the Air Vent

Because the world needs another opinion

Ugh!

Posted by Jeff Id on April 17, 2011

I’ve got to let off a little steam.   Currently, in the US, we have a government overspending their income by a gigantic proportion.   Those in charge have no chance of feeling the result of their own policy (while in office) and those who lose office didn’t have the power anyway so — who cares.

So we have this big tea party movement, you know the one which wanted to slash government.   What did we get from the biggest change in electorate in our lifetimes — something like 40 billion in spending cuts. The leftist (and fake conservative) media calls them extremists and mocks their intent, yet this is all we got.

Well I have to say that if you are Greece, Turkey, Venezuela or Iran, that kind of cut is a fantastic victory!!  But if you are the single largest economy in the world and you are overspending your income by nearly two times this FORTY BILLION amounts to precisely – 0ne week of overspending!! — Or for the less numerically inclined – one fart in the wind.  Two months of our deficit is the annual gross domestic product of Venezuela — go socialism.

Nobody will bail out a 14 trillion dollar debt.  Nobody could.    Our GDP is 14 trillion, only a small percentage of that is actual profit.  Just what do people think when they hear political hacks talking about not cutting ‘services’ when we’re overspending govt income by nearly 2 trillion per year?   This isn’t a simple matter of ‘tax the wealthy’, the wealthy don’t exist in those numbers.  This isn’t a matter of trim some spending, the trimming needs a chainsaw.

But the magnitude has the public educated public —- baffled, confused, bewildered.   Our tea party cut 40 billion ish — per year!!   yay!!!!

What about the ONE HUNDRED FIFTY BILLION PER MONTH!!!

Yet half of the public thinks Obama’s doing a good job.  Half want Pelosi back.  Hell a different half think John Boehner is doing a fine job because he’s just compromising in his position.  I’m in NONE of those halves. During the ‘budget’ negotiations I heard/read numerous media outlets saying ‘the public doesn’t want the federal government to ‘shut down’.  I kept wondering who they asked?  Screw em, shut em all down if that’s what it takes to get the morons to pay attention.

I’m a businessman, I know sometimes compromise is required but I also know when it is time to drive the stake in the ground and say enough.   We can tolerate no more government unions (an oxymoron on any other planet in this universe), no more insane spending levels on bloated federal government for programs which are not required.  A TOWN can manage its own education with 15,000 USD/student.   We don’t need the feds help for education –AT ALL — zero!  Health care has become nothing more than a profit center for lawyers and politicians.  Over-strict over-interpreted law has spawned massive corporations of bottom feeding Armani suits, yet we continue to feed it.

Why don’t people think of this on their own?  Why do I have to write it instead of the thoughtful and wise overpaid media?    Don’t comment that it wasn’t really 40 billion in cuts please.  I already know and the point is — it wasn’t even close so WHO CARES!

I wrote recently that I really fear for our children, someone commented back that all generations have that fear. My reply is that this time it is not fear of the unknown that is the problem.

106 Responses to “Ugh!”

  1. I’m with you, Jeff.

    The danger is a tyrannical government if we don’t get our economy under control.

    Hang in there!
    Oliver

  2. Derek said

    Ugh!
    If you can not grasp the physical unreality of supposed earth’s surface warming by atmospheric “back radiation”,
    what hope have the public of understanding Gov. spending.

    In the public’s defense, everyone’s brain goes la la la la la la, once millions, or billions, or trillions are the numbers quoted.

    Just like everyone’s brain should go la la la la la la once “all radiation is positively absorbed” is mentioned…
    All radiation IS positive compared to absolute zero, but that ain’t the same thing, is it.

    The atmosphere’s presence AIDS cooling, NOT WARMING.
    Cooler things do not warm warm warmer things.
    – Has anyone heard of heat pipes here,
    have you ever compared the basic operating principle of a heat pipe to the water cycle – I thought not…..
    And, yes, the US Gov. IS massively overspending (as are many others, including the UK Gov.),
    but WHO understands that, or the consequences of it.

    Some sense on all fronts is definitely missing, ranting, or venting, up the wrong trees will not.

    We (us minions) will all pay, as hinted at how by Oliver K. Manuel above.

  3. Mark F said

    WTF? USA can be exempted from global Carbon tax, as the country will qualify as a have-not pretty soon. Canada, too, if we count Provincial debt and deficits. Sigh.

