OT: The Fed's policies explained. Waiting for Ahneida Ride's review

[BengeBoy]

I guess Xtranormal animations aren't just for cyclists any more. The Fed's quantitative easing explained via animation. Here is the clip:
The Fed explained (http://www.youtube.com/watch?v=PTUY16CkS-k)

Character 2: "Why do they call it quantitative easing...why don't they just call it the printing money?"

Character 1: "Because printing money is the last refuge of banana republics and failed economies...and the Fed doesn't want to admit it doesn't have any better ideas."
....


Character 2: "I want to bang my head against the wall"

Character 1: "You should not do that....health care is too expensive"

The Fed explained (http://www.youtube.com/watch?v=PTUY16CkS-k)

[RPS]

I liked the beard comment.

[Ahneida Ride]

http://www.rayservers.com/images/ModernMoneyMechanics.pdf

600 Billion outa thin air, allows banks to createan additional
9 x 600 = 5400 Billion also outa thin air. (using fractional non reserve)

WE pay interest on nothing, since no work was exerted to create any of
this "money". It's all one big Ponzi scheme.

Money is now debt and debt is now money. :butt:

gas is now 3 frns a gallon. Scared .... ????

Don't Worry, Be Happy (http://www.youtube.com/watch?v=l9K4BKkLaCI)

[BumbleBeeDave]

. . . here he goes again! :eek: :rolleyes:

BBD

[sixfootbrit]

I think Ben B's favorite song goes "I'm forever blowing bubbles..."

[Seott-e]

Come on.......Don't we all know the feds are much better at running the economy into the groun, I mean, or...running the, Ahhhhh...Yes, health care is next.
I think they know exactly what they are doing, just like the Gov health care plan.

[dnades]

Pretty much on the money if you'll forgive the pun. Even before the 'bailout' the fed pumped in 7.8 trillion dollars to the banks. They just insist on giving themselves more money because who is going to stop them? Us? Were too busy to be bothered apparently. It is such a frikin mess. I think every unemployed person in the NYC metro area should go down to Wall
Street on Monday morning and camp out. Set up shifts. Wall Street is so busy making 'money' that they are missing out on the big picture or perhaps they just don't care. This country has been strip mined by those policies and as far as I am concerned should be shut down immediately. We'll get over it. It is either going to be 20 years of treading water if you are lucky(take a look at japan) or 5 years of pain and recovery with hopefully a better system in place.

this subject really pushes my buttons. Liked the animation though. there is just something about that digital voice and the incredulity of the situation. Twilight zone indeed.

[Ahneida Ride]

We could (and once did) issue United States Notes.

and we (the people) pay NOTHING, ZIPPO, NADA, interest to private banks.

The Honorable President John F. Kennedy was the last person to try this.

Instead, we allow a private corporation to issue its shopping coupons
substituting for our money and charge us interest on nothing.

:help:

------------

By very definition, a note must state terms of redemption.
When it is redeemable.
What it is redeemable in.

The terms of redemption has been removed. Notes (paper) were only
accepted in the first place cause it was redeemable in a tangible
asset.

[flydhest]

Even before the 'bailout' the fed pumped in 7.8 trillion dollars to the banks.


What does this mean and where did you find this number? I'm sincerely curious.

[BumbleBeeDave]

What does this mean and where did you find this number? I'm sincerely curious.

. . . this should get interesting now!

BBD

[1centaur]

Google gives me this:

http://mcdac.blogspot.com/2008/11/how-feds-are-blowing-through-78.html

and this helps explain it:

http://baselinescenario.com/2008/11/26/78-trillion-and-counting/

[93legendti]

It's ironic that:

printing $700 Billion is supposed to stimulate the economy;
the $787 Stimulus Bill was supposed to be stimulative;
extending the tax cuts as to the upper 2% will allegedly cost $700 billion over 10 years and will have NO stimulative effect.

[LegendRider]

Q - I'm confused by how this quantitative easing actually works. Can you explain?

A - Imagine a large hot-air balloon carrying a bunch of people with a gigantic hole in it. The person in charge of flying the balloon could:

a) Land, fix the hole, then take off again.
b) Keep firing the gas cannister thereby keeping the balloon in the air as long as possible before the gas runs out and the balloon suffers a catastrophic crash.

Now imagine the person in charge of the gas cannister:
a) Is responsible for the hole in the balloon and will be found out if the balloon lands.
b) Has a parachute.
c) Gets money for every second the balloon stays in the air.

[MRB]

Interesting Thread. I am by no means an economist, but I am a concerned citizen.

Do any of you Serotta Pals have an opinion on the Silver Bear Cafe? (www.silverbearcafe.com) That is where I first found a link to this "video of the week" animation.

thanks

[Dlevy05]

To whomever gets the chance, I would HIGHLY recommend:

"How our economy grows, and why it crashes" by Peter D. Schiff

This book may not be right about everything, but like the cartoon, it explains things in an easy to understand, straightforward, and comprehensive fashion. Excellent for children, too.

[Ray]

What does this mean and where did you find this number? I'm sincerely curious.
Somebody prolly said it on the interweb. It must be right.

[djg]

What does this mean and where did you find this number? I'm sincerely curious.

Just to the right of 7.7 trillion?

Sorry dude. I'm not sure this ends well, but I do want to watch. Are you sure you don't want to come on over and teach money and banking to my kids? Harry seems pretty good at math and I might pour some very agreeable wine.

[Dlevy05]

It's ironic that:

printing $700 Billion is supposed to stimulate the economy;
the $787 Stimulus Bill was supposed to be stimulative;
extending the tax cuts as to the upper 2% will allegedly cost $700 billion over 10 years and will have NO stimulative effect.


I think it's ironic that the stimulus plan went to the industries that have proven they have failed. The way I see it, the most irresponsible industries in America were rewarded for failing. The stimulus plan should have gone to new jobs being created in NEW sectors of the economy, to expand our economy based on what the future can bring for us, not the jobs we know Americans can't do well....

f**k it Dude, let's go riding... (bowling, ...whatever...)

[Ray]

I think it's ironic that the stimulus plan went to the industries that have proven they have failed. The way I see it, the most irresponsible industries in America were rewarded for failing. The stimulus plan should have gone to new jobs being created in NEW sectors of the economy, to expand our economy based on what the future can bring for us, not the jobs we know Americans can't do well....

f**k it Dude, let's go riding... (bowling, ...whatever...)
I think you may be confusing the stimulus and the bailouts. But I agree with the last part, about let's go riding or bowling.

-Ray

[Dlevy05]

I think you may be confusing the stimulus and the bailouts. But I agree with the last part, about let's go riding or bowling.

-Ray


Weren't the bailouts part of that plan? I'm not saying, just asking. I haven't been in the US for a while, and haven't had a chance to follow everything.

[RPS]

I think you may be confusing the stimulus and the bailouts. But I agree with the last part, about let's go riding or bowling.

-Ray
It’s easy to do when there is such a murky distinction. ;)

[veloduffer]

I think it's ironic that the stimulus plan went to the industries that have proven they have failed. The way I see it, the most irresponsible industries in America were rewarded for failing. The stimulus plan should have gone to new jobs being created in NEW sectors of the economy, to expand our economy based on what the future can bring for us, not the jobs we know Americans can't do well....

f**k it Dude, let's go riding... (bowling, ...whatever...)

Most of the bailouts to the financial industry have been repaid. The govt actually made an 8.2% return or $29 billion. That's about 2-yrs worth of farm subsidies. And it looks as if the bailout may have helped the US auto industry too.

The govt is also "bailing out" the states through the stimulus, which have used the money to close their budget gaps for the past three years. That is being phased out and the states will still have to grapple with deficits, as all three years of cost cutting has not offset the loss in tax revenue. If you read the headlines, there is growing concern about the states and their ability to issue municipal bonds. If the muni bond were to collapse (like the mortgage backed securities), the federal govt would have to intervene and that bailout would be large. The alternative would be large tax hikes at the state level.

The Fed is trying to stimulate the economy to raise tax revenues at all the govt levels and (I think) continued fear of deflation or stagnation.

[Dekonick]

Thank goodness Howard County has a AAA bond rating... :banana:

[rounder]

I used to work for the Federal Reserve Bank years ago and remember an economist mentioning, how can we know where we will be three months from now, when we don't even know where we are today.

His point was that it takes a while to gather the data and analyze it. I bet it is even tougher these days, when the news media is so eager to report on anything regardless of reliability, or their own personal point of view (sell themselves and/or more books).

[veloduffer]

Thank goodness Howard County has a AAA bond rating... :banana:

I wouldn't trust the rating agencies too much. Remember, there were a lot of AAA RMBS securities that are now CCC.

The rating agencies, in their infinite wisdom, recently changed their rating methodology for municipal bonds. It used to be based on a 'distance to distress' and earlier in 2010 they moved it to a 'distance to default' to be in line with their corporate methodology. Because very few munis have defaulted IN THE PAST, they upgraded nearly all the municipal issuers by at least one notch or higher. Of course, the agencies have downgraded many munis almost to their original ratings due to deterioration in fiscal budgets.

Interestingly, the rating agencies didn't declare the State of CA nor IL in default when they couldn't pay their bills. Because they continued to pay their debt service on their bonds, they are still rated 'A'. But they should have been declared to be in "Selective Default", which they would have done if any corporate failed to pay one or more of its obligations. They get around this by rating only the muni bond issue/security, not the issuer (as they would with a corporation).

The problem for the federal govt and state govts with their budgets is that they cut everything except the for their largest expenditures - Medicare (state and federal) and Defense & Soc Security for the federal. These items are well over half the budget.

And the uproar has already started about the recommendations of the bipartisan budget panel - raising social security age and cutting benefits, removing tax deduction for mortgages (we are about the only country that has this deduction), etc. We are a country that likes our public goods (Medicare, Soc Sec, clean water, public education K-12, etc) but don't like to pay for them, despite having the lowest tax burden of any OECD country and having 24% derived from taxes, second lowest in the world except Mexico at 19%.

Here's a good example. Some of the water pipes in Wash DC date back to the Civil War and last winter, a harsh one by DC standards, caused quite a few water main breaks. People complained about the outage and the fact that their $60/mo water bill was seemingly expensive. But compare that to your cable bill, about $150 for triple play. You can live without cable but you can't live without water.

Unfortunately, our culture is generally short-term in its thinking and that has left us with a greater dependence on foreign energy (look at France which only get 10% from overseas), large fiscal deficits, declining education and deteriorating infrastructure amongst others. :help: We are a country that is truly creative & innovative and can "roll up its sleeves" type of work ethic, but we don't apply that universally or often enough. And we can't solve our current situation in a day, week or few months. We went through the worst economic and financial collapse since the Great Depression. It takes time to recover from that type of calamity.

Oh well! At least we had a great riding weekend here in the northeast - near 60 for Nov. :hello: :banana: :beer:

[dnades]

Sorry for the delay. Here is the link to the article:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=armOzfkwtCA4&refer=worldwide


I learned this from reading a book by David Korten called An Agenda for a New Economy 2nd edition. Like many of you I am very concerned about the economic situation in this country and when I heard him interviewed on a radio program I was intrigued enough to get his book. So far it is a terrific and slightly horrific read. I recommend getting the book. He is all for banishing Wall street from the face of the earth but he does explain how Wall Street works and why it does what it does which is what I was looking for.

[prolearts]

Rant alert, but if you're game:

Seems to be a lot of "small government" type sentiments flying around on the forum here. Funny how having cycling in common can mask all kinds of philosophical differences. Is it the price of the brand or something? (Poll: What's your tax bracket?!)

I am a small business owner and employer. I am fine with a bit more taxation on myself and I'm also FINE with stimulus that puts people back to work. I am also fine with some decent inflation. It is SIMPLY MUCH BETTER than deflation for everyone but the rich (net creditors) and those on fixed incomes without cost-of-living-increases (a pretty small subset of fixed-income recepients). This encompasses the VAST majority of working Americans.

Quantitative easing is a very, very poor substitute for actual fiscal stimulus (as are tax cuts), but apparently that's the last thing that's currently allowed in our fact-starved sur-reality.

Here are some links that I find to be pretty sensible and unassailable economics if anyone is interested, they run very much contrary to the (completely erroneous) "household" model of US government spending which seems to animate all sorts of folks, rich and poor alike. I wish my household was like the US, then I COULD simply issue some more currency and pay down my house note right quick, and I'm not being sarcastic in the way I think most folks would take that. Oh, be that it were so.

On inflation and the irrational fear of:
http://www.newyorker.com/talk/financial/2010/09/27/100927ta_talk_surowiecki

On how our monetary system works. Taxes do not precede spending and we don't have to "borrow from the Chinese" they need us more than we need them:
http://bilbo.economicoutlook.net/blog/?p=1075

http://www.businessinsider.com/once-again-heres-why-borrowing-from-abroad-to-finance-deficits-isnt-a-problem-2010-8

On cutting deficits in a recessionary period:
http://rortybomb.wordpress.com/2010/10/20/dean-baker-on-the-growth-through-austerity-argument/

I'm not a big Democratic supporter (far too "left" for that!), but EVERY Republican Prez and Congress explode budget deficits, often during healthy economic times with unfunded tax cuts, unfunded wars, etc. etc. and then go on about how the Democrats tax and spend as soon as they are in the minority. It's all pretty tiresome. Nixon in 71 was far to the left of Obama.

Anyhoo, flame on!
:beer:

[rustychain]

Prolearts,
Well said
Thanks

[Ray]

I don't know how long it will take, or who the players will be this time (other than I know it won't be me), but this will not end well.

But since Flyd tossed his hat, however haltingly, into the ring, I can't help but watch. Except that I suspect he won't go there to even a small percentage of the extent he could. But if he did, THAT would be some fun to watch, as an old liberal (but traditional deficit hawk except during massive recessions!) myself.

-Ray

[97CSI]

His point was that it takes a while to gather the data and analyze it. I bet it is even tougher these days, when the news media is so eager to report on anything regardless of reliability, or their own personal point of view (sell themselves and/or more books).And for everyone to believe what is put out by the media or on the internet (especially the drivel that is acceptable as 'news' on Fox). Everything for the rich while the middle-class wages continue to shrink (down 12% since 2000). Eventually, when there are not enough middle-class jobs for your kids to earn a decent living, we will figure it out. And then we will go to war (the politicians last haven) to get the jingo-juices flowing. Read my signature line below.

