a credit of up to $500 for individuals and $1,000 for couples. It won praise in an analysis by the Tax Policy Center, a nonpartisan research group, because it could be carried out quickly, by reducing the amount of money withheld from paychecks.)

For the growing ranks of the unemployed, it will be more noticeable: benefit checks due to stop will keep coming, along with an extra $25 a week. (The legislation would also devote roughly $43 billion over two years to extend and increase unemployment benefits. The provision would add as much as 33 weeks of benefits, for states with the highest unemployment rates.)

At the grocery store, a family of four on food stamps could find up to $79 more a month on their government-issued debit card.  (The House bill would spend $20 billion over five years on added food stamps. If the recovery legislation is adopted by mid-February, officials say, the first added food stamps will be delivered in April and nearly all of that aid used that month.)

Some help for the housing market. As it currently stands (last week), the Senate has voted and passed an amendment to the economic stimulus package that will give up to $15,000 tax credit towards a new home.(The Senate unanimously approved a proposal by Senator Isakson (R-GA) that would give a $15,000 tax break or up to 10% percent to anybody who buys a house by the end of the year.)

But let’s take a closer look see…

While it may be difficult to predict how well the overall plan will work, it is easier to draw conclusions about its individual components, gauging them against the basic goal of any stimulus: to promote economic activity and create jobs as quickly and efficiently as possible.

There is mounting evidence that the two primary economic shocks underlying our present malaise—the worst housing market bust since the Great Depression and the most wrenching credit crunch of the postwar period—are intensifying. And they are doing so at the very time that the U.S. economy is adjusting to record oil prices.

In recent congressional testimony, Treasury Secretary Hank Paulson correctly observed that the economy would continue to encounter “bumps in the road” as long as home prices were falling. Unfortunately, the annualized pace of decline in home prices at the national level has now increased to over 16 percent, a rate that we have not seen since the 1930s.

Let’s address the  two primary economic shocks underlying our present malaise…

1) Since housing constitutes the main component of the average American’s wealth, Congress should be more focused on the housing market than on short-term fiscal policy fixes. Declining home values have already taken a harsh toll on consumer confidence, which has plummeted to its lowest level in 28 years. A further drop in home prices could drive consumer confidence even lower.
 
 
 

 

2) The average Americans credit is bad and it’s going to get worse due to the economy. Banks are not going to lend to the average American anymore, especially after all this is said and done.

There is no stipulation that these tax rebates must be spent this year — or next year, for that matter. That being the case, many recipients may well use these funds to pay down debt and/or to bolster their savings. Here is an interesting proposal that wouldn’t line the pockets of the government but instead the average American!  This was a comment  written by Stand Strong on a message board at MSNBC http://boards.msn.com

There are over 350 million people in the United States population and growing.
What if the government were to give to each individual tax payer in the United States there own
Stimulus package, check, government grant (whatever you want to call it). There over 300 million people in the US population why not give each tax paying individual a stimulus check. 
Give each US American a $1 million dollars stimulus package, check, government grant, or even half that amount. The government would still have over $500 billion dollars left over from their proposed package. Which the government probably wouldn’t require that much. That’s a huge savings to invest in the United States. We need to stimulate the economy now, not years from now. Invest in the American people who desperately need it now.

I know $1 million dollars seems like a lot, but $300,000,000 is a drop in the bucket compared to over $850, 000, 00

It would help stimulate the economy by enabling everybody to be able to help themselves.

I would help people get out of debt and have a better life by:

1)         Helping people pay their mortgages so they can remain in their homes.

2)         Pay utilities

3)         Better health care

4)         Live Healthier Lives

5)         Buy cars

6)         Fix their homes up

7)         Help business now, stay in business

8)         Start businesses of their own

9)         Investments

10)       Kids to college

11)       Retirement

12)       Lower crime

13)       People could afford to shop.

14)       Many Many More

Government would get it back in tax revenues.

This would do for more than stimulate the economy; it would stimulate each and every tax payer in the United States. After all it’s about each and every individual in the United States, not just a select group of people.

Benefit

The American People Need a Stimulus Package / Not a Package to Stimulate the Government

 

 

 

 

What do you think?  Leave us a comment and let us know!  Thanx again for reading thoughts from this ol’ caveman!

You Can read more caveman’s perspectives from lawman Just A Caveman

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33 Responses to “Stimulus Package and the Average Joe”

  1. […] Stimulus Package and the Average Joe « A Different Kind of Blog […]

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  2. tothewire said

    Very well written! Great job here Lawman!