  4. Steve S said

    Jeff

    With all due respect for your sceptical credentials, you have obviously never read (for example):

    The Real Housewives of Wall Street
    Why is the Federal Reserve forking over $220 million in bailout money to the wives of two Morgan Stanley bigwigs?
    by Matt Taibbi

    in the in the April 28, 2011 issue of Rolling Stone.

    If you did, you might change your entire, and stunningly ignorant, world view.

    The real story of the current destruction of America is the story of the rise and rise of the financial sector from 30% now.

    It is the story of how the ‘Scheming Gnomes of Wall Street’, or in other words a small 1% East Coast Establishment, have relentlessly manipulated and brainwashed the GOP, the Democrats, the media and the nation into a new social paradigm where all money, both old and freshly printed (ha! ha!) rolls daty and day out inexorably into their own pockets, largely untaxed as well.

    This is the same elite who also created and served us up the greatest corporate lackey of modern time, that silver tongued, long term memory free, spineless Blade Runner replicant known as Barack Obama.

    Call us all back when you finally Get It (and the real meaning of the insider joke called ‘Yes We Can’).

    I hasten to add that when and if you do finally get it you might be so shocked that you might well take your dear wife and much loved kids and GTFO.

    Canada, Australia, New Zealand, Brazil , Argentina, Chile etc., etc – all countries which BTW largely missed out on Wall Street’s phony ‘Depression’ are beckoning eagerly for all those US citizens with a professional or trade qualification or good skill.

    You won’t read that in the long running bread and circuses noise for what passes for 90% of US media.

  5. Jeff Id said

    Steve, we might disagree, but you don’t have the skill set to call me ‘stunningly ignorant’.

    While the Rolling Stone is a terrible place to get news, they also had an article about some secret meetings between bank execs before the payoffs. It is odd that that is the place where truth is told yet MSM is nothing but garbage.

    We might also agree more than you think.

  6. Steve S said

    Jeff, I quoted the article by Matt Taibi as just a little, readable ‘taster’ which shows how even the wives of the ‘Gnomes of Wall Street’ are getting in the act of their husbands, albeit in a more modest (but equally crooked) way. The husbands of course are not ripping off the American people mere 100s of millions but hundreds of billions.

    And that, my friend is the point.

    The problem does not lie with the ordinary American people (the ‘cattle’ in this great cynical game) nor even with its stupid governments (Federal and State) and legislatures.

    The problem lies with the deliberately evolved nature of the US financial system which 40 years ago made up 30% of it.

    However, that system has evolved into one where the flow of money is inexorably into the hands of a very small minority (<1%) and their corporate structures. That flow is based on numerous fiscal 'devices' and a massive level of corporate tax avoidance. If you do your research properly you will find that is now an incontestable truth.

    In that context, ranting on about the 'irresponsibilty' of the US government's welfare spending is so far off the mark it is not funny. Presumably you are aware that 90 million US citizens now rely on food stamps to avoid starvation and of that 90 million some 70 million are below the generally recognized poverty line?

    Whatcha goin' to do do? Order them to stop eating and breathing?

    You are wasting your energy (and smarts) tilting at windmills.

    To reduce 'the American Problem' down to one single sentence it is this:

    Today the US has a gross over supply of moneyf*****s, mediocre eggheads and armchair experts and a gross undersupply of brown shirts with baseball bats.

    Sound familiar?

  7. Steve S said

    Typo correction:

    The problem lies with the deliberately evolved nature of the US financial system which 40 years ago made up 30% of it.

  8. Steve S said

    Trying again (weird):

    The problem lies with the deliberately evolved nature of the US financial system which 40 years ago made up 30% of it.

  9. kuhnkat said

    Steve S,

    apparently you are too ignorant to have heard of the Federal Reserve which has been around longer than any of us!! How about the size of the non-taxable Trusts?? Looked into them lately?? What you are referring to is just one of the latest twists in the money men and isn’t even the main course.

    Yet, in your ignorance you insult our host. HAHAHAHAHAHAHAHAHAHAHA

  10. Steve S said

    It’s obviously an issue with the greater than and less than symbols.

    40 years ago less than 10% of the economy now greater than 30%

  11. Steve S said

    Yes, I have heard of the Federal Reserve. I’m also very familiar with the type of people who get appointed to it.

    And I don’t even need to wear a Kuhnskin cap to do that either!

  12. Jeff Id said

    Steve,

    Your numbers of food stamp and poverty citizens are too high – dramatically. These people do exist though and are created by the solution, the sooner that our public grasps that simple concept, the better.