[johnnymossville]

And for everyone to believe what is put out by the media or on the internet (especially the drivel that is acceptable as 'news' on Fox). Everything for the rich while the middle-class wages continue to shrink (down 12% since 2000). Eventually, when there are not enough middle-class jobs for your kids to earn a decent living, we will figure it out. And then we will go to war (the politicians last haven) to get the jingo-juices flowing. Read my signature line below.

Destroying the middle class is a necessary part of the plan. They can't have people running around who don't need them.

[Seott-e]

Rant alert, but if you're game:

Seems to be a lot of "small government" type sentiments flying around on the forum here. Funny how having cycling in common can mask all kinds of philosophical differences. Is it the price of the brand or something? (Poll: What's your tax bracket?!)

I am a small business owner and employer. I am fine with a bit more taxation on myself and I'm also FINE with stimulus that puts people back to work. I am also fine with some decent inflation. It is SIMPLY MUCH BETTER than deflation for everyone but the rich (net creditors) and those on fixed incomes without cost-of-living-increases (a pretty small subset of fixed-income recepients). This encompasses the VAST majority of working Americans.

Quantitative easing is a very, very poor substitute for actual fiscal stimulus (as are tax cuts), but apparently that's the last thing that's currently allowed in our fact-starved sur-reality.

Here are some links that I find to be pretty sensible and unassailable economics if anyone is interested, they run very much contrary to the (completely erroneous) "household" model of US government spending which seems to animate all sorts of folks, rich and poor alike. I wish my household was like the US, then I COULD simply issue some more currency and pay down my house note right quick, and I'm not being sarcastic in the way I think most folks would take that. Oh, be that it were so.

On inflation and the irrational fear of:
http://www.newyorker.com/talk/financial/2010/09/27/100927ta_talk_surowiecki

On how our monetary system works. Taxes do not precede spending and we don't have to "borrow from the Chinese" they need us more than we need them:
http://bilbo.economicoutlook.net/blog/?p=1075

http://www.businessinsider.com/once-again-heres-why-borrowing-from-abroad-to-finance-deficits-isnt-a-problem-2010-8

On cutting deficits in a recessionary period:
http://rortybomb.wordpress.com/2010/10/20/dean-baker-on-the-growth-through-austerity-argument/

I'm not a big Democratic supporter (far too "left" for that!), but EVERY Republican Prez and Congress explode budget deficits, often during healthy economic times with unfunded tax cuts, unfunded wars, etc. etc. and then go on about how the Democrats tax and spend as soon as they are in the minority. It's all pretty tiresome. Nixon in 71 was far to the left of Obama.

Anyhoo, flame on!
:beer:


In your last paragraph you talk about “unfunded Tax cuts” but really, isn’t it a proven fact that lower tax rates will bring in more tax revenue to the government by allowing the economy to grow / flourish ?

[Ray]

In your last paragraph you talk about “unfunded Tax cuts” but really, isn’t it a proven fact that lower tax rates will bring in more tax revenue to the government by allowing the economy to grow / flourish ?
In a word, no. In a sentence, yes, but only up to a point. In a paragraph.... I'm not up for a paragraph. Its called the Laffer curve, not the laugher curve. You could look it up. And what we're talking about here is only the portion above $250,000 per year income being taxed at 39% instead of 36%.

But to make the obvious point, if you lower the tax rate to zero, would revenues go up?

Oh crap, I said I wasn't gonna do this...

OK, I'm banning myself now...

-Ray

[RPS]

But to make the obvious point, if you lower the tax rate to zero, would revenues go up?

And just as obvious, what happens at 100 percent?

[veloduffer]

In your last paragraph you talk about “unfunded Tax cuts” but really, isn’t it a proven fact that lower tax rates will bring in more tax revenue to the government by allowing the economy to grow / flourish ?

It all depends where the tax cuts are aimed. Corporate taxes only make a small part of the tax revenues for govt budgets. In some states, its primarily sales tax and others income tax that are the main revenue sources.

Tax cuts for the highest tier does little for economic stimulus - it targets a very small section of the population. High income folks spending is not dependent on tax rates. Luxury taxes on big ticket items have not slowed down those purchases - it's a nuisance rather than a decision-maker. Since this economy is predominantly based on consumption, tax cuts are much better aimed at the lower and middle classes with broader populations.

Tax cuts while in a deficit budget position is the same as increasing spending. You're only widening the deficit and the longer term benefits (raising employment is a common goal) are subject to too many variables. A tax cut or tax holiday in payroll taxes or the like may have helped reduced unemployment, if initiated earlier. But employment won't move until the economic outlook brightens.

Stimulus spending can help an economy, if it is targeted at the right sectors. And monetary stimulus (QE2) is a very blunt instrument and really is a big fuss over really nothing. Bernake is getting a lot of flak for what is a normal Fed activity; politicizing central banks are a bad idea in the long run. Maybe it should be private securities rather than govt securities. But either way, it isn't likely to move the dial much.

[Ray]

And just as obvious, what happens at 100 percent?
Exactly. Which is why we should perhaps be more clear in our public discourse that we're considering a 3% decrease or increase on the upper portion of the money that high earners make. Which probably does not constitute the difference between fascism and socialism, despite the screaming, yelling, and gnashing of teeth on both sides! IMHO of course.

-Ray

[LegendRider]

Tax cuts for the highest tier does little for economic stimulus - it targets a very small section of the population. High income folks spending is not dependent on tax rates. Luxury taxes on big ticket items have not slowed down those purchases - it's a nuisance rather than a decision-maker. Since this economy is predominantly based on consumption, tax cuts are much better aimed at the lower and middle classes with broader populations.


That simply isn't true. Tax rates absolutely have an impact on consumer behavior. Remember the luxury excise tax from 1991?

From an AP story:
In 1991, a 10-percent excise tax was enacted on the portion of sales prices higher than $30,000 for automobiles, $100,000 for boats and yachts, $10,000 for furs and jewelry, and $250,000 for airplanes.

It was part of a deficit-reduction plan - and a tax hike not vetoed by President George H.W. Bush. But a study for the Joint Economic Committee concluded job losses due to the tax cost the government $24.2 million in unemployment benefits and lost income tax revenues. Subtract the revenue from the luxury tax, and the net loss in the 1991 fiscal year was $7.6 million

The wealthy didn't buy yachts; shipyard workers lost their jobs and revenue to the gov't decreased. The law of unintended consequences.

[RPS]

Exactly. Which is why we should perhaps be more clear in our public discourse that we're considering a 3% decrease or increase on the upper portion of the money that high earners make. Which probably does not constitute the difference between fascism and socialism, despite the screaming, yelling, and gnashing of teeth on both sides! IMHO of course.

-Ray
I agree but don’t think that will solve much of anything if implemented -- it’s not enough. We need to address the real problems instead of playing ridiculous politics.

Most Americans who are not experts on economic matters believe on principle – or common sense if you prefer -- that we can’t spend our way out of debt – period. We created a lot of problems over many decades by living beyond our collective social means and nothing we do today is going to fix this issue short of us becoming more productive as a society (i.e. – working harder and more efficiently) and being thriftier in the long run. Our excesses of the past have to be unwound and it will be painful. These creative fixes that only move money around from one group to the other are just going to delay the inevitable because we are no longer the only game in town. Our arrogance will lead to our downfall IMHO if we keep going down the same path of living above our means. It is not sustainable.

Just like a responsible individual or family in debt has to do, we need to spend a lot less. Making more is OK too but it’s far easier to spend and waste less. Unfortunately I don’t see politicians having the courage to speak the truth to the American people.

We need to address taxes for sure, but also SS, Medicare, defense, and all other sacred cows.

[97CSI]

And just as obvious, what happens at 100 percent?That's an excellent idea for unearned income over, say $10M a year? For instance, Wall Street and banker and other corporate exec's who can't possibly "earn" that much. They've simply manipulated the rules (paid off the politicians, etc.) to do so.

[Ray]

Our arrogance will lead to our downfall IMHO if we keep going down the same path of living above our means. It is not sustainable.

Just like a responsible individual or family in debt has to do, we need to spend a lot less. Making more is OK too but it’s far easier to spend and waste less. Unfortunately I don’t see politicians having the courage to speak the truth to the American people.

We need to address taxes for sure, but also SS, Medicare, defense, and all other sacred cows.
Although we likely disagree on how a govt should address the debt/surplus question in boom times vs bust times, I agree with the above fundamental part of your post completely. Taxes, SS, Medicare, Defense, etal should be ALL be on the table and both sides need to compromise. And politicians don't tell us that and don't compromise because we (collectively) don't want to hear it and we toss them out of office as soon as they even try. I think we agree on the fundamental problem. But I blame us (again, collectively) more than the politicians. They're doing exactly what we demand they do.

But we've been around this merry go round a time or two my friend. I'm a bit weary of the same old shiny horses and flashing lights (not from you specifically Rick, just in general). So let's embrace this area of agreement on broad principles, accept that we're not gonna solve the detail in this forum, and go for a ride!

-Ray

[veloduffer]

That's pretty inconsequential for a multi-trillion budget - the numbers are not even a rounding error. How many luxury items are made here than overseas? I can't think of many other than business jets and some yachts. Cars? Watches? Jewelry? And really, how much do they comprise of GDP?

Industries that are the largest employers are retail and leisure (hotels, restaurants). If you cut sales tax on dining bills and hotel taxes, you'd probably do more for the economy and change consumer behavior.



That simply isn't true. Tax rates absolutely have an impact on consumer behavior. Remember the luxury excise tax from 1991?

From an AP story:
In 1991, a 10-percent excise tax was enacted on the portion of sales prices higher than $30,000 for automobiles, $100,000 for boats and yachts, $10,000 for furs and jewelry, and $250,000 for airplanes.

It was part of a deficit-reduction plan - and a tax hike not vetoed by President George H.W. Bush. But a study for the Joint Economic Committee concluded job losses due to the tax cost the government $24.2 million in unemployment benefits and lost income tax revenues. Subtract the revenue from the luxury tax, and the net loss in the 1991 fiscal year was $7.6 million

The wealthy didn't buy yachts; shipyard workers lost their jobs and revenue to the gov't decreased. The law of unintended consequences.

[onekgguy]

And for everyone to believe what is put out by the media or on the internet (especially the drivel that is acceptable as 'news' on Fox). Everything for the rich while the middle-class wages continue to shrink (down 12% since 2000). Eventually, when there are not enough middle-class jobs for your kids to earn a decent living, we will figure it out. And then we will go to war (the politicians last haven) to get the jingo-juices flowing. Read my signature line below.

Speaking of which... (http://www.commondreams.org/view/2010/11/14-1)

Kevin g

[54ny77]

Having spent 4 hours at a state DMV the other day on an otherwise trivial matter, I can say this much: gov't is the only growth industry on fire right now.... :mad:

[LegendRider]

That's pretty inconsequential for a multi-trillion budget - the numbers are not even a rounding error. How many luxury items are made here than overseas? I can't think of many other than business jets and some yachts. Cars? Watches? Jewelry? And really, how much do they comprise of GDP?

Industries that are the largest employers are retail and leisure (hotels, restaurants). If you cut sales tax on dining bills and hotel taxes, you'd probably do more for the economy and change consumer behavior.

You made a very specific claim: Luxury taxes on big ticket items have not slowed down those purchases - it's a nuisance rather than a decision-maker.

There is evidence that this isn't true and most economists would agree that taxes on goods that have elastic demand significantly impact behavior.

[veloduffer]

You made a very specific claim: Luxury taxes on big ticket items have not slowed down those purchases - it's a nuisance rather than a decision-maker.

There is evidence that this isn't true and most economists would agree that taxes on goods that have elastic demand significantly impact behavior.

I don't think you can take a single year as true indicator, particularly since 1990-91 there was a recession and reduced spending would have been the norm anyhow. It would have been interesting if it was enacted during a boom cycle like 2005-2007.

The luxury tax was an excise tax and the current debate is on income tax, anyhow. The effect of a tax increase on the wealthy can be blunted by tax arbitrage and shelters that are not available to the middle and lower income class. I don't think a 3% increase (or lack of a decrease) will make much difference either way. It's mostly symbolic.

[goonster]

And just as obvious, what happens at 100 percent?
Obvious, or not obvious, it's not a hypothetical question.Ask the Swedes. (http://en.wikipedia.org/wiki/Pomperipossa_in_Monismania)

In 1976 Astrid Lindgren found that her top marginal tax rate had risen to 102%. The ruling party was voted out. Tax rates remain high (~50% eff. income with a 25% VAT). Note that the issue only came to a head when raised by a universally-revered children's book author.

[prolearts]

In your last paragraph you talk about “unfunded Tax cuts” but really, isn’t it a proven fact that lower tax rates will bring in more tax revenue to the government by allowing the economy to grow / flourish ?

Well, I'd love to see actual evidence that is culled using normally acceptable economic data practices that showed that. Here are a few takes on the myth of tax cuts allowing so much growth that tax revenues increase:

On the 80s tax cuts:
http://krugman.blogs.nytimes.com/2008/01/17/reagan-and-revenue/

On the GW Bush tax cuts:
http://www.cbpp.org/cms/?fa=view&id=165

Plenty more out there. Nice discussion folks.

[prolearts]

Most Americans who are not experts on economic matters believe on principle – or common sense if you prefer -- that we can’t spend our way out of debt – period. We created a lot of problems over many decades by living beyond our collective social means and nothing we do today is going to fix this issue short of us becoming more productive as a society (i.e. – working harder and more efficiently) and being thriftier in the long run. Our excesses of the past have to be unwound and it will be painful. These creative fixes that only move money around from one group to the other are just going to delay the inevitable because we are no longer the only game in town. Our arrogance will lead to our downfall IMHO if we keep going down the same path of living above our means. It is not sustainable.