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  3. tothewire said

    I think that guy needed to check his math.

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  4. tothewire said

    what about inflation? no thought went into what people stimulus package would do to inflation…

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  5. lawman2 said

    yeah,but the idea is funny…more socialistic that obama’s! i am just wondering how many americans know just how touchy this stimulus package working out the details really is.

    lipstick on a pig…hehehe

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  6. […] Stimulus Package and the Average Joe « A Different Kind of Blog […]

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  7. […] Stimulus Package and the Average Joe « A Different Kind of Blog […]

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  8. […] Stimulus Package and the Average Joe « A Different Kind of Blog […]

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  9. tothewire said

    I just noticed something about your writing. You told me (and the other authors for our blog) to write at an 8th grade level…

    Your Just A Caveman post are written @ 8th grade level (OR LESS)
    Your other post are well written and concise.

    Clever Lawman!

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  10. tothewire said

    NO what I should have wrote was your post starting with Caveman are written at an 8th grade level. I guess you have all your post in the Just A Caveman category.

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  11. Wayne Moore said

    I just found this blog – I don’t know if it is serious, a joke, or what. Lawman2’s description of the package is good, but modifications were made and approved in the conference committee yesterday that reduced the total by about $50 billion and eliminated the house purchase credit. If this blog is intended to be a place where the Average Joe can express opinions, I would like to hear what everyone thinks of the following.

    In addition to the massive spending and individual tax cuts, the value of which could be debated forever, a stimulus package needs to cause business investment for recovery and growth. A week ago I sent my 5-page recommendation to the White House and to key Democratic and Republican Congressional leaders via UPS overnight letter. The first and fourth recommendations would be opposed by the GOP; the second and third recommendations would be opposed by the Democrats. However, all four taken together would actually stimulate the U.S. economy and would require the bi-partisan compromise that I believe Obama and the American public want. In summary, the four recommendations were:

    1. Discourage executive compensation excesses by a change in IRS Code Section 162(m) that uses a ratio to median company pay and by adding SEC rules requiring full and easily accessible disclosure (transparency).

    2. Make American firms more competitive in the global market by reducing corporate income tax rates to a level near the lower end of the middle range of OECD nations.

    3. Make corporate dividends paid to shareholders deductible for corporate income taxes.

    4. Pay the cost of the corporate tax reduction and dividend deductibility by:

    a. Eliminating the special tax treatment of dividends and capital gains enacted in 2003.

    b. Imposing a 35% corporate excise tax on excess compensation beyond the new Code Section 162(m) limit, in addition to it not being deductible for corporate income taxes.

    A corporate income tax rate reduction from the current 35% to about 24% would place U.S. corporations in a far better position for competing in the global marketplace – it would place U.S. companies in the lower middle range of industrialized nations instead of at the top end – THIS WOULD CREATE JOBS! During Monday night’s press conference, the phrase “attracting private capital” was repeatedly used by President Obama. This could be accomplished quickly with a corporate tax rate reduction AND allowing dividends to be deductible by corporations. A major reason that the financial crisis is impacting investment is the fact that the interest paid on debt financing is tax deductible, while dividends paid on equity financing is not. This has also created some of the present Wall Street problems. The investment mindset is now oriented toward appreciation of investment rather than true return on investment, driven by the tax code bias that taxes dividends twice. I would be willing to give up the 2003 individual tax cuts (Item #4) as a way to pay for these changes (I am retired and nearly all my income is from investments).

    This would probably have to be separate legislation. It would actually take money out of the pockets of highly compensated employees (executives, etc.) and make the money available for investment by companies. Would the Average Joe support or oppose this type of tax change?

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  12. al said

    What a joke, just proves the place we really need to improve is public education. 1 million times 300 million is 300 Trillion. Of course as long as the public is stupid, politicians and large corporations have a much easier time controlling things.

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  13. obama the antichrist said

    AMEN al!!!!!!! ok so you said $20 some add to the paycheck…its actually so much better than that! A WHOPPING $13

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  14. Lawman2 said

    you are right wayne.somehow i missed your comment yesterday and just found it this morning.i will post a new post come monday when i have more details on this new package deal.

    al- the last part…i did find it posted on the msnbc message boards and thought it was almost funny and sad.

    ota man where you been?missed you!

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  15. Lawman2 said

    we love to visit other blogs if you have a blog,please leave a link,and the ol’caveman will stop in and read ya.