    If someone feeds you for doing nothing, and you don’t want anything else, what are you gonna do?

    I don’t mind helping the helpless, but it is time to chuck the clueless off the food mobile.

    The brownshirt is a horrible reference that shouldn’t be thrown about without cause.

  13. kuhnkat said

    Steve S,

    You might be interested in a book called “The Coming Battle: A Complete History of the National Banking Money Power in the United States” by M. W. Walbert. The original copyright was 1899 and gives an excellent background to the shenanigans currently underway by an accountant.

  14. Steve S said

    In 2011, Americans who make over $1 million will pay just 23.1 percent of their incomes in federal income tax. In 1961, the Institute for Policy Studies notes in its newly released annual Tax Day report, Americans who made over $1 million — in our current dollars — paid 43.1 percent of their incomes to the IRS. That was when the middle class, and America as a whole, was prospering.

    If congressional Republicans get their way, the middle class will feel considerable pain from program-cutting tactics to curb the national debt, while the rich class gets more tax breaks and keeps sapping the wealth of the nation as Democrats lack the courage to fight hard for increasing their taxes. With rising economic inequality the US is rapidly becoming a two-class society: 20 percent rich and 80 percent poor.

    Beats me why anyone other than the rich (and their dupes and stooges) would think that is a good thing.

    Whenever I listen to Obama and congressional leaders it is like watching Saturday Night Live or the Daily Show. They are that absurd.

    How many more millions of Americans must experience more pain and suffering, go hungry, lose their homes, lose their jobs, postpone retirement, and go without decent health care before the public snaps out of their stupor? Not that there is very much optimism among Americans. In a University of Michigan March survey just 11 percent expect inflation-adjusted income gains during the year ahead, barely above the all-time low of 8 percent in 1980, and only 21 percent expect the economy to improve over the coming year.

    But where is the political outrage? Loud enough to scare the hell out of politicians and the 1% East Coast Establishment which controls them? Instead we are bogged down in a brain dead fear and loathing blame game amongst ourselves – the ‘ordinary Americans.

    When will Americans rise up as those in Tunisia, Egypt and Libya did and before that in former Soviet-bloc nations and tear down their corrupt and dysfunctional system?

    Unemployment at 20 percent or more, inflation at 10 percent or more, a multi-trillion dollar national debt to a tiny elite that has already milked our government dry, and nothing but lies from their political avatars.

    Beats me how a belief in voting in different Republicans or Democrats will fix things.

    Millions of suckers still believe that there is a difference between Republicans and Democrats. I and lots of others I talk to know there is only one party in the US and that is the Greed Party, they are winning – we are not. And the fight is not even on! The people who are running this crazy system are very
    careful not to make it so bad that all those lard assed Americans will get up off the couch and
    protest.

    But you know what really pisses me? The Russians, the Chinese, the Indians……none of whom have to kow tow to such a disgusting elite, are all smirking behind their hands and chuckling over drinks as this uniquely American tragedy plays itself out to to its unspeakably bitter end.

  15. Jeff Id said

    “In 2011, Americans who make over $1 million will pay just 23.1 percent of their incomes in federal income tax.”

    ?And I’m ignorant? Who told you these lies?

  16. Steve S said

    My source?

    http://www.ips-dc.org/reports/unnecessary_austerity_unnecessary_government_shutdown

    Although I hasten to add this figure can be found in numerous places on the Web, including the value for 2009 on official Fed. Govt. sites.

    Even worse if you write a check over $10 to the IRS, then you just paid more than Verizon, Boeing, Bank of America, Citigroup and General Electric combined in federal taxes.

    And you may have paid a higher percentage of your income than the billionaires who appear on the pages of the Forbes 400. As super-investor Warren Buffet has pointed out, he pays a lower actual tax rate than his secretary.

    Business Week’s cover story this week is “The Billionaires Guide to Paying No Taxes.” Reporter Jessie Drucker declares, “the more you make, the less you pay.” For our nation’s millionaires and billionaires, “this could be the best tax day since the early 1930s.”

    Don’t worry, we’re assured, these wealthy investors and global corporations are the great productive engines of the American economy. To tax them at all, we are told, would be to “kill jobs” and hurt the economy. In fact, we should pay them – like the $3.2 billion we taxpayers funneled to General Electric last year in various forms of tax breaks and subsidies.

    I sincerely hope Jeff that next you are not going to be trying to tell us e.g. that FDR was a commie?