Just like a responsible individual or family in debt has to do, we need to spend a lot less. Making more is OK too but it’s far easier to spend and waste less. Unfortunately I don’t see politicians having the courage to speak the truth to the American people.

We need to address taxes for sure, but also SS, Medicare, defense, and all other sacred cows.

The first line of this paragraph is what is keeping the economy in the toilet right now. Cut during a boom. The economy is not going to dig it's own way out of this slump for a long, long time. The money multiplier from creating infrastructure related jobs is MUCH, MUCH more effective than even really significant tax cuts on lower income earners.

Cutting during the boom is the only time it makes sense to cut. THE ONLY TIME. There are accounting identities which are not theories, they are simple equations. They are as simple as your household budget which could be stated as such:

Household accounting identity:
family income - expenses/discretionary spending = savings

US accounting identity:
Govt. deficit/surplus + Current acct deficit/surplus (roughly speaking, this is the trade deficit) = Private sector deficit surplus

Now, the private sector (excepting corporations, which are FLUSH with cash right now, quite profitable and are choosing not to spend) is MASSIVELY indebted and needs to deleverage. This is everyone who has big cc bills, has a home-equity loan outstanding, is underwater on their home, has loans out on their 401Ks and so on. IF you expect that the private sector needs to NET SAVE (as stated earlier, corporations have already been hard at this, which is why f*** all for jobs have been created over the last 18-24 months), a sane person must admit that the above accounting identity means the public sector needs to NET SPEND right now (and that is leaving aside the current account balance/trade deficit which is HUGE and makes this even more true).

It's just math. If you don't think the economy should wallow in the toilet for another decade or so before we limp back to where things were in 2007, the government must spend until demand is sufficiently stoked again. It's pretty easy to create a budget surplus when the economy is booming, it's economic and social suicide to try for a surplus or even a very modest deficit when the economy is in the tank. See this paper for a very in-depth defense and explanation of this:

http://mrzine.monthlyreview.org/2010/baker191010.html

[zap]

http://www.econlib.org/library/Enc1/SupplySideEconomics.html

[SPOKE]

As far as my income is concerned I'm considered middle-class. I can also tell you that in my particular job function salaries have been managed down since about 2004-2005. Even with higher sales volumes my salary has gone down. This trend has been happening with the three companies I have worked fore since 1998. (all three compete for the same customers).

The change above along with an increasing income tax, sales tax, and other fees that I must pay have greatly reduced my disposable income that I used to gladly use to stimulate the economy.

I promise to do my part to stimulate the economy if my personal economy improves and my confidence in our national/global economy improves.

I doubt I'm alone in this view.

[97CSI]

Those wonderful $10M salaries, bonuses and perks at the top have to come from somewhere. The rich have all ready fleeced the working-class so now it is the middle-class' turn. Remember, you voted for it two weeks ago. Just listen to the new House Majority Leader. Transfer of wealth, indeed. To those who all ready have it.

[veloduffer]

Those wonderful $10M salaries, bonuses and perks at the top have to come from somewhere. The rich have all ready fleeced the working-class so now it is the middle-class' turn. Remember, you voted for it two weeks ago. Just listen to the new House Majority Leader. Transfer of wealth, indeed. To those who all ready have it.


To paraphrase Dennis Hopper from the movie "Flashback": "Yeah, they created two classes, the truly greedy and the truly needy."

[RPS]

The first line of this paragraph is what is keeping the economy in the toilet right now. I tend to disagree. From my perspective the economy is in the toilet because yet another bubble burst (in this case housing) which drove us down to earth. If we keep shoring up the failed assumption that we can somehow live above our collective means through clever manipulations of the financial systems we will just keep the “next” bubble growing for a while but fundamentally it can’t keep growing forever so it too will eventually burst. Besides, aren’t all incremental moneys required for stimulus either borrowed or printed? Granted I’m far from an economist but I have yet to read anything in simple English to suggest spending more than we have won’t eventually come back to bite us in the @$$.

It's just math. If you don't think the economy should wallow in the toilet for another decade or so before we limp back to where things were in 2007, the government must spend until demand is sufficiently stoked again. It's pretty easy to create a budget surplus when the economy is booming, it's economic and social suicide to try for a surplus or even a very modest deficit when the economy is in the tank. I’m willing to take our beating now and get it over with instead of putting it off for a future day. If I thought we could “austere” our way back to repaying the national debt in 10 years and set ourselves up to be more competitive long term I would gladly endure my share of the pain. What I don’t want is to keep digging a deeper hole for future generations.

[SamIAm]

These last two posts by our comrades from New Jersey help to really frame this tax issue for what it is, class warfare, wealth envy, populism etc. It has never been about the incremental revenue that it WON'T generate.

[97CSI]

These last two posts by our comrades from New Jersey help to really frame this tax issue for what it is, class warfare, wealth envy, populism etc. It has never been about the incremental revenue that it WON'T generate.Yes, comrade Samski, you are partially correct. Is definitely class warfare http://www.commondreams.org/view/2010/11/14-1, and the rich are winning. Wealth envy? Could always use more, but am retired with a house near the Jersey shore and condo in town, so we are doing OK. Populism, definitely. Just want the rich to pay their share. If they have 70% of the wealth then they should pay 70% of the taxes. That's all I ask. No shelters for unearned income or inherited wealth. I believe in the good old American work ethic. Earn it yourself.

[Seott-e]

Well, I'd love to see actual evidence that is culled using normally acceptable economic data practices that showed that. Here are a few takes on the myth of tax cuts allowing so much growth that tax revenues increase:

On the 80s tax cuts:
http://krugman.blogs.nytimes.com/2008/01/17/reagan-and-revenue/

On the GW Bush tax cuts:
http://www.cbpp.org/cms/?fa=view&id=165

Plenty more out there. Nice discussion folks.

Well , here's another view.
http://www.heritage.org/Research/Reports/2003/08/The-Historical-Lessons-of-Lower-Tax-Rates

This is a great and healthy discussion.

[Ozz]

Well , here's another view.
http://www.heritage.org/Research/Reports/2003/08/The-Historical-Lessons-of-Lower-Tax-Rates

This is a great and healthy discussion.
The most useful info I gleaned from the above link, and the two by "prolearts" is:

"Yes, it is. I know we’re supposed to pretend that we’re having a serious discussion in this country; but the truth is that we aren’t." - Krugman

:help:

[1centaur]

Just want the rich to pay their share. If they have 70% of the wealth then they should pay 70% of the taxes. That's all I ask.

Hmm, I wonder how that works in Excel over many sequential years?

And that's before you define wealth (stocks that have to be sold to raise cash? Farm land? Your house? Your Renoir? Your Honda?), or realize that spending 100% of what you make on something not counted as wealth means no taxation - awesome incentive system.

[Ray]

Populism, definitely. Just want the rich to pay their share. If they have 70% of the wealth then they should pay 70% of the taxes. That's all I ask. No shelters for unearned income or inherited wealth. I believe in the good old American work ethic. Earn it yourself.
Just to clarify, under a progressive taxation system, which we have in this country and have had for longer than any of us have been alive, the rich should pay a higher percentage of taxes than the percentage of income they earn. If they earn 70% of the wealth, we/they should be paying MORE than 70% of the taxes. And there's not much serious disagreement about that, except for those who believe in the flat tax (there are plenty who do, but its still a pretty small minority opinion). But most people, even the wealthy, accept the idea of progressive taxation. The only question is HOW progressive.

Which is where the 3% we're arguing over now comes into play. And nothing in this argument has anything to do with eliminating or changing write-offs, loopholes, etc - its ONLY about that 3% difference from 36% to 39% for the portion of higher incomes above the first $250,000. The deficit commission, which has floated a preliminary proposal which, like it or not, IS the beginning of a serious discussion, does recommend getting rid of all sorts of shelters, write-offs, loopholes, etc. And their proposal has already been thoroughly shredded by both sides because it dares to MENTION the sacred cows of taxes, military spending, medicare, social security, home loan interest deductions, etc.

To me, that's the gut check. If they're all just posturing now, maybe they'll still pass the gut check. But I doubt it. More likely the deficit commission proposal will be dead before it hits the floor, so to speak, and we don't do anything about our long term debt until we're forced to by a financial crisis that probably puts the little 2008 tremor to shame.

For what its worth, I am and have been in favor of getting the long term structural deficits under control for my whole adult life. I don't agree with a lot of you that the deficit spending we've done for the past 2-3 years to a) bail out the financial system and auto companies - most of which has been paid back, and b) the stimulus program that did help keep the bottom from completely dropping out, (at least according to my counterfactual assumptions!) is a bad thing. I think its a critically important thing and the immediate deficits we're running up don't bother me. We should have been running surpluses when times were good so that borrowing so heavily now wouldn't be such a problem, but the bad times are when you SHOULD be spending to keep things afloat imho. But the real problem is the long term un-sustainability of the big stuff (medicare, social security, military spending), particularly in light of our unwillingness to raise any taxes for anything, ever! If we can attack that seriously, I think the temporary problems of the past (and maybe next) few years can be dealt with. But if we can't deal with the long term stuff, we're gonna be in deep trouble.

That's my take anyway.

-Ray

[goonster]

Can we please stop arguing about taxes, and get back to Quantitative Easing?

I would like to hear more on that from the forum's economists . . .

[93legendti]

Our federal tax system is not progressive. It is confiscatory vis a vis the top 50% and charitable towards the bottom 50%, who NOW pay no federal taxes.

The Administration insists the money sent to the non-federal tax paying citizens as part of the ill-fated Stimulus (sold as THE vehicle to "jump start the economy" and "keep unemployment under 8%"-NOT to "keep the bottom from falling out") was a "tax cut"-hard to get a federal tax cut when you pay no federal taxes, but who am I to argue with the administration?

In 2006, the top 10% of earners - households making an average of $366,400 - paid ~73% of the income taxes collected by the federal government.

In 2007 the top 1% percent of income earners paid 40% percent of all federal income taxes, while the bottom 50% paid only 3%. More than 1/3 of U.S. earners paid no federal income tax at all.

In 2009, it got worse.

The bottom 40%, on average, made a profit from the federal income tax, meaning they get more money in tax credits than they owed in taxes. For those people, the government sent them a payment.

"Progressive" should at least mean that everyone who had federal income money also paid federal taxes.

[1centaur]

I think the arithmetic has already been done that you could take all the earnings of the top x% rather than 39% (plus loss of deductions and assorted this and that which add up to over 50% of income) and it would not solve the problem. How many $10MM earners are there on Wall Street, 40? I make a good living (a long, long, long way from numbers like that) and I've no idea what tax shelters people use. Amazing how the few are used to roast the many. The 36-39% move is just incrementalism that betrays a world view - when faced with spending cuts or tax increases, tax increases win every time. Start with the "rich" to win the first election (and $300k that may not be earned next year let alone over any kind of planning horizon, with 4 kids and college tuitions and retirement savings, is not exactly yacht territory), move down to $120k after the next election "to be fair," add VAT "because all civilized countries with health care have that," add carbon taxes "because we care about the earth," and we'll think of more next week. There is a never ending "need" for more government spending if one believes that government exists to solve people's problems by using OPM. The midterm elections reflected a gut desire to stop that freight train by much of the middle of the spectrum, a number far greater than the number of rich people looking at tax increases in round one.

We see the same pattern in many countries (and states), overpromising under the assumption that the wealth will be there. It's easy to promise and hard to pay; the ability to pay will come from the earners when they feel they can earn it, not from a genie lamp whenever government "needs" it. So yes, it would be great to save more in the good times and spend more fiscally in the bad times, but we're past that point today, our deficits and prospects are beyond simple fixes like that. A vibrant economy closes deficits faster than anything else we can do, but we can't afford incentivizing tax decreases without making the deficits worse. We won't get a vibrant economy by fiscal stimulus that pushes the dollar closer to the brink. So now we need mutual pain, and I think that means something like what the deficit commission said, 75% spending cuts and 25% tax increases. Our economist at work used that NYT deficit calculator and closed the deficit completely in 2015. He declared that he would get one vote, his, if he ran for President on that platform. This is why it looks like the government wants to create inflation, but just the right amount. Inflation hurts savers and the elderly for the benefit of the young. I am told that some Zimbabwe stocks kept up with their hyperinflation. Something to keep in mind, oh 45-60 Serotta forum denizens.

[1centaur]

QE2 - Bernanke's speech basically said it didn't work the first time so don't worry about inflation this time (separated by a couple of paragraphs). Stunning.

Monetizing the deficits while hoping for animal spirits to wake. There's a tiny rumbling out in the economy today, IMO, but it won't be enough to get unemployment under 8% for a long time (2, 3 years?). I saw stats today about what % of consumer spending comes from the top 6-7% of earners - it was surprisingly high. 70% of GDP is consumption in the US.

QE2 is a fun game to play while hoping for something better, it benefits the banking system which will help in the long run. Credit is becoming more available. The dollar is not crashing. It was all they had so they went with it, but if we come back it will not be driven by QE2 but by our work and risk ethics, IMO.

[LegendRider]

Let's hope the US dollar never sinks to the low of the Zimbabwean dollar!

[Rueda Tropical]

First, we didn't get any tax cuts under Bush. The conservative economist Milton Friedman pointed out that for a tax cut to be a tax cut you have to cut an equal amount of government spending. So let's see how the Bush tax cuts worked:

I borrow a dollar from China. I give you the dollar along with a note with your name on it saying you owe China a dollar plus interest. So after your "tax cut" you are actually in the hole for more then you received. Not a bad scam considering the political gain showering "tax cuts" on voters get's you.

You can balance the budget. Pick what you would cut:
http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html

As far as tax cuts paying for themselves with more revenue then they cost. After the Reagan and Bush tax cuts the deficit exploded. I don't know how many times the tax cuts pay for themselves crowd has to be proven devastatingly wrong before they stop repeating that canard. Reagan was actually more a Keynesian then a Libertarian. Cutting taxes in the recession and raising them before the recession was over ...he took back half his tax cuts to reduce the deficit caused by the cuts. The 10 Reagan tax increases never gets mentioned by todays Republicans.