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  16. arkangel3 said

    Wayne, you make some very interesting suggestions. While I certainly agree that lowering the Corporate Income Tax might attract more nations to do business here (and prevent our companies from leaving), allowing a tax deduction for dividends paid to shareholders just isn’t getting through to me. Dividends are based on profit, and as you stated the offset to any potential losses would be in Capital Gains changes. I think the Cap Gains taxes as they are now are fine and strike just the right balance between encouraging investment and not being burdensome (well, too much…I hate taxes, LOL) on your wallet. I absolutely agree with limits placed on Executive Compensation, but ONLY from those companies taking TARP funds. I am ADAMANTLY opposed to ANY salary ranges set by the Government for ANY Private Sector jobs. That is not letting a free market operate, and (God, now I’m going to sound like a Republican- which I am NOT) reeks of Communism.

    Certainly a complete overhaul of Corporate and Personal taxes is in order and needs to be addressed as soon as possible. It will be the only way we can fund projects that we so desperately need, encourage job growth, reduce the deficit, and balance the budget. I strongly believe this needs to be addressed in the next decade, or we will be forever mired in debt and poverty as a nation.

    For the record, I am an Independent who leans left (a “Pragmatic Progressive”) on almost everything, but is very fiscally conservative (having been a Banker for some 20 odd years…which I no longer am). I consider what the Banks did in helping to cause this mess we’re in a complete repudiation of EVERYTHING a Bank is supposed to do to carry out business. I think the Banks that screwed up should fail (and their customer’s allowed to collect up to the FDIC limits, of course). I think that Big Banks, if they are going under because of this (thus killing the ENTIRE economy) be Federalized until such time as the crisis has passed and they can be spun off into Private entities again.

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  17. tothewire said

    I agree with Arkangel. I am disappointed in the stimulus package, it wasn’t a change I can believe in.

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  18. tothewire said

    Yes, Al you are so right!

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  19. Wayne Moore said

    arkangel3: Thanks for your response and questions. I, too, am a political independent and I voted for Obama. I was a business founder and entrepreneur for 27 years before selling my small business to a public company in 1999. I stayed on and helped that company grow until my retirement last summer. Here are my answers – I apologize for the length:

    Compensation: I am not suggesting that government set salary ranges. However, under the current Internal Revenue Code Section 162(m), a public company’s corporate income tax deduction is now capped at $1 million per year for amounts paid to its chief executive officer and each of the next four highest-paid executive officers. My recommendation is to replace the hard-coded “$1 million per year” for amounts paid to the top 5 executive officers with a simple ratio test for all highly compensated persons, irrespective of their job title. Amounts paid to highly compensated persons in excess of 25 times the firm’s median compensation of all its employees, for instance, would not be deducted as an expense and would be subject to corporate income taxation. For example, if the median compensation of a firm’s workforce were $50,000, then annual compensation including bonuses paid to any employee in excess of $1,250,000 would not be tax deductible by the corporation. This is not a change in the current practice; it just makes the IRS Code more flexible. This will meaningfully relate executive pay and that of other highly compensated persons to the median compensation of the firm’s employees, irrespective of the industry, and will provide transparency for shareholders (private and federal) of public firms. SEC rules should require that the TOTAL amount of excess compensation subject to corporate taxation must be disclosed and easily accessible so that the owners of the firm (shareholders like me) have an easy reference for the impact of the firm’s compensation policies and effectiveness of corporate governance.

    Corporate Income Taxes: This recommendation is common sense. The corporate income tax is a significant expense that becomes part of the product price for U.S. consumers and exports. According to Organisation for Economic Cooperation and Development (OECD) statistics, the current U.S. corporate tax rate is among the highest in the world. Reducing the U.S. corporate income tax rate by 30% across the board would place U.S. corporate income taxes at a level near the lower end of the middle range of member nations of the OECD, making U.S. products much more competitive in the world market. This is a true economic stimulus. This recommendation is also made by Professor Michael J. Graetz of Yale University in his new book, 100 Million Unnecessary Returns: A Simple, Fair, and Competitive Tax Plan for the United States (2009), as well as many other tax experts.