  17. Jeff Id said

    Believe what you will Steve but the link is full of crap. I would love it were it true, but my guess is that as an evil business owner who employs people, I’ll pay more 2011 tax than I will take home. The IRS is quite effective at getting its share and only the most gullible fall for the stories. The fact that Warren was able to re-invest and defer income rather than hand over the money to the corrupt government just means that he wasn’t able to get his hands on his own money either and found a better way to grow it. It was his money right?

    Again, the GE ‘tax breaks’ as you call them are not the story. It’s the false ‘green’ economy created for GE that is the real money. Subsidies and fake projects which you correctly point out are the payback for political campaign contributions. Without looking, which party did GE contribute most to? — I know the answer, do you?

    As history has shown, redistribution is a fools errand with a very bad ending.

  18. Jeff Id said

    I should add, we’ve gotten too far off track. My original post was about the ridiculous US debt and continuing deficit which cannot be stopped no matter how highly you tax Warren Buffet.

  19. M. Simon said

    Uh. We drove the Germans out of France. Can we go home yet?

    Jeff. Not much will get done without the Senate and the Presidency. And knocking out a few lukewarmers in the primaries.

  20. M. Simon said

    As super-investor Warren Buffet has pointed out, he pays a lower actual tax rate than his secretary.

    What a load of Bull. If he thinks he hasn’t paid enough all he has to do is write a check. No one is stopping him.

  21. M. Simon said

    Or why not up his secretaries pay until she is in something approximating his bracket? He can afford it.

  22. JT said

    You might like to read Ross McKitrick’s explanation of how the US got into this mess.

    http://rossmckitrick.weebly.com/uploads/4/8/0/8/4808045/us_financial_crisis.rm.pdf

  23. scp said

    Glad I didn’t delete you from my RSS reader when you said you would stop blogging. ;-)

    As long as we’re hoping for Washington to solve the debt problem, we’re going to be disappointed. The incentives are wrong and Washington’s Supreme Court fortified version of the Constitution is dysfunctional. I think this may be the solution – http://www.tomwoods.com/books/nullification/. Maybe that’s not the solution either, but I’m no spring chicken, and I’ve got a lifetime of experience telling me that Washington isn’t going to fix itself no matter who we send there. It’s time to try something different. What better source than Madison and Jefferson for our next approach?

    Perhaps it’s because I’m stunningly ignorant, but I had a hard time following along with much of whatever Steve S’ was trying to say. Here’s a nice little video that seems relevant to the 23.1% claim, though – http://www.youtube.com/watch?v=lOyaJ2UI7Ss. I don’t believe it, but even if “the rich” are “only” paying 23.1%, so what? They earned it. Steve S. didn’t. Steve S. is not entitled to that money, no matter how good his intentions. You can’t perform charity by using coercion.

  24. Steve S said

    (1) I left the US over a decade ago and emigrated to Australia where I run my own business, an internationally recognized specialist consultancy in water engineering, hydrometallurgy etc.
    (2) I retain a one quarter partnership in a US consultancy.
    (3) I have also worked in Switzerland for 3 years where citizens pay a flat tax around 8% and auslanders a flat tax around 17%.
    I am very familiar with tax law and tax history in all 3 jurisdictions.
    I am in favor of a flat tax rate. The history, practice and theory of tax law in the West suggests a flat rate of around around 25 – 30% can be sufficient to maintain a viable social democracy with a social safety net and universal one payer health care.
    Australia has had a budget surplus for 12 of the last 13 years while providing universal health care to a high standard.
    Most democracies exhibit full employment in practice at a level where those who cannot find or keep a job constitute only 4 – 5% of the workforce, no more. Call this if you like the ‘layabout level’.
    I do not believe the canard that a modern society exhibiting real unemployment of 10 – 15% also has about 10 – 15% of layabouts who don’t want to work.
    I am not in favor of an inverted system where the rich can afford to achieve a lower tax rate than the middle or lower classes.

    I also see no justification whatsoever for the entrenched belief amongst the parochial, over-testosteroned, hairy-chested ‘frontier social Darwinists’ of the US that what the US needs is a drastic reduction in social spending (including health) when so much revenue is lost to a systematic rorting of the system by those intellectually and materially capable of doing so.

    Finally, what I find particularly hilarious is the fallacy in thinking by the aforementioned hairy social Darwinists that the small 1% of the US population who have grown very rich and very powerful since the Reagan era and now control the US, might somehow represent, be akin-to, or identify philosophically in any sense whatsoever with them!