[pbjbike]

First, we didn't get any tax cuts under Bush. The conservative economist Milton Friedman pointed out that for a tax cut to be a tax cut you have to cut an equal amount of government spending. So let's see how the Bush tax cuts worked:

I borrow a dollar from China. I give you the dollar along with a note with your name on it saying you owe China a dollar plus interest. So after your "tax cut" you are actually in the hole for more then you received. Not a bad scam considering the political gain showering "tax cuts" on voters get's you.

You can balance the budget. Pick what you would cut:
http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html

As far as tax cuts paying for themselves with more revenue then they cost. After the Reagan and Bush tax cuts the deficit exploded. I don't know how many times the tax cuts pay for themselves crowd has to be proven devastatingly wrong before they stop repeating that canard. Reagan was actually more a Keynesian then a Libertarian. Cutting taxes in the recession and raising them before the recession was over ...he took back half his tax cuts to reduce the deficit caused by the cuts. The 10 Reagan tax increases never gets mentioned by todays Republicans.

As always, you are concise, to the point, and telling the truth. Keep On. :banana: :banana: :banana:

[onekgguy]

I am absolutely loving this thread. Please, powers-that-be, don't shut it down.

Kevin g

[tribuddha]

First, we didn't get any tax cuts under Bush. The conservative economist Milton Friedman pointed out that for a tax cut to be a tax cut you have to cut an equal amount of government spending. So let's see how the Bush tax cuts worked:

I borrow a dollar from China. I give you the dollar along with a note with your name on it saying you owe China a dollar plus interest. So after your "tax cut" you are actually in the hole for more then you received. Not a bad scam considering the political gain showering "tax cuts" on voters get's you.

You can balance the budget. Pick what you would cut:
http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html

As far as tax cuts paying for themselves with more revenue then they cost. After the Reagan and Bush tax cuts the deficit exploded. I don't know how many times the tax cuts pay for themselves crowd has to be proven devastatingly wrong before they stop repeating that canard. Reagan was actually more a Keynesian then a Libertarian. Cutting taxes in the recession and raising them before the recession was over ...he took back half his tax cuts to reduce the deficit caused by the cuts. The 10 Reagan tax increases never gets mentioned by todays Republicans.


AMEN Brother!!! tax cuts did not work then and they wont work now, if they had we wouldn't be having this discussion we had many tax cuts and the only thing that happened was deficits..Clinton increased taxes and payed down debt......

[prolearts]

These last two posts by our comrades from New Jersey help to really frame this tax issue for what it is, class warfare, wealth envy, populism etc. It has never been about the incremental revenue that it WON'T generate.

How is it that class warfare only ever goes one way for some? The rich are infinitely better at it than the poor will ever be.

97CSI, I'd love to knock back a few with you one day! You're a hoot.

This discussion is congealing along the usual lines, which I reckon is how it goes. It's been fun though.

As for the Heritage Foundation and the other supply-sider links, in each case cited, lowering the top tax rates corresponds with a significant jump in income inequality, so naturally a lower tax rate may still gain marginally more revenue. This says nothing about how much MORE might have been gained with a higher rate (it really, really doesn't). However, I wasn't aware that anyone was heralding the decade leading up to the Great Depression as a testimonial to the effectiveness of lower taxes on the rich. But in a country where only 42% (and falling) of citizens can name the THREE BRANCHES OF GOVERNMENT, historical lessons aren't learned for long (this is real, and really scary: http://www.zogby.com/Soundbites/readclips.cfm?ID=13498).

Here's another take on the upper tax bracket and class war and such. At least this article admits that CORRELATION IS NOT CAUSATION. However, the correlation is pretty striking and it ain't the line the Heritage Foundation is selling.

Income Inequality and Financial Crises
http://www.nytimes.com/2010/08/22/weekinreview/22story.html?_r=1&ref=business

Also, here's Paul Krugman again on supply-side follies. I don't always agree with him, but he does spend a lot of time correcting grievous errors of data misrepresentation from the likes of the links above.
http://krugman.blogs.nytimes.com/2010/07/15/carter-reagan-revenue/

Well, I reckon that's enough from me on all this. Quantitive easing is a sh*t policy, but it's just ever so slightly better than doing nothing and I hope that it's critics who say it will lead to inflation and a "weaker" dollar are right, because both of those would help all but the top 10% or so, whether they all know it or not.

Anyway, whether it's bottom or tax brackets, I do enjoy the company on the forum. Cheers!

[RPS]

As I understand it there is absolutely nothing that keeps anyone from paying more taxes than due. Honestly, if it’s such a great idea just write a bigger check – they will cash it. ;)

[Seott-e]

AMEN Brother!!! tax cuts did not work then and they wont work now, if they had we wouldn't be having this discussion we had many tax cuts and the only thing that happened was deficits..Clinton increased taxes and payed down debt......

OK, so tax increases do work, but how and what do they do for us ?????
With the Bush bail-out and now the Obama bail-out and the projected deficit, how much are we going to be expected to pay ? Is this really just continuing to feed the monster with no end in sight ? After 94 with Clinton we had pretty controlled spending. Now look what we have…….

[Rueda Tropical]

OK, so tax increases do work, but how and what do they do for us ?????
With the Bush bail-out and now the Obama bail-out and the projected deficit, how much are we going to be expected to pay ? Is this really just continuing to feed the monster with no end in sight ? After 94 with Clinton we had pretty controlled spending. Now look what we have…….

Our chief strategic and economic rival is China. In the past several decades China has seized our manufacturing base and the technology that goes along with it. They have gained control of the world supply of critical raw materials like rare earth elements which are required to build everything from smart bombs to computers. They have used the tidal wave of dollars they have gained in the process to secure the world's resources in Latin America, Africa and Asia.

They did all this without invading any countries, without building any massive military bases far outside it's borders, without firing a shot. We in the meantime continue to mortgage ourselves to the Communist dictatorship in China to maintain an crippling expensive network of overseas military installations and to prosecute 2 wars which are now costing us 1 Trillion dollars. Evidently we needed to invade 2 countries and spend a $Trillion dollars to kill a few dozen terrorists who are still alive and operating and laughing their asses off at our incredible incompetence.

Every dollar China spends on technology like car batteries (they have the most advanced) and securing resources makes them stronger. Every dollar we have spent on our military adventures and out of control defense budget has made us weaker.

The NY Times interactive budget balancer does not give you the option of completely pulling all troops out of Iraq and Afghanistan and closing all overseas bases and leaving the Europeans, Japanese, etc., to pay for their own defense, ending all military foreign aid and cutting our defense budget by at least half. China is spending 2% of it's GDP on defense. We are spending more then double that. Yet China is cleaning our clock and increasing it's influence world wide while our influence and economy declines.

[dave1215]

hmmm, representation without taxation

is this why we have a congress that panders to voters
by continually creating new programs of spending
without having any semblance of fiscal responsibility?



Our federal tax system is not progressive. It is confiscatory vis a vis the top 50% and charitable towards the bottom 50%, who NOW pay no federal taxes.

The Administration insists the money sent to the non-federal tax paying citizens as part of the ill-fated Stimulus (sold as THE vehicle to "jump start the economy" and "keep unemployment under 8%"-NOT to "keep the bottom from falling out") was a "tax cut"-hard to get a federal tax cut when you pay no federal taxes, but who am I to argue with the administration?

In 2006, the top 10% of earners - households making an average of $366,400 - paid ~73% of the income taxes collected by the federal government.

In 2007 the top 1% percent of income earners paid 40% percent of all federal income taxes, while the bottom 50% paid only 3%. More than 1/3 of U.S. earners paid no federal income tax at all.

In 2009, it got worse.

The bottom 40%, on average, made a profit from the federal income tax, meaning they get more money in tax credits than they owed in taxes. For those people, the government sent them a payment.

"Progressive" should at least mean that everyone who had federal income money also paid federal taxes.

[Seott-e]

hmmm, representation without taxation

is this why we have a congress that panders to voters
by continually creating new programs of spending
without having any semblance of fiscal responsibility?

You might be thinking special interest groups. (panders to voters) What we need is a government that listens to the Voters.
What ever happened to the idea of a govenrment Of the people, For the people and by the people. I know that sounds so old, but isn't it right ?

I think a Flat Tax would be the way to go...........

[Rueda Tropical]

In 2007 the top 1% percent of income earners paid 40% percent of all federal income taxes

Then they were not paying enough as they are getting much more then 40% of all gains in income in the last several decades while wealth and income has been shrinking for the middle class. That has resulted an income distribution that looks more like a banana republic then a first world country. That sort of rise in income inequality has also been a pre-cursor to every financial crash.

[mschol17]

Our federal tax system is not progressive. It is confiscatory vis a vis the top 50% and charitable towards the bottom 50%, who NOW pay no federal taxes.

The Administration insists the money sent to the non-federal tax paying citizens as part of the ill-fated Stimulus (sold as THE vehicle to "jump start the economy" and "keep unemployment under 8%"-NOT to "keep the bottom from falling out") was a "tax cut"-hard to get a federal tax cut when you pay no federal taxes, but who am I to argue with the administration?

In 2006, the top 10% of earners - households making an average of $366,400 - paid ~73% of the income taxes collected by the federal government.

In 2007 the top 1% percent of income earners paid 40% percent of all federal income taxes, while the bottom 50% paid only 3%. More than 1/3 of U.S. earners paid no federal income tax at all.

In 2009, it got worse.

The bottom 40%, on average, made a profit from the federal income tax, meaning they get more money in tax credits than they owed in taxes. For those people, the government sent them a payment.

"Progressive" should at least mean that everyone who had federal income money also paid federal taxes.

This is either wrong or carefully worded so it doesn't mean what it appears to mean.
47% of people don't pay any federal income tax, but they do pay state income tax, gas tax, sales tax, FICA, etc... It's only 10% or so of people who make a profit on overall federal taxes. Since these people are incredibly poor, it's not like they're receiving more than a few thousand dollars a year net.

Progressive taxation was suggested and endorsed by Adam Smith, Abraham Lincoln, James Madison, etc. It's not some sort of communist class warfare tactic, it's the recognition that the wealthy people benefit most from an orderly and productive society.

[Ray]

You might be thinking special interest groups. (panders to voters) What we need is a government that listens to the Voters.
What ever happened to the idea of a govenrment Of the people, For the people and by the people. I know that sounds so old, but isn't it right ?

I think a Flat Tax would be the way to go...........
They DO listen to the voters. Polls consistently show that Americans strongly favor:

* Low Taxes
* No Cuts to Social Security or Medicare or other sacred cows
* A big military (no major cuts in military spending)

And that's exactly what our elected officials give us. Polls also show that most Americans are concerned about big deficits and politicians pay plenty of lip service to that, but they know that they'll get tossed out of office a whole lot quicker if they threaten social security, medicare, our national security, or higher taxes than if they just run the deficit up a little farther because the pain from the deficit isn't here yet.

They're listening to the voters and giving us exactly what we (collectively) want. What we want isn't sustainable.

And, by the way, most voters don't think the flat tax is the way to go. So who should the politicians listen to - you, or the voters?

-Ray

[97CSI]

Then they were not paying enough as they are getting much more then 40% of all gains in income in the last several decades while wealth and income has been shrinking for the middle class. That has resulted an income distribution that looks more like a banana republic then a first world country. That sort of rise in income inequality has also been a pre-cursor to every financial crash.
And, this terribly skewed income distribution has become considerably worse in the past 4+ years since this data was tabulated.

[saab2000]

It's ironic that:

printing $700 Billion is supposed to stimulate the economy;
the $787 Stimulus Bill was supposed to be stimulative;
extending the tax cuts as to the upper 2% will allegedly cost $700 billion over 10 years and will have NO stimulative effect.

This is an interesting point......

[oldpotatoe]

They DO listen to the voters. Polls consistently show that Americans strongly favor:

* Low Taxes
* No Cuts to Social Security or Medicare or other sacred cows
* A big military (no major cuts in military spending)

And that's exactly what our elected officials give us. Polls also show that most Americans are concerned about big deficits and politicians pay plenty of lip service to that, but they know that they'll get tossed out of office a whole lot quicker if they threaten social security, medicare, our national security, or higher taxes than if they just run the deficit up a little farther because the pain from the deficit isn't here yet.

They're listening to the voters and giving us exactly what we (collectively) want. What we want isn't sustainable.


-Ray

Boy, that is exactly right. As a retired USN guy who is 2 years from Social Security, I favor a BIG cut in defense and a raising of the retirement age to get social security..but neither will happen.

[93legendti]

This is an interesting point......
Thanks, I thought so. ;)

[Rueda Tropical]

The poor persecuted US rich. They have increased their share of the national wealth by geometric amounts. Yet Exxon paid 0% in taxes, Google 2%, Warren Buffet pays a lower tax rate then his secretary, there is likely not one successful hedge fund manager who pays a higher tax rate then his or her secretary despite raking in billions. Half the foreign corporations operating in the US pay no tax, as a matter of fact corporate taxes have become optional with all the loop holes and legal scams available to them.

I want to be persecuted like that! Where do I sign up?

[97CSI]

Boy, that is exactly right. As a retired USN guy who is 2 years from Social Security, I favor a BIG cut in defense and a raising of the retirement age to get social security..but neither will happen.Raising the retirement age is about the worst thing I've read/heard for several reasons. First, unemployment among young adults (<25) is something like 20%. If the retirement age is increased then this will go up as the older folks take more jobs. Plus, try to get another job if you are 50+ and have lost your job for whatever reason. Poverty amongst 65+ today is something we, the richest country in the world, should be ashamed of. Raising the retirement age will make it that much worse. Simply creating another group of working-poor (or non-working for most of them) is a non-starter. Sounds good to the greedy 'haves', but will just drive up other costs. The 'law of unintended consequences' cannot be avoided.

[93legendti]

Raising the retirement age is about the worst thing I've read/heard for several reasons...
Not only that the age won't be raised for something like 50 years. You think lawmakers in 50 years will feel bound by this decision?

As I understand it social security is not even part of the deficit.

Discretionary spending has increased 84% since 2008. Hmmm...