    Dividends: Because dividends are not deductible for corporate income taxes, the amounts distributed to shareholders as dividends are first taxed at the corporate tax rate of 35%, and then taxed as income to the shareholders on their personal tax returns, resulting in what is commonly called “double taxation of dividends.” This quirk in the tax code has resulted in much distortion in economic activity, meaning that business decisions are made to minimize tax consequences rather than for rational business reasons. The tax code was changed in 2003 to lower the tax rate on dividends and capital gains to 15%, which did mitigate the impact of double taxation to the shareholders, but did nothing to improve corporate tax efficiency and competitiveness of U.S. corporations in the global economy. When corporations obtain capital through debt financing (bonds and bank loans), the interest on that debt is tax deductible for the corporate income tax calculations. The interest paid to the bond or loan holder represents their return on investment (ROI). Permanent financing of a corporation is accomplished through the issuance of shares of stock, with the intent that a portion of corporate profits will be distributed to shareholders through dividends as their return on investment. However, unlike interest paid on debt financing, the dividends paid on equity financing (shares of the corporate stock) are not deductible for C corporations under the existing tax code, making the payment of dividends inefficient.

    An overlooked problem caused by the non-deductibility of dividends for corporations is the bias created toward debt financing as well as a shift in the objective or goal of investing from the simple concept of direct ROI from dividends to placing too much emphasis on capital gains. Many stock market investors pay little or no attention to dividends because their investing strategy is to buy shares of stock at a low price and sell them a higher price, with their realized capital gains being the only ROI considered. They are speculators rather than true investors. They prefer that companies do not pay dividends, but rather reinvest what would have been paid out as dividends in the business or use it to buy back outstanding shares, thereby increasing the investors’ percentage share of company ownership. Either way, the value of the stockholders’ shares should rise in bull markets, but this increase will only be taxed at the individual level as capital gains when the shares are sold. In my view, the tax code provision of not allowing dividends to be deductible has skewed the fundamentals of investing and made it into a form of gambling. The 2003 tax rate cut simply rewarded the tendency toward gambling and did nothing to improve American corporate competitiveness. Jeremy Siegel and Andrew Metrick, both finance professors at the Wharton School of Business, with Paul Gompers, a finance professor at Harvard, have argued that a simple solution to restoring investor confidence and rationality to the stock market would be to make corporate dividends tax deductible (see http://www.upenn.edu/pennnews/researchatpenn/article.php?363&bus ). The professors argue that if dividends were a deductible expense, firms would be strongly motivated to pay out much of their profits as dividends, since retained earnings would be subject to the corporate tax. Firms that did not pay dividends would be viewed unfavorably by investors who feared that the earnings were inflated and that the cash does not exist. The payment of cash dividends would therefore add significant credibility to management’s earnings reports. They further argue that allowing dividend deductibility would also eliminate the incentive for management to take on large amounts of debt and risk bankruptcy just to gain the deduction for interest costs. This could help relieve pressure on the stressed financial system.

    By the way, Simon Johnson, a highly regarded MIT Professor of Economics, agrees with your view of the bank problem and its solution. He was on Bill Moyer’s Journal last Friday evening on PBS.

    Concluding comment: Tremendous federal debt obligations have been created by the AMERICAN RECOVERY AND REINVESTMENT TAX ACT OF 2009 on top of those already created by TARP, which will have to be paid by my children, grandchildren, and great grandchildren. The recommendations above will stimulate the American economic engine in a manner that will create long term growth, helping cure the present problems as well as making payment of the incurred obligations much easier for future generations to handle.

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  20. arkangel3 said

    Thanks for the thoughtful reply, Wayne. Wow! I think like a prof at MIT, LOL! Alexander Hamilton may eventually get his wish.

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  21. […] response to the post I wrote Stimulus Package and the Average Joe we received some pretty thought invoking comments that in there own would make great post […]

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  22. Wayne Moore said

    Okay, now I’ll burden the readers of this blog with my view on the rest of the story: How would we pay for the corporate tax reduction and dividend deductibility if enacted?

    About 7% of federal income taxes come from corporate income taxes and this amount has been shrinking as companies have found ways to avoid the tax (relocate to other countries, etc). Keep in mind that those corporate taxes are part of the price paid for the corporate products and services by U.S. consumers and global export buyers. If the corporate tax rate were cut by 30% across the board, then about 5% of federal income taxes would come from corporate income taxes. Republicans would argue that this 2.1% revenue loss would be recovered through growth and they are probably correct. However, this is where responsible governing enters the picture. We have now created a huge federal deficit that we need to begin repaying to lessen the burden on our grandchildren and to mediate the risk of China being the biggest investor in America as the primary owners of the treasury bonds issued to cover our deficit spending.