    Different social groupings, different dominant ethnicities, different cultural tastes, different level of greed sophistication, in most cases a core allegiance even to a different country.

    The gulf is as wide as the gulf between a Bernanke and a Borat.

    No amount of hairy chested self-delusion or ‘cultural learnings’ bridge it.

    The true relationship is that between a carpenter and his well used tools.

  25. stan said

    I must be letting my side down as I’ve never grown much chest hair.

    Jeff, my biggest frustration is that the GOP has allowed itself to get pulled into arguments about specific programs. That’s always a loser because every program has beneficiaries who will fight for it and stated objectives which sound positive (regardless of how inefficient or ineffective the actual program). The only way to cut spending is to simply reduce every budget by a certain percentage (say 10%). Even better, reduce spending to the level of 3 years ago (people weren’t dying in the streets 3 years ago).

    There’s no way BO can argue that it’s a disaster to return to the same bloated budget of 3 years ago.

  26. Scott B said

    Jeff, I respect your opinion, don’t completely agree as I would put military spending at a slightly higher priority than the social programs you mention. Either way we both know that cuts to all of the above along with higher taxes would be necessary to not only get our yearly budget under control but actually pay back some of the debt we’ve amassed. We also both know this is a lost cause.

    Simply put, the people will not support politicians that would consider making all of the cuts that would be necessary and the politicians know this. So they just play games to get a certain constituency to vote for them and keep things going as they have been. Look at this link. Perfect example of the state of our government.

    http://tpmdc.talkingpointsmemo.com/2011/04/pandemonium-dems-jam-panic-republicans-with-even-more-conservative-budget.php?ref=fpa

    This is our joke of a government. You’ve got one side publicly supporting a conservative budget when they don’t think it will pass, but when the Dems try to play games to get them to pass it and use the bill against them in elections, the Republicans change their vote to make sure it’s not approved. Notice none of this has anything to do with actually passing a budget that will fix our problems. It’s just playing games over what these politicians can claim during their next campaign.

  27. Jeff Id said

    Eventually higher taxes result in lower revenue. That’s what makes the concept of paygo such a bad decision. I believe we have already crossed that line.

  28. Neil said

    This is a problem that is not restricted to the USA. Despite mention of NZ trying to attract people by Steve S above, NZ has the same problems, just absolutely smaller numbers. In many cases in NZ what was once a privilege has become an entitlement, a hand up a hand-out. I could continue with the marketing phrases, but you get the picture. In NZ we have a government and lifestyle that exceeds our income. The problem is most people do not even think about this. The primary reason is that they are too busy trying to survive. The next group have some understanding but either do not understand that governments create next to nothing and primarily re-distribute wealth or chose to ignore this. As a consequence they are always calling for the government to fix stuff, unemployment, the cost of food, petrol etc.

    In NZ I usually ask people in this type of debate what will they give up? I start here as the usual call is to tax the rich. In NZ the general public would probably say someone rich earns NZ70,000 to NZ100,000 per year or US55,000 to US78,000 pre-tax. So what will they give up? Largely free education, no, needs to to be better. Largely free health, no, need more, waiting lists are too long. Reduced Police, no, need more. Reduced welfare, no, thats what all rich people want, hit the poor person (refer rich concept above). So we then cycle back to tax the rich. the problem in NZ is that they dont exist, because if they can, they leave (middle income) or stay because they are rich enough to be insulated from the tax issue in the first place.

    So in NZ we are drifting along until the next big disaster, the last was pre-1984 and lead to a massive restructuring of the economy. Politicians will not pre-empt it as they will get voted out.

    As I say to many, you get what you vote for, unfortunately they are not always what YOU voted for, wanted or expected.
    Neil

  29. Steve S said

    Here’s the real version of what happened: A decade ago, the United States had the greatest budget surplus ever recorded in human history. Then the regressives came to power. They quickly slashed tax revenues, especially from the rich, borrowing like crack addicts in order to pay for their profligacy. They meanwhile spent gigantic sums on a war based on lies, on hugely increased military spending apart from the war, on a new Medicare benefit which they insisted on setting up in a way that massively benefitted insurance and pharmaceutical corporations rather than the federal treasury, and on general pork barrel spending, thus driving the national debt up dramatically further, and creating the world’s greatest ever deficits. Never forget it was the GOP who did this. Now these very same people are falsely claiming an electoral mandate to slash spending, screaming that borrowing is an urgent problem which must be addressed at all costs. At the same time, they continue each year to further slash revenues coming into the government, massively exacerbating the very problem they claim to desperately want to solve.