[dave1215]

...non-starter...

favored partisan political rhetoric

[RPS]

They DO listen to the voters. Polls consistently show that Americans strongly favor:

* Low Taxes
* No Cuts to Social Security or Medicare or other sacred cows
* A big military (no major cuts in military spending)

And that's exactly what our elected officials give us. Polls also show that most Americans are concerned about big deficits and politicians pay plenty of lip service to that, but they know that they'll get tossed out of office a whole lot quicker if they threaten social security, medicare, our national security, or higher taxes than if they just run the deficit up a little farther because the pain from the deficit isn't here yet.

They're listening to the voters and giving us exactly what we (collectively) want. What we want isn't sustainable.

And, by the way, most voters don't think the flat tax is the way to go. So who should the politicians listen to - you, or the voters?

-Ray
Ray, very well stated -- I’m finding myself agreeing with you more than I ever thought possible. Where we would disagree for sure is what drives us “collectively” to act so stupidly. I’d argue that our innate selfishness prevents popularization of decisions to promote efficient behavior but I’d expect you would disagree. At least I’m encouraged that Americans with different political points of view are starting to agree on the problems. Maybe some day we’ll agree on solutions.

BTW, I’m not as sure as you about the lack of acceptance for a flat income tax if it included absolutely no deductions except for a sizeable initial deduction to make it infinitely progressive. No double taxing, no loopholes, no nothing other than everyone gets an initial amount of income tax free in order to accommodate the needy. It would put a lot of attorneys, accountants, and IRS folks out of work but in time they’d find something more productive to do. And ultimately that’s what we need – to be more efficient by eliminating processes that don’t inherently create anything but waste.

[jblande]

Discretionary spending has increased 84% since 2008. Hmmm...



What percentage of the federal budged does that equal?

How does it compare to the increases in military spending (20% of federal budget) during the golden years preceding 2008?

[JMerring]

At least I’m encouraged that Americans with different political points of view are starting to agree on the problems.

not from where i'm sitting. my perception is that things are getting worse and we are getting more polarized. the only difference i see is that we on this board are having a civil discussion in spite of our political differences, that's all.

[rugbysecondrow]

The lobbying efforts of the professions you mentioned will never let the flat tax happen. There is too much infrasture built around the existing yet inefficient behemoth.

There is not fairness in taxation. Folks believe the rich should pay more be use they are rich and that the poor should pay less or zero because they are poor. Everybody should contribute and have a relatively equal vesting in the government.

Ray, very well stated -- I’m finding myself agreeing with you more than I ever thought possible. Where we would disagree for sure is what drives us “collectively” to act so stupidly. I’d argue that our innate selfishness prevents popularization of decisions to promote efficient behavior but I’d expect you would disagree. At least I’m encouraged that Americans with different political points of view are starting to agree on the problems. Maybe some day we’ll agree on solutions.

BTW, I’m not as sure as you about the lack of acceptance for a flat income tax if it included absolutely no deductions except for a sizeable initial deduction to make it infinitely progressive. No double taxing, no loopholes, no nothing other than everyone gets an initial amount of income tax free in order to accommodate the needy. It would put a lot of attorneys, accountants, and IRS folks out of work but in time they’d find something more productive to do. And ultimately that’s what we need – to be more efficient by eliminating processes that don’t inherently create anything but waste.

[97CSI]

How does it compare to the increases in military spending (20% of federal budget) during the golden years preceding 2008?NPR (that evil leftwing radio group) had an economist who studies military spending and the former comptroller of the DOD under Bush II on for an hour yesterday. A most interesting discussion on the entrenched bureaucracy and long-term programs and how they are tied in with our allies around the world. The most interesting part of the discussion for me was the fact that all of our NATO allies spend <2% of their GDP on defense. Something we need to pay attention to. What percentage is China spending?

[veloduffer]

What percentage of the federal budged does that equal?

How does it compare to the increases in military spending (20% of federal budget) during the golden years preceding 2008?

Discretionary spending in FY 2010 was $1.39 trillion, or 38% of total spending. More than half ($844 billion) was security spending, which includes the Department of Defense, overseas contingency programs and Homeland Security.

Non-security spending was $553 billion. The largest departments were: Health and Human Services ($84 billion), Transportation ($76 billion), Education ($46.8 billion), Housing and Urban Development ($43.6 billion) and Agriculture ($25 billion).

Included in discretionary spending are expanded benefits for veterans with disabilities and mental illness.

Earmarks are about $7.7 billion. In reality, it's pretty small component of the budget and more political than anything else. It ain't chump change, though.

Mandatory Spending, at $2.16 trillion in FY 2011, was 56% of the U.S. Federal Budget. The largest mandatory spending programs were Social Security and Medicare, as follows:
Social Security - $730 billion
Medicare - $491 billion
Medicaid - $297 billion
TARP - $11 billion
Jobs Programs - $25 billion
All other mandatory programs - $619 billion. These programs include Food Stamps, Unemployment Compensation, Child Nutrition and Tax Credits, Supplemental Security for the Disabled and Student Loans.

TARP is relatively low now because most of the financial sector has repaid and the TARP program has earned a profit of $29 billion. Included in TARP is GM and Chrysler, of which only one is likely to be repaid.

Social Security is funded through payroll taxes. Through 2017, Social Security collects more in tax revenues than it pays out in benefits because there are 3.3 younger workers for every beneficiary. However, as the baby boomers come through the system, the surplus will turn to a deficit and will require monies from the general fund.

Medicare payroll taxes and premiums cover only 57% of current benefits. The remaining 43% is financed from general revenues. Because of rising health care costs, general revenues would have to pay for 62% of Medicare costs by 2030. As with Social Security, the tax base is insufficient to pay for this.

On an actuarial liability basis as of 2008, the present value of the projected shortfall (in all future years) between Social Security benefits and program revenue to be $15.9 trillion, more than double the $7.7 trillion of federal debt currently held by the public. The equivalent measure for Medicare is $85.9 trillion, more than 11x the publicly held federal debt. Without other action, those gaps will increase at approximately the rate of interest each year.

These two sacred cows will need to be restructured to reduce the deficit in any meaningful way if there is no significant increase in taxes. Also, continued immigration is a key to having favorable demographics to support these programs.

[Ray]

Ray, very well stated -- I’m finding myself agreeing with you more than I ever thought possible. Where we would disagree for sure is what drives us “collectively” to act so stupidly. I’d argue that our innate selfishness prevents popularization of decisions to promote efficient behavior but I’d expect you would disagree. At least I’m encouraged that Americans with different political points of view are starting to agree on the problems. Maybe some day we’ll agree on solutions.
I think we'd also disagree about what the solution should look like. A state with very little government, very little safety net, and very low taxes? Or a state with a fairly strong safety net (to get us through the inevitable tough times, like these), a government that doesn't drive the economy but has a voice in it, and the relatively higher taxes to pay for it? Although I'm sure I worded this badly to make my preference look better and yours worse (sue me, I'm human!), these are both sustainable models but with very different philosophical underpinnings. I'm guessing you'd open door number one and I know I'd open door number two. And its the tension between THESE two visions that used to result in the compromises that formed the US government.

But somewhere along the way we came up with a set of determinative swing voters who wanted all of the things a liberal wants AND all of the things that a conservative wants and here we are. Either classic liberalism or classic conservatism can work (I'd argue its mostly a difference of who each works for) and a mix of the two is the type of compromise we used to be able to hammer out and live with. Once we lost our sense of limits, consequences, sacrifice, etc, I think that went out the window and we're left with too many voters who want liberal government with a conservative price tag and that doesn't fly. As I've said before, its probably not a huge percentage - I'm not dissing ALL Americans (most probably have pretty coherent visions), but I'm dissing the large enough group of voters who swing back and forth and seem to just vote on how things are going at the moment. And that sort of short term thinking has us in a bit of a pickle.

-Ray

[RPS]

not from where i'm sitting. my perception is that things are getting worse and we are getting more polarized. the only difference i see is that we on this board are having a civil discussion in spite of our political differences, that's all.
J, I’m more optimistic than that. To me it seems we are starting to agree on what the problems are but still disagree on what to do to correct them. For me that’s a great start.

On one of the most contentious issues of our time: every day I see greater willingness to discuss needed social security cuts. Personally I’d like some day to get as much as Uncle Sam can send me, but I’m realistic about the need to make significant cuts in the program. I believe most Americans – even retires or soon to be retires – are starting to accept the inevitability that something has to occur. The issue will likely come down to whether cuts are made across the board or if – like income taxes – they are made more progressive.

For now I’ll enjoy believing the days of finger pointing and hiding our heads in the sand are behind us -- until proven wrong. :beer:

[Rueda Tropical]

What percentage is China spending?

2%

[RPS]

Once we lost our sense of limits, consequences, sacrifice, etc, I think that went out the window and we're left with too many voters who want liberal government with a conservative price tag and that doesn't fly. As I've said before, its probably not a huge percentage - I'm not dissing ALL Americans (most probably have pretty coherent visions), but I'm dissing the large enough group of voters who swing back and forth and seem to just vote on how things are going at the moment. And that sort of short term thinking has us in a bit of a pickle.

-Ray
We seem to agree that we need limits, consequences, sacrifice, etc...

Now we just need to find ways to make sure some don't abuse lack of limits, lack of consequences for their decisions, and lack of personal sacrifice for personal gain at the expense of others in society. We are really not that different in what we want. I want a safety net too for those who really need it. I know its true value -- fell on it once and it saved me and my family for a short period. There is nothing wrong with a social safety net for catastrophic events. It just can’t be made into a way of life or we all suffer.

[oldpotatoe]

favored partisan political rhetoric

bing, bing, bing, we have a winner!

[veloduffer]

But somewhere along the way we came up with a set of determinative swing voters who wanted all of the things a liberal wants AND all of the things that a conservative wants and here we are. Either classic liberalism or classic conservatism can work (I'd argue its mostly a difference of who each works for) and a mix of the two is the type of compromise we used to be able to hammer out and live with. Once we lost our sense of limits, consequences, sacrifice, etc, I think that went out the window and we're left with too many voters who want liberal government with a conservative price tag and that doesn't fly. As I've said before, its probably not a huge percentage - I'm not dissing ALL Americans (most probably have pretty coherent visions), but I'm dissing the large enough group of voters who swing back and forth and seem to just vote on how things are going at the moment. And that sort of short term thinking has us in a bit of a pickle.

-Ray

+1

Don't discount the cultural differences between the US and Asia and other countries. One of the most significant factor is the low savings rate in the US that creates a need for SS and Medicare/Medicaid. In Asia, the average savings rate is near 40% of income. We don't come close to that.

Also, the structure of the economy is important. Being a largely consumption based economy creates large trade deficits. Other countries like France and Germany with higher level of social welfare programs (and subsquent higher level of govt spending on a GDP basis - the US is about 34% and they are closer to 50%) are net exporters. It's a bit amazing that these European countries with a higher and more rigid labor structure have more exports (as % of GDP) than the US by far. From talking to folks in the steel and other basic industries, a big component of their costs are regulatory in trying to transact deals.

[Rueda Tropical]

Before you all get all nostalgic for the good old days days before the Fed, Glass-Steagall, FDIC and Social Security look at this chart. The era when Austrian economics ruled: gold standard, no safety net, lower taxes and unregulated business looks positively dismal. An unbroken series of closely spaced financial recessions and depressions and growth that is anemic in comparison to what came with all those evil Socialist policies instituted by Roosevelt and Keynes.

Unfortunately Central Banking like drugs can be abused. Volcker was followed by bubbles Greenspan and the Republican wave that undid the regulatory structure that was established in the New Deal and ramped up the military industrial complex Eisenhower warned against. The result: a massively over leveraged economy. Was that because of entitlements? They are a drop in the bucket compared to the global tidal wave of debt Wall Street created and our global military presence costs us.

[dave1215]

...bubbles Greenspan...

that's funny, do people really call him that or is it a newly minted nickname?

...tidal wave of debt Wall Street created and our global military presence costs us.

yes, and don't forget consumers living way beyond their means with credit card debt and home "equity" loans
that's why the economy is anemic now and won't be helped by qe2 and other fed manipulations
demand won't grow until individuals, states and municipalities have deleveraged

[Rueda Tropical]

yes, and don't forget consumers living way beyond their means with credit card debt and home "equity" loans
that's why the economy is anemic now and won't be helped by qe2
demand won't grow until individuals, states and municipalities have deleveraged

All part of the "new economy" where the Chinese sweat and we just sit back and borrow our way to riches. It's what they call "financial innovation" on CNBC.

[rugbysecondrow]

Social security was created as a widows benefit in an age where women didn't work and men were the single earner. When that man would die, maybe prematurely, these women were left destitute. It wasn't because people didn't save but rather our society decided widows deserves some level of care.

I don't have time to read nor research it all, but I suspect the decline in savings is related to the ease and availability of credit which cheapens the overall perceived value of money by the consumer. Why save when one can borrow, why refrain from spending just because I can't pay for it? The same consumer culture we live in is the same one politicians live in, no wonder they take those same practices to Washington, they know no other way.

+1

Don't discount the cultural differences between the US and Asia and other countries. One of the most significant factor is the low savings rate in the US that creates a need for SS and Medicare/Medicaid. In Asia, the average savings rate is near 40% of income. We don't come close to that.

Also, the structure of the economy is important. Being a largely consumption based economy creates large trade deficits. Other countries like France and Germany with higher level of social welfare programs (and subsquent higher level of govt spending on a GDP basis - the US is about 34% and they are closer to 50%) are net exporters. It's a bit amazing that these European countries with a higher and more rigid labor structure have more exports (as % of GDP) than the US by far. From talking to folks in the steel and other basic industries, a big component of their costs are regulatory in trying to transact deals.

[veloduffer]

I don't have time to read nor research it all, but I suspect the decline in savings is related to the ease and availability of credit which cheapens the overall perceived value of money by the consumer. Why save when one can borrow, why refrain from spending just because I can't pay for it? The same consumer culture we live in is the same one politicians live in, no wonder they take those same practices to Washington, they know no other way.

Agreed. Consumer credit (credit cards) is a relatively new phenomenon in many Asian countries.

[Rueda Tropical]

Agreed. Consumer credit (credit cards) is a relatively new phenomenon in many Asian countries.