    My recommendation: Instead of allowing capital gains to be tax-favored as they are under the existing tax code and rewarding stockholders for successful gambling in stock market price variations, which is frequently driven by non-economic (even fraudulent) factors causing irrational price swings, eliminate the special tax treatment of dividends and capital gains enacted in 2003. This would require a six to nine month phase-in period during which investors could make their own portfolio decisions relative to the revised tax code. The impact of this tax revision could be mitigated by increasing the amount of capital loss allowed on individual tax returns and by fixing the alternative minimum tax (AMT). The final stimulus package temporarily addresses the AMT as a concession to the GOP, but the AMT problem needs a permanent and rational fix.

    There would no longer be a need for special tax treatment of dividends because they would be taxed on individual returns in the same manner as the interest earned on the corporate bonds and certificates of deposit in investor portfolios. Return on investment (ROI) for both interest and dividends would finally be on an equal basis, removing the inefficiencies in capital allocation created by the bias in the current tax code.

    Finally, as a further means of discouraging extremely high compensation levels and generating tax revenue, a 35% corporate excise tax should be imposed upon excess compensation beyond the new Code Section 162(m) ratio-based limit, in addition to it not being deductible for corporate income taxes. The amount of such tax paid by each corporation should be made visible through SEC reporting requirements so that individual investors like me can use it as a parameter in judging corporate governance.

    Are these changes possible? I don’t know. My wife says that I am wasting my time. The GOP would support the tax cuts and the Democrats would support the tax increases. Both are needed in my view.

    This morning on Face The Nation, two Senators (D-NY, R-SC) and two House Members (D-CA, R-NY), continued the debate we have heard for the past three weeks with nothing new. However, when the discussion moved on to the banking crisis, there seemed to be a lot more common ground among them. In fact, on the issue of temporary nationalism of the banks, one from each party opposed it and one from each party said it might have to be an option. We may have an issue with a potential bi-partisan outcome.

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  23. Wayne Moore said

    Oops! I meant nationalization of the banks.

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  24. Lawman2 said

    wayne i have so enjoyed your comments!so much so that i made them a post… https://tothewire.wordpress.com/2009/02/15/stimulus-and-our-readers/

    do you have a blog?

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  25. Lawman2 said

    if so i would love to visit and i would gladly direct readers your way. if not,why not join ours? our readers would love to hear from you on a regular basis.

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  26. Wayne Moore said

    I do not have a blog of my own. I’m not sure what “joining” this blog would mean.

    My actual area of expertise is local government property tax policy. My little company supplied software systems and services to local governments beginning in 1973 (pre-Prop 13) as a vendor, and I learned a lot about local government finance and property taxation in the process. I now help citizen/taxpayer groups in various parts of the country that promote good state property tax policy as my way of “giving back” in a field that has been good to me. State legislators come up with some crazy plans for property tax “reform” because they are generally ignorant on the topic, as are the citizens who elect them. However, at the state level I can make a difference – at the federal level there is almost no hope of having any influence.

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  27. lawman2 said

    i would love to have you write a post or as many as you like. we had 221 emails in 2 days over your comments on this post a lone…

    i posted these comments on home page https://tothewire.wordpress.com/2009/02/15/stimulus-and-our-readers/
    and so far there has been another 56 emails on comments from you and arkangel!

    i know ark is busy with his own blog but the two of you caused quite a stir here!

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  28. Wayne Moore said

    Lawman2: I only see 27 responses to “Stimulus Package and the Average Joe” (including my 5) and 7 responses to “Stimulus and OUR READERS”. Where are the 221 and 56 to which you refer? I’m interested in the comments.

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  29. tothewire said

    Between the tothewires@yahoo.com and lawman2_39@yahoo.com

    Oh I forgot we received 21 at the butter_30som@yahoo.com email.

    This post by far has generated the most emails.

    We recommend all blogs to post an email simply because we have more emails than comments. Our readers feel more connected to us by having email access.

    We still only average 2,500 readers per day but somedays we have had over 6,000 readers!

    I have to say the majority of our emails are from Just A Caveman fans.

    Well we are off to bed here!

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  30. tothewire said

    Lawman, I need you to look over my presentation before tomorrow…

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  31. lawman2 said

    yes, tothewire is correct.

    heading that way now tothewire.

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  32. tothewire said

    Lawman when did you take down the email links on the side of the page?

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  33. lawman2 said

    one of the other admins did.we got tired of trying to keep up with them all.

    don’t worry after we get all caught up we will put them back up.

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