Americans were not always spending like drunken sailors. Not so long ago savings, paying off your mortgage, keeping appliances and cars for as long as they were serviceable and savings were the norm. The new behavior had to be marketed, sold and learned.

[veloduffer]

Americans were not always spending like drunken sailors. Not so long ago savings, paying off your mortgage, keeping appliances and cars for as long as they were serviceable and savings were the norm. The new behavior had to be marketed, sold and learned.

True and a good part of it was due to the liquidity provided by securitization of auto loans and credit cards, which started to take off in the 80s.

[dave1215]

Americans were not always spending like drunken sailors. Not so long ago savings, paying off your mortgage, keeping appliances and cars for as long as they were serviceable and savings were the norm. The new behavior had to be marketed, sold and learned.

facilitated by the fed manipulating interest rates down
making borrowing costs lower to encourage spending
and driving all other asset prices up producing the "wealth effect"

people have been borrowing more than they should have
just to live the aspirational lifestyle that has become the american way
you see it on television, in music and all other outlets of popular culture

[MadRocketSci]

hmmm, representation without taxation

is this why we have a congress that panders to voters
by continually creating new programs of spending
without having any semblance of fiscal responsibility?

Time to dig up this quote again:

A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship. The average age of the world's greatest civilizations from the beginning of history has been about 200 years. During those 200 years, these nations always progressed through the following sequence:

* From bondage to spiritual faith;
* From spiritual faith to great courage;
* From courage to liberty;
* From liberty to abundance;
* From abundance to complacency;
* From complacency to apathy;
* From apathy to dependence;
* From dependence back into bondage.



Dictatorship? Maybe not...we'll see.

Then there's that chinese proverb thing that goes roughly "Two generations rich, one poor" The first generation creates the wealth, the second maintains it, and the third spends it.

As Merlin says in Excalibur, "It's just the way of things"

[97CSI]

I'm good with a benign monarchy or dictatorship. As long as I am the monarch or dictator. :) Serottas for all!!! :hello:

[93legendti]

facilitated by the fed manipulating interest rates down
making borrowing costs lower to encourage spending
and driving all other asset prices up producing the "wealth effect"
people have been borrowing more than they should have
just to live the aspirational lifestyle that has become the american way
you see it on television, in music and all other outlets of popular culture
This is a side issue and has nothing to do with elected officials spending like drunken sailors. If I spend more than I make, I go broke. If our gov't spends more than it takes in, it prints money and raises taxes.

It's a good gig-unless you don't like being a one-term president or one of 60 unemployed representatives.

If people were spending now, the economy would be growing faster than 2%.

FWIW, cutting taxes costs NOTHING-unless you start with the proposition that what people earn is owned by the gov't.

[SamIAm]

I love this piece by Bastiat:

http://bastiat.org/en/government.html

So good regardless of which side of this debate you are on.

[drewski]

not from where i'm sitting. my perception is that things are getting worse and we are getting more polarized. the only difference i see is that we on this board are having a civil discussion in spite of our political differences, that's all.

I agree. I would like to see us move away from the 2 party system.
I like how Germany has 6.

Right now our politicians are all thinking short-term.

A philosopher friend I have says: "Our leaders will follow when our people
are ready to lead." This statement is up to a great deal of interpretation.
However I interpret this as meaning that until we can all accept responsiblity
for the economic decisions that we make on a individual basis, we will continue to have a system that is ruled by corporations.

I think our culture is crying out for a return to good old-fashioned
home grown businesses that support a mix of service based and manufacturing based businesses.

Too big too fail is really a scary concept.

[drewski]

I love this piece by Bastiat:

http://bastiat.org/en/government.html

So good regardless of which side of this debate you are on.


Along the same lines I think of a song by a progressive rock
group I used to like when I was in High School. Marillion

While his generation digests high-fiber ignorance,
cowering behind curtains and the taped up, painted windows.
Decriminalized genocide, provided door to door Belsens.
Pandora's box of holocausts,
gracefully cruising satellite infested heavens,Waiting, wait.
.waiting the season of the button,the penultimate migration,
Radioactive perfumes for the fashionably,for the terminally insane ... insane
Do do do do do do you realize,Do do do do do do you realize,Do do do do do do you realize,
This world is totally fugazi!


Where are the prophets, where are the visionaries,where are the poets, to breach the dawn of the sentimental mercenary.
Where are the prophets, where are the visionaries,where are the poets, to breach the dawn of the sentimental mercenary.
Where are the prophets, where are the visionaries,where are the poets, to breach the dawn of the sentimental mercenary.

[veloduffer]

FWIW, cutting taxes costs NOTHING-unless you start with the proposition that what people earn is owned by the gov't.

That's not true. It costs nothing if the govt is in surplus. If it is in deficit, there are interest costs on the debt issued to fund the gap. Cutting taxes would widen the gap and therefore increase borrowing costs.

Cutting taxes in the current environment is equivalent to increasing spending.

[dave1215]

This is a side issue and has nothing to do with elected officials spending like drunken sailors...

not a "side issue" if you believe the op asked about the fed's policies :)

[zap]

That's not true. It costs nothing if the govt is in surplus. If it is in deficit, there are interest costs on the debt issued to fund the gap. Cutting taxes would widen the gap and therefore increase borrowing costs.

Cutting taxes in the current environment is equivalent to increasing spending.

Please explain.

[97CSI]

If you cut taxes and thus revenue to the gov't, then it has less money to operate........... which it makes up by issuing more bonds, etc. (gov't borrowing, in all it forms). Thus, we (the gov't) have borrowed additional money on which we must pay interest. This is true when we are in a deficit. When there is a surplus, one only has less of a surplus (no borrowing) when cutting taxes. Unless, like ronnie raygun, the person who really started all this deficit madness with his huge tax cuts for the rich, you make such large tax cuts that you flip us from a reasonable surplus (or near neutral position) to a big deficit.

[RPS]

I interpret this statement very differently than a few of you.
FWIW, cutting taxes costs NOTHING-unless you start with the proposition that what people earn is owned by the gov't.
I equate its meaning similar to when my wife comes back from the mall and says she “saved” $30 by buying a $100 item for $70. That’s not saving $30, just spending less by only spending $70 instead of $100. There is a big distinction there. Likewise, taxes always cost the taxpayer part of his income whether the nation has surpluses or deficits. These are two different issues.

[93legendti]

I interpret this statement very differently than a few of you.

I equate its meaning similar to when my wife comes back from the mall and says she “saved” $30 by buying a $100 item for $70. That’s not saving $30, just spending less by only spending $70 instead of $100. There is a big distinction there. Likewise, taxes always cost the taxpayer part of his income whether the nation has surpluses or deficits. These are two different issues.
Yes.

My point is that the money you earn is yours. Elected officials who claim that a tax cut for people who actually pay federal taxes (allowing you to keep more of your money) "costs" something, are framing the issue to make people think the taxpayer is "getting" something. The taxpayer is only keeping more of his money. There may or may not be less revenues collected, but it is not an actual "cost".

NOW, the people in the bottom 50% who don't pay any fed taxes AND end up profitting from the payment sent by the IRS because they had more money in tax credits than they owed in taxes, are costing all of us.

[97CSI]

NOW, the people in the bottom 50% who don't pay any fed taxes AND end up profitting from the payment sent by the IRS because they had more money in tax credits than they owed in taxes, are costing all of us.Interesting how you seem to have such a strong dislike of poor people. For those are the ones who receive these tax credits. Sick, disabled, working poor with no health or retirement benefits. Those are the folks you are talking about. Plenty of low-life and lazy amongst them, but they don't choose to be that way.

[1centaur]

Skipping back to the flat tax question:

It won't pass because most voters won't go for it. I agree with that sentiment. Not because there are not valid arguments for a flat tax, but because so many people pay less than whatever the number is (18ish%?), so for them it's just "more tax." Even a 5/15/25 graduated system that serves as an attempt to demonstrate that the flat tax is not just a way for the rich to pay less ends up costing a lot of people more.

Middle class people who are attracted to common sense and efficiency, as well as richer people who don't know how to work loopholes, would like a flatter and simpler tax system, but they don't make up enough of the voting public, I believe.

BTW, markets have been weak for the last couple of days, partly because European countries can't pay their bills and others (would those be the greedy rich countries?) don't want to help out, but partly because the anti-QE2 backlash is getting loud enough that some fear the Fed will not monetize the whole Treasury issuance for the next 12 months. You know, if you base your economic strategy on pumping up investment assets so that average people start getting hired by newly confident rich people, and just one thing sends markets the wrong way.....

Seems like employers need to perceive a runway to prosperity, and QE2 is more like a fog bank that's hiding whatever's out there.

[RPS]

BTW, markets have been weak for the last couple of days, partly because European countries can't pay their bills and others (would those be the greedy rich countries?) don't want to help out, but partly because the anti-QE2 backlash is getting loud enough that some fear the Fed will not monetize the whole Treasury issuance for the next 12 months.
First Greece, now Ireland, who’s next? Is it likely to spread further? And if we ever find ourselves in the same position who would bail us out?

[97CSI]

First Greece, now Ireland, who’s next? Is it likely to spread further? And if we ever find ourselves in the same position who would bail us out?China............ many folks think they cannot afford for us to go down. They own too much of our debt.

[veloduffer]

First Greece, now Ireland, who’s next? Is it likely to spread further? And if we ever find ourselves in the same position who would bail us out?

There are significant differences in the causes of their distress. Off balance sheet shenanigans (more leverage than reported), outright lying about their economic statistics and inability to collect taxes have put Greece in dire straits. Ireland had a large real estate bubble that has wiped out its banking sector.

The US benefits from being a larger more diversified economy - it's a $14 trillion economy - Greece's GDP is $356 billion and Ireland is $260 billion. When you put the stimulus spending in the context of the total US GDP, it's about 5% of the economy.

A big constraint for the EU countries is that due to the currency union, each member does not have any monetary policy and must abide by the economic criteria to remain in the union.

[93legendti]

Interesting how you seem to have such a strong dislike of poor people...
I didn't write any of that. Nothing could be farther from the truth. I've put 7 "poor people" thru college and one of the 7 is going to Vet school on my dime. This summer I committed to putting three 12 year old orphans thru college when they come of age. I've solicited funds for another 6 "poor people" to go thru college. If everyone "disliked poor people" in this manner there would be no poor.

I did state that there was an actual cost to providing "tax refunds"/payments to people who don't pay federal taxes-as opposed to the illusory "costs" of reducing taxes of those that actually pay taxes.

[1centaur]

A big constraint for the EU countries is that due to the currency union, each member does not have any monetary policy and must abide by the economic criteria to remain in the union.

Right (and Portugal seems to be next; we'll see about Spain). Having an economic problem and not being able to control one's own currency is a problem, possibly a fatal flaw. While some joke that Germany wants to stay in the Euro because its cheapness is helping them sell BMWs, really the big issue is the amount of Euro sovereign debt on other European countries' banks' balance sheets. Ideally, Greece would drop out of the EuroZone, default on their debt and slash 60% of its principal, then live with an inability to borrow for a while, and in turn the Euro currency would strengthen via amputation. But if Greek debt principal is cut in half, the 6% capital bases of some European banks might have a need to be recapitalized, and if Greece is joined by others it becomes a giant cluster. If we imagine it all gets cleared up grudgingly by more prudent governments who somehow have to sell this devil's bargain to their voters, what happens down the road when Greece and Portugal and Spain try to borrow - will Euro banks be buyers? How about US or Chinese banks? It's quite a world we live in. Neither a borrower nor a lender be is not exactly the formula for economic vibrancy that funds government projects, but the idea sure has appeal from time to time.

[mschol17]

If you like the problems for countries in the EU who can't control their monetary policy, you'll love the gold standard...

[pbjbike]

I didn't write any of that. Nothing could be farther from the truth. I've put 7 "poor people" thru college and one of the 7 is going to Vet school on my dime. This summer I committed to putting three 12 year old orphans thru college when they come of age. I've solicited funds for another 6 "poor people" to go thru college. If everyone "disliked poor people" in this manner there would be no poor.

I did state that there was an actual cost to providing "tax refunds"/payments to people who don't pay federal taxes-as opposed to the illusory "costs" of reducing taxes of those that actually pay taxes.

Just, WOW! I don't always agree with you on policy, but your actions are truly walking the talk. Thank you. :hello:

[veloduffer]

Right (and Portugal seems to be next; we'll see about Spain). Having an economic problem and not being able to control one's own currency is a problem, possibly a fatal flaw. While some joke that Germany wants to stay in the Euro because its cheapness is helping them sell BMWs, really the big issue is the amount of Euro sovereign debt on other European countries' banks' balance sheets. Ideally, Greece would drop out of the EuroZone, default on their debt and slash 60% of its principal, then live with an inability to borrow for a while, and in turn the Euro currency would strengthen via amputation. But if Greek debt principal is cut in half, the 6% capital bases of some European banks might have a need to be recapitalized, and if Greece is joined by others it becomes a giant cluster. If we imagine it all gets cleared up grudgingly by more prudent governments who somehow have to sell this devil's bargain to their voters, what happens down the road when Greece and Portugal and Spain try to borrow - will Euro banks be buyers? How about US or Chinese banks? It's quite a world we live in. Neither a borrower nor a lender be is not exactly the formula for economic vibrancy that funds government projects, but the idea sure has appeal from time to time.

If Spain were to fail, I think the EU might be in danger of collapsing. It's a $1.6 trillion economy, much larger than Portugal, Ireland and Greece. Luckily it's big banks (Banco Santander, BBVA, etc) have diversified operations; it has a "thrift" problem in the caja banking system but it appears manageable. It's other major corporates are also diversified. But like the US, it's economy will have fairly anemic growth for some time.

[1centaur]

The thing is that Spain had a really massive real estate bust and extremely high unemployment. When Greece first started having problems, Spain was not even under consideration. It's a bit more conceivable now. Confidence in sovereign debt comes and goes. Only has to be gone at the right time to cause a default.

[Rueda Tropical]

-as opposed to the illusory "costs" of reducing taxes of those that actually pay taxes.

There is nothing illusory about the costs of "tax cuts" that don't have an equal amounts of spending cuts attached to them. The money is borrowed that tax payers get to "keep" and must be paid back with interest. You can not have your cake and eat it to.

[97CSI]

Anyone catch Warren Buffett on CNBC this morning (my morning watch while I drink my cuppa and read the paper)? Warren stated uncategorically that the rich do not pay their share and generally pay less then us 'average' tax papers. His tax will be 16-17% this year with no tax-shelters. He said that would be the lowest of anyone who works in his office, including all the secretaries, etc. If we could get gov't spending under control and the rich to pay their share the budget would be balanced and could start working on paying down the country's debt. Easy as pie...........

[RPS]

Anyone catch Warren Buffett on CNBC this morning (my morning watch while I drink my cuppa and read the paper)?
I did. It also illustrates to me that the idea of a flat tax may be viable to the average voter if explained with proper clarity. If something like $30,000 (or whatever the right number) initial deduction and then 20% (or whatever) percent above that, the Warren Buffetts (i.e. -- the very rich) in the US would pay as much or more without having to commit resources towards tax avoidance. Investment decisions would also be more sound rather than structured in part to avoid paying taxes.

I get that there are special interest groups that want to stay employed doing obsolete and unproductive tasks, but are we going to let the tail wag the dog indefinitely to avoid making tough decisions or having to say “no” once in a while?

BTW, Buffett’s comments on the EU problems were most interesting. It seemed to me he has some doubts on whether so many countries with different cultural, financial, and business differences can ultimately work out their issues.

[RPS]

Time to feed the rich to the government? by Scott Burns

Timely piece in today’s Houston Chronicle concludes “not as much there to eat as you might think”.

http://130.80.29.3/disp/story.mpl/business/7298315.html


For what it’s worth, I think Burns is more liberal than conservative outside of financial matters. He’s more of a factual numbers guy.

[1centaur]

Anyone catch Warren Buffett on CNBC this morning (my morning watch while I drink my cuppa and read the paper)? Warren stated uncategorically that the rich do not pay their share and generally pay less then us 'average' tax papers. His tax will be 16-17% this year with no tax-shelters. He said that would be the lowest of anyone who works in his office, including all the secretaries, etc. If we could get gov't spending under control and the rich to pay their share the budget would be balanced and could start working on paying down the country's debt. Easy as pie...........

Not easy at all. Buffett happily mixes and matches income taxes, social security taxes, capital gains taxes, dividend and unemployment taxes without giving an explanation (I have heard) why these should be viewed as equivalent. The Serotta Forum is not a great place to have a lengthy debate on tax policy, but I would rather Buffett say that social security taxes should be uncapped even though the benefits are capped because the rich should pay for something they won't get, and that double taxation of earnings in the form of capital gains taxes (unindexed for inflation) is good for the economy, than play the populist "my rates are lower than her rates" card. Hey, my rates are higher than Warren's too, and higher than a secretary's. I guess my capital gains are not as high as his. Ironically, just as Buffett can afford to pay much more in taxes without caring a bit, he could afford to pay his secretaries a lot more and thereby lower their tax rate by pushing them beyond the cap and giving them investable savings.

[97CSI]

Of course its not easy. Is an extremely complex problem in a democracy (republic for those who wish to quibble), which only responds to crisis. That is why your statement about trying to address in a forum is so on-point. None of us has the whole answer and can't be typed in page or two. But........ to get back to Warren Buffett and his statement. The bottom-line is what he stated. The rich skate by in this country. The only income classes that are growing are the rich and the poor. And giving the rich more will not solve the problem.

[SamIAm]

Of course its not easy. Is an extremely complex problem in a democracy (republic for those who wish to quibble), which only responds to crisis. That is why your statement about trying to address in a forum is so on-point. None of us has the whole answer and can't be typed in page or two. But........ to get back to Warren Buffett and his statement. The bottom-line is what he stated. The rich skate by in this country. The only income classes that are growing are the rich and the poor. And giving the rich more will not solve the problem.

You are not giving the rich anything, you are merely "appropriating" less. There is a difference. The rich do not skate by in this country unless of course you equate rich with luck. If you assume rich people become rich by working harder, sacrificing early in life to reap rewards later and taking on much higher risk, then at least by my definition they are not skating by.

[54ny77]

buffet talks outta one hole and farts with the other.

you decide which side he makes the world think smells like a dairy queen sundae.

Not easy at all. Buffett happily mixes and matches income taxes, social security taxes, capital gains taxes, dividend and unemployment taxes without giving an explanation (I have heard) why these should be viewed as equivalent. The Serotta Forum is not a great place to have a lengthy debate on tax policy, but I would rather Buffett say that social security taxes should be uncapped even though the benefits are capped because the rich should pay for something they won't get, and that double taxation of earnings in the form of capital gains taxes (unindexed for inflation) is good for the economy, than play the populist "my rates are lower than her rates" card. Hey, my rates are higher than Warren's too, and higher than a secretary's. I guess my capital gains are not as high as his. Ironically, just as Buffett can afford to pay much more in taxes without caring a bit, he could afford to pay his secretaries a lot more and thereby lower their tax rate by pushing them beyond the cap and giving them investable savings.

[JMerring]

luck is when opportunity meets preparation. i'm sure many of you are familiar with that maxim, but it is worth repeating. very very very very few of those among us who are successful - especially in business - are so purely because of their hard work and ability. life happens and **** happens and there is almost nothing any of us can do to get out of life's and/or ****'s way.

[Pete Serotta]

Well said and what helps the country, in the past, grow and prosper.

Some of the tax laws and the less than level taxation have benefitted the ultra rich. (not middle class). There is an entire industry or two or even more that thru the tax laws, PACs for the politicians, and shear greed have made it lopsided.

Yes and some of the poor have been able to do this also with such things as loan forgiveness, mortgage reductions for they are in default, short sales of homes, 90 plus week un-employement, and on and on...

THERE IS MORE THAN ENOUGH AREAS TO ADDRESS TODAY UNFORTUNATELY.

I hope I am not starting a cafeteria food fight by this note. If so, I will delete it at the first request. Over 50% of the folks, by last estimate, do not pay Federal tax. I even have a nephew in his 30s getting 400 dollars plus for food stamps. :confused: :confused:



You are not giving the rich anything, you are merely "appropriating" less. There is a difference. The rich do not skate by in this country unless of course you equate rich with luck. If you assume rich people become rich by working harder, sacrificing early in life to reap rewards later and taking on much higher risk, then at least by my definition they are not skating by.

[54ny77]

The Greeks do that...intentionally!

Right now, that approach isn't working so good for for them. :banana:

Over 50% of the folks, by last estimate, do not pay Federal tax.

[Rueda Tropical]

Ironically, just as Buffett can afford to pay much more in taxes without caring a bit, he could afford to pay his secretaries a lot more and thereby lower their tax rate by pushing them beyond the cap and giving them investable savings.

You are on to something 1centaur. You should start a secretaries union and set up a picket line outside of Berkshire.

[veloduffer]

buffet talks outta one hole and farts with the other.

you decide which side he makes the world think smells like a dairy queen sundae.

He does do that a bit. Remember he said derivatives were weapons of mass destruction. Berkshire's results last year included losses in derivatives.

[97CSI]

If you assume rich people become rich by working harder, sacrificing early in life to reap rewards later and taking on much higher risk, then at least by my definition they are not skating by.I don't have to assume anything. Am well aware of how most 'rich' folks get rich. The ones you are describing are about 5% of the rich.

Don't get me wrong...... I've got nothing against the rich. By some recent definitons of same, I might even be one of them. :confused: I simply think they should pay to support the 'system' in proportion to what they get from the 'system'. As always, it is the 'system' that is at fault. Which is the complex part that needs to be addressed.

[1centaur]

luck is when opportunity meets preparation. i'm sure many of you are familiar with that maxim, but it is worth repeating. very very very very few of those among us who are successful - especially in business - are so purely because of their hard work and ability. life happens and **** happens and there is almost nothing any of us can do to get out of life's and/or ****'s way.

I'll use this quote to start off but I am also addressing 97CSI's comments.

It would probably be wise to define the term "rich" if we're going to say how most of them got that way. I was assuming the Obama formula of $250K+ of income. What's that, top 3% of earners (and ignoring the difference between wealth and income)? For most of my professional career I have worked with several people making $150k to $1MM in a given year, sometimes more. Almost none of them were to the manor born, and almost all of them worked hard, were smart, did their jobs and led unsurprising lives, didn't kick the dog, etc. They'd done well in high school, done well enough in college, and found their way to an industry that pays well where their efforts and talent were sufficient to remain, for at least a while. They sweat their retirements and college bills (since they know they won't get aid) and their children's futures (they don't plan to leave huge estates) and fear they will lose their jobs too. They don't think they are skating through life as they live it. Maybe if they get close to retirement without blowing all their effort in the wrong company they might start to exhale, but they know it could be an illusion of safety. The poor have it much, much harder than this, but for most of the small-r rich in the US it's not a life of tea and crumpets and Jeeves fetching supper.

I have also observed as I have grown older that the people out there with pretty major money compared to me are small business owners who have succeeded, again without a silver spoon to get them going. The Millionaire Next Door detailed how the American Dream has played out for these types of people. Hard work, luck, risk, character - it's a mosaic.

Movie/TV/sports stars are rich and did not come from great backgrounds in most cases. They were lucky and talented and work hard. Some doctors and lawyers fit this bill as well.

Yes I've met some New York Wall Street types who went to an Ivy League school and work for a white shoe firm and make huge paychecks, but I also know there are a lot of people there who've come up from humble beginnings, and extremely hard work under intense competitive pressure is unavoidable in that field. When I look at lists of CEO backgrounds I also don't see an incredibly high number of tony backgrounds. My co-portfolio manager likes to say that the average CEO got 500s on his SATs and is good with people - that's his observation over time.

So I guess I think I know how most Americans got "rich," and while it's not "purely" through hard work, hard work had a huge part to play (as did taking risks that most people don't, whether by choosing a profession or making a business work). I don't accept that rich = lucky for most people, I think it's lucky plus a lot of other things.

[93legendti]

http://www.selfgrowth.com/articles/Mattos1.html

In studying the affluent, I found a pattern that the wealthy follow. It is more often the result of planning, hard work, perseverance, and self-discipline that determines who become wealthy. The factors compiled here are summarized from the research done by Thomas Stanley Ph.D. on over 1100 actual millionaires (many are multi-millionaires) in the U.S. today.

1) Live Well Below Your Means

Don’t be fooled. The ‘average’ millionaire doesn’t look like a millionaire! They play great defense (saving and investing) as well as offense (making money). Just like in football – great offense is exciting…but great defense wins games. An interesting note: Millionaires on average claimed their spouses were as frugal or more than they were. It’s a family affair: Sacrifice high consumption today, for financial freedom tomorrow.

2) Spend Your Time, Energy, and Money in Ways that Build Wealth.

The average millionaire spends 8.5 hours per month planning, while the non-affluent spend 4.5 hours or less planning. How can 4 more hours per week impact your future? Make it happen and the odds are in your favor of joining the truly wealthy!

3) Choose Financial Independence over Displaying High Social Status

The wealthy run highly efficient operations both in business and at home. Most live in average neighborhoods, and drive average cars. They’re not interested in keeping up with the Jones’.

4) Don’t Accept Economic Support from Your Parents once Outside the Home

An amazing fact: 80% of millionaires are first generation millionaires; they have made their money on their own, in their lifetime. Many of these folks have been immigrants to the U.S., starting out with minimal cash on hand. Work hard to learn and generate wealth—it CAN be done, and happens in America every day.

5) Teach your children to be economically self-sufficient to foster a “Wealth Mind-Set”

6) Become Proficient in Targeting Market Opportunities

7) Choose the Right Occupation

[Rueda Tropical]

So I guess I think I know how most Americans got "rich,"

For the purposes of tax policy how anyone got rich doesn't matter. Wether they worked 24/7 inventing the cure for cancer or made their fortune swindling widows. Making the rich out to be crooks or the poor/middle class out to be loafers and moochers is best left to demagogues and radio shock jocks.

How ever they make their living everyone should pay their fair share. Why should a cop, plumber or teacher pay a higher tax rate on their income from wages then Warren Buffet or a hedge fund manager or trust fund baby on their income from capital gains and or dividends. Why should corporations as wildly profitable as Exxon get to pay zero taxes or Google get away with paying 2%? How is it that after decades of income growth distributed across all sectors of society that since Reagan the vast majority of all income growth went to the top 1% but their tax burden did not grow at the same rate?

[97CSI]

For the purposes of tax policy how anyone got rich doesn't matter. Wether they worked 24/7 inventing the cure for cancer or made their fortune swindling widows. Making the rich out to be crooks or the poor/middle class out to be loafers and moochers is best left to demagogues and radio shock jocks.

How ever they make their living everyone should pay their fair share. Why should a cop, plumber or teacher pay a higher tax rate on their income from wages then Warren Buffet or a hedge fund manager or trust fund baby on their income from capital gains and or dividends. Why should corporations as wildly profitable as Exxon get to pay zero taxes or Google get away with paying 2%? How is it that after decades of income growth distributed across all sectors of society that since Reagan the vast majority of all income growth went to the top 1% but their tax burden did not grow at the same rate?Thank you. Exactly what I was going to say. Doesn't matter where ones riches come from, or how. Only that they ante up their share when it is time to support the system that made/makes it possible to achieve said riches.

[1centaur]

Well, I was responding directly to the "I know how the rich get rich and it isn't hard work" sentiment, so if it now doesn't matter....

...then we're back to tax policy - why have a different rate for cap gains than for wages; why should people who use SS as their retirement savings pay a different % of their income for those savings than people who retire on their own savings; should people who use unemployment insurance pay more of their income for it than those who don't; what level of taxes work as incentive to create wealth and what % does not; why do corporations pay certain tax rates while S corps pay another; why should 1/2 the population pay no income taxes while voting themselves benefits; should people who save a lot of money be able to give it to their children (should people be allowed to save money?), etc. etc.

And that's what the Serotta Forum is not the right place to debate.

Back to QE2?

[97CSI]

My response was, I admit, far too simplistic........

And, as you state, this is not the 'best' forum to discuss due to incomplete answers. A paragraph when several pages are needed.

I would like to see a citation presenting the info on the the 50% who pay no taxes.

[1centaur]

On QE2, I learned yesterday that the notion that Japan tried too little QE2 is pretty much false. As a % of GDP, they tried a ton. It did not stimulate the economy enough to be a grower, it failed to do what we say we're trying to do, though it's unclear what would have happened without it.

Why? It appears lack of demand for loans, which is evident in the US today as well. Why don't people want to borrow? Because they think it's too risky to their wealth. What makes it risky? The threat of deflation ranks high, but an unclear path to greater wealth must be in the mix. The Fed seems to be looking at the former - generating inflation so it's advantageous to be a borrower, and maybe it's easier for the US to generate inflation because our dollars price commodities, though it's unclear commodity inflation would make people borrow.....

Should the US also be looking at the latter - the path to greater wealth from borrowing (not Wall Street wealth but business creation wealth)? My opinion is yes. Get rid of uncertainty on taxes (this is not the same as a tax cut, necessarily) and health care costs, and demonstrate a pro business attitude (this does include regulations), and the runway to greater wealth presents itself.

I think that's where we are. And I think if QE went to the people not to buying Treasuries, we'd get some growth (what would you do with a stack of bills?), but our deficit financing might become a problem.

[93legendti]

After all the trillions of $ thrown at the problem thru all the gov't programs and the fact unemployment sailed past the promised 8% mark and is clinging stubbornly to 9.6%, it's hard to imagine people advocating that MORE $ should be thrown at the problem.

There is $2 trillion in REAL dollars sitting on the sidelines-and it isn't becuase the savings account rate is attractive.

As The 1 posted, it would be so simple and inexpensive to "Get rid of uncertainty on taxes... and health care costs, and demonstrate a pro business attitude...and the runway to greater wealth presents itself", yet the administration wants to try everything EXCEPT this approach. :crap:

[mschol17]

As The 1 posted,
It would be so simple and inexpensive to "Get rid of uncertainty on taxes... and health care costs, and demonstrate a pro business attitude...and the runway to greater wealth presents itself", yet the administration wants to try everything EXCEPT this approach. :crap:

Pro business attitude? What a joke. This administration saved the economy from depression and corporate profits are at an all time high. The stock market has gone up like 50% in the two years Obama has been in charge. The public was full of populist fury, and the administration took a measured approach on every issue (no nationalization of banks, no clawback of bonuses, etc.). If these guys are so insulted by a little tough language that they can't see the facts, they need to switch to a new profession. Just because Obama hasn't bowed down and kissed the feet of business like Bush did doesn't mean he's "anti business." I haven't even mentioned the successful intervention into GM that saved millions of jobs in the Midwest.

The whole "uncertainty" canard is equally nonsensical, since the Republican's plan to "repeal and replace" healthcare contains no specifics whatsoever, and they are currently advocating a temporary extension of the Bush tax cuts over a permanent extension of the sub-250k cuts.

You're just spouting talking points. A 3% increase of tax rates to Clinton-era levels isn't the end of capitalism.

[veloduffer]

I think a lot of the thinking about the economy has been short sighted. We were in a recession in 2001-2002 as a result of the stock market bubble bursting (remember Red Hat). With folks down on stocks and other financial assets, the money started going to hard assets - real estate - that was encouraged by low interest rates. So we've gone from bubble to bubble and the economy hasn't found a way to provide solid, stable growth. Having an economy so dominated by consumer spending is not ideal, especially if this recession is somewhat transcedent like the Depression and changes our behaviour to save more.

Many corporates are flush with cash, but good profits are not across the board. Much of the cash has been due to cost cutting (layoffs and hence unemployment) and lower capital investment, thus generating higher free cash flow. But they are unwilling to spend it without a clear outlook.

The two largest employment sectors in the US are retail and leisure, and they are muddling along with weak year-over-year comparisons. So high unemployment will be around for the next year at least.

So all this policy debate doesn't address the fundamental question about the structure of our economy. They are essentially short term catalysts but not long term fixes.

[Rueda Tropical]

Now that the labor arbitrage of globalization is a core part of our economy and the internet has eliminated geographic boundaries for many activities ...what exactly will US workers be doing? Why pay a US accountant, programmer, engineer, factory worker or customer service rep a penny more then their Chinese, Vietnamese, Polish or Indian counterparts?

The ongoing impact of this has been masked by a huge asset / credit bubble. Instead of rising wages we got rising debt levels keeping living standards high. But despite the Fed's best efforts that is over. The reality of a country that looks more like Guatemala then the US of 30 years ago in terms of income distribution will start to sink in.

Add to that the fact that the reckless abuses on Wall Street that caused the crash are still going on unrestrained. The banks that were to big to fail? They are bigger then ever. The Corporate leaders that ran the economy into the ground? They were rewarded and still run the show. Regulation was gutted and may be killed all together if the new congress has it's way, setting us up for the next financial melt-down.

And the debt that everyone is focused on? With Republicans in office it will get much bigger. The modern Republican party has created more debt then all the tax and spend Liberals in history combined. If you thought we had to much debt last year wait until you see the cost of the "compromises" our new congress comes up with.

[Bob Loblaw]

A 3% increase of tax rates to Clinton-era levels isn't the end of capitalism.

But it is a step in that direction. When does it end? When the economy is near collapse, the government is bankrupt and we're rioting in the streets over a change in the retirement age?

BL

[JMerring]

But it is a step in that direction. When does it end? When the economy is near collapse, the government is bankrupt and we're rioting in the streets over a change in the retirement age?

BL

we were well on our way in the other direction (ie, towards more capitalism) and the economy was more than just 'near' collapse.

[Bob Loblaw]

we were well on our way in the other direction (ie, towards more capitalism) and the economy was more than just 'near' collapse.

When was that? I must have missed it.

[SamIAm]

yet the administration wants to try everything EXCEPT this approach. :crap:

Because they must pander to the wealth envy crowd.

[dekindy]

If U.S. citizens had the courage and unselfishness to enact sound fiscal policy and the government had not adopted such foolish lending policies and nearly plunged us into a recession, then the Fed would not have to enact such radical policies. The Fed is only a symptom of the problem, it is not the problem. IMHO the Fed has done it's job very well over the last 30 years. It is now time to do ours and give up all our subsidies and spending ways and get back to sound policies, both personal and governmental. Will you do your part or will you yell and scream when it comes to living within our means?

[97CSI]

Because they must pander to the wealth envy crowd.Ha, ha, ha............... who could possibly envy this sad, empty group of nouveau riche as they sit in their mega-churches and pat themselves on the back while their kids OD and hang themselves, etc. "Nasty, brutish and mean" was invented for them............... Most folks don't want what others have. But, they do want everyone to pay their share in proportion to what they receive from the 'system'. As most of us here likely do, we have interactions with many across the spectrum of income. Don't ever recall a conversation where people talked wanting what another person has. Do recall a couple of the paranoid better off folks believing that anyone who wants them to pay their share is "out to get them". But am sure that isn't you.

[JMerring]

When was that? I must have missed it.

apparently so.

[RPS]

My response was, I admit, far too simplistic........
At a personal level simple works great for me when I frame an issue in terms that I value.

Take the definition of who is rich and taxing them more. In a thread about finance and the economy it’s inevitable to define and measure “rich” in dollars, but as a broad tool to justify my own envy or something I should aspire to, how can I rate monetary richness high at all.

Probably way too simplistic too but do you think Warren Buffett wouldn’t pay $10 billion to be 30 again, to be healthy enough to ride a century, to not need Viagra, or wake up without arthritis, etc… things many “poor” in this forum take for granted. These things have immeasurable value few of us would ever trade for any amount of almighty “dollars”.

Additionally, tax rates have little to do with the bigger picture of what some of these very rich do and/or would do to create wealth. Given an opportunity to eliminate 1,000 employees in order to wipe out a large portion of their accrued retirement benefits as a form of income they would do it anyway whether they had to pay 16 or 32 percent in taxes. I know it is way too simplistic but there are a lot of other things I would address before becoming fixated on taxing the rich even higher just because we can. If I have concerns at all is how some of them get their money, not how much they get to keep. If they earn it honestly they can keep as much as poor me. If not, they shouldn’t keep any at all. That’s the kind of simple that works for me -- I don’t want their money as long as they don’t take mine.

[97CSI]

At a personal level simple works great for me when I frame an issue in terms that I value. That’s the kind of simple that works for me -- I don’t want their money as long as they don’t take mine.Problem is, they are taking your money, in so many ways.

[Bob Loblaw]

apparently so.

There was America 60 years ago, which we are moving away from, and there is France today, which we are moving towards. There may have been a brief fluctutation during that process, but the trend is certainly firmly established.

BL

[RPS]

Problem is, they are taking your money, in so many ways.
With all due respect, I seriously doubt you know what it feels like to have your money or things you’ve earned taken away. I hope I’m right because I don’t wish it on you or anyone else.

As an average guy I fear the poor more than the rich. I’ve been screwed over by both groups and the consequences of the poor were far worse. Maybe not politically correct to state it here but it’s the absolute truth. There are good and bad people, and being rich or poor doesn’t make you either.

[SamIAm]

Ha, ha, ha............... who could possibly envy this sad, empty group of nouveau riche as they sit in their mega-churches and pat themselves on the back while their kids OD and hang themselves, etc. "Nasty, brutish and mean" was invented for them...............

You clearly do!

Perhaps the government should step in and "appropriate" enough of these people's assets so as to save them and their children from the sad situation you describe.

[JMerring]

There was America 60 years ago, which we are moving away from, and there is France today, which we are moving towards. There may have been a brief fluctutation during that process, but the trend is certainly firmly established.

BL

the america of 60 years ago that we are moving away from isn't a case of capitalism vs. socialism. besides, the french are among the happiest people around. good, plentiful, cheap wine. beautiful country. lots of respect for cyclists. no obesity problem. women who appreciate fine - indeed, any - lingerie. lots of vacation time. le grand boucle. a mellifluous language. sure, they have their problems, but overall, what's not to like? :beer:

[veloduffer]

the america of 60 years ago that we are moving away from isn't a case of capitalism vs. socialism. besides, the french are among the happiest people around. good, plentiful, cheap wine. beautiful country. lots of respect for cyclists. no obesity problem. women who appreciate fine - indeed, any - lingerie. lots of vacation time. le grand boucle. a mellifluous language. sure, they have their problems, but overall, what's not to like? :beer:

+1

Moreover, the French don't need to protect oil interests in the Middle East - they moved themselves off much of that dependency after the first oil crisis.

You can question their adulation for Mickey Rourke, and Richard Virenque over Laurent Jalabert. :confused:

[onekgguy]

Compare Clinton's 2 terms and Bush's 2 terms with respect to tax policy; one being much more regressive than the other. Seems to me the economy did much better and created many more jobs during Clinton's era than Bush's.

Yes, I understand that Bush had to deal with 9/11. Let's be glad he had a sound economy to begin with. We can never know how his economic policies would've played out had 9/11 never happened but I have a hunch he would've found some way to scuttle the whole works.

I used to buy the argument that higher taxes will only stifle economic growth and that tax cuts will do just the opposite. But then I used to listen to Limbaugh and Hannity back then too.

So, just what did we gain with the Bush tax cuts and how is continuing them going to better us all?

Kevin g

[JMerring]

Compare Clinton's 2 terms and Bush's 2 terms with respect to tax policy; one being much more regressive than the other. Seems to me the economy did much better and created many more jobs during Clinton's era than Bush's.

Yes, I understand that Bush had to deal with 9/11. Let's be glad he had a sound economy to begin with. We can never know how his economic policies would've played out had 9/11 never happened but I have a hunch he would've found some way to scuttle the whole works.

I used to buy the argument that higher taxes will only stifle economic growth and that tax cuts will do just the opposite. But then I used to listen to Limbaugh and Hannity back then too.

So, just what did we gain with the Bush tax cuts and how is continuing them going to better us all?

Kevin g

food for thought: http://economix.blogs.nytimes.com/2010/11/18/were-the-bush-tax-cuts-good-for-growth/.

while we're on the times (i know, i know, progressive drivel), i found this interesting, too, in particular the quotes i've pasted below it: http://www.nytimes.com/2010/11/18/opinion/18kristof.html?_r=1&hp=&adxnnl=1&adxnnlx=1290102521-Dy2T1rcJrOcQr501dmlX4g.

"The best data series I could find is for Argentina. In the 1940s, the top 1 percent there controlled more than 20 percent of incomes. That was roughly double the share at that time in the United States....Since then, we’ve reversed places. The share controlled by the top 1 percent in Argentina has fallen to a bit more than 15 percent. Meanwhile, inequality in the United States has soared to levels comparable to those in Argentina six decades ago — with 1 percent controlling 24 percent of American income in 2007."

and

"One of America’s greatest features has been its economic mobility, in contrast to Europe’s class system. This mobility may explain why many working-class Americans oppose inheritance taxes and high marginal tax rates. But researchers find that today this rags-to-riches intergenerational mobility is no more common in America than in Europe — and possibly less common."

[97CSI]

You clearly do!Sorry to disappoint........ I'm what's called 'old money'. That means that my 90 year-old mother and her sister have all the money. :) But, they let me buy a nice bicycle occasionally (Ottrott arrives tomorrow).

The future is very difficult. As the fellow who was on CNBC this morning stated, it is unlikely we will get back much in the way of the jobs that have been shipped overseas (and continue to be shipped overseas). If everyone was willing to work at minimum wage we might have a chance. But that isn't going to happen (a non-starter :) in partisan political parlance, I believe someone said). Perhaps if the world went back on the 'gold standard' we could stop the manipulation of currencies (ours, included). But, that is another can of worms.

When did Argentina default on its foreign debt? 75-80? They've done pretty well since. Perhaps we are headed there. Think the consquences for the world economy would be considerably more dramatic. The dreaded 'domino effect'? Even the rich might have to give up a few things if that were to happen. Though I think it would likely make us all the poorer.

[Pete Serotta]

Please feel free to start another thread on this subject. When they get this long, they start diverging to some degree. THANKS :help: PETE