    Their solution is to cut spending on essentials for poor people and the middle class. They have completely taken any form of tax restoration off the table. They won’t dream of reducing military expenditure, which is bloated to an absurd degree. They cannot contemplate allowing the government to buy cheaper drugs from Canada, or negotiating a bulk price discount for those drugs, let alone rescinding their (socialist) prescription drug benefit plan. They would never accept a reduction in the hundreds of billions of dollars spent on corporate welfare each year for agricultural or sugar or oil or other industries.

    None of this is random. This has been a three decade long process to produce that which our super greedy rich have craved the most, namely, a return to the good old days when they had everything and the rest of us had nothing. They have been indignant at the very notion of the slight bit of economic egalitarianism America managed to maintain for a couple of generations. They sat on their hands, gnashing their teeth, from the 1930s through the 1970s, because they had to, but now they’ve back with a vengeance.

    Exporting jobs, slashing government programs, moving tax burdens, bankrupting the government, breaking unions, co-opting Democrats, creating bogus news media, dumbing down education, fabricating scary bogeymen, stealing elections. It’s all there.

    Remember when Nixon and Kissinger decided to kill socialism (not to mention lots of ordinary people) in Chile by “making the economy scream”?

    Welcome to Chile Norte, suckers.

    Here’s hoping that as it has with the Chileans, common sense will eventually prevail.

  30. Jeremy said

    Oh Jeff, you’re not the only one who thinks this. When the democrats complained bitterly of the proposed $60 billion from the right, I chuckled and rolled my eyes. When the Democrats cried that the republicans had already “won” the argument and shouldn’t be greedy, I was flabbergasted. When the “compromise” deal of $38 billion was announced, I laughed out loud and wept for the future.

    Is the left unable to count? Do they not understand scientific notation and the difference between 10^6, 10^9, and 10^12? Does the right really think that conceding so much in spending already weakens their position for the next election? We need to be abolishing entitlement programs wholesale and cutting trillions from the budget, not billions. We certainly should not creating BS arguments over abortion to muddle the budget waters.

    America needs a no-confidence amendment allowing for the people to directly and permanently fire all politicians in congress, i.e., force a special election, and all sitting representatives are permanently banned from political life. That amendment should be invoked in situations like this.

  31. RB said

    Probably a conservative of 1940s America was similarly bemoaning the future 50 years hence

    http://www.usgovernmentspending.com/federal_debt_chart.html

    There is adequate evidence to show that federal balance sheets cannot be thought of like a household’s . The only time America went into a fiscal surplus in Andrew Jackson’s time, 1835, was followed two years later by the longest Depression that the U.S. has faced – a century that also featured multiple Depressions. It is also an economic identity that the net world government deficit is equal to the net private sector savings. Perhaps, there is something to the idea that businessmen and macro-economists should not be too confident of their knowledge of the other.

  32. Alan D McIntire said

    Right now the govt buget is about $3.6 trillion From IRS figures, total adjusted gross income for everyone making $200,000 per year or more was 2.06 trillion. Simple math tells you that the government can’t continue the current trend without drastically inflating the currency.

    Back in the early 1970s, due to a run on gold, Nixon stopped allowing foreign governments to have dollars directly converted to gold.
    As a result, all those dollars held by Europeans suddenly dropped drstically in value, and we had high inflation, over 10% per year, and high unemployment- “stagflation”. Because of a lack of political willpower or political stupidity, we’re headed the same way right now.

    Look for third world inflation rates of over 10% shortly. I was in my early 20s back in the 1970s- I remember a series of
    “wage/ price controls” , and rhetoric blaming the middle man. Look for more of the same this time around as those in government blame those evil oil companies for over 10% inflation in the near future.

  33. Alan D McIntire said

    I should have said total gross income for everyone with an adjusted gross income over 200,000 in 2008, the last year available.

  34. stan said

    “It is also an economic identity that the net world government deficit is equal to the net private sector savings.”

    Not true. Some governments simply print money. They don’t borrow in the debt market. That’s what the Fed is doing with quantitative easing. The US Treasury has massive debt. To fund it, they borrow by selling T-bills and bonds. The Fed is now buying vast quantities of that debt. Where does the Fed get the money to buy the debt? It prints it with the printing press.

  35. Ron Paul
    April 12, 2011

    Last week, Congress and the administration refused to seriously consider the problem of government spending. Despite the fear-mongering, a government shutdown would not have been as bad as claimed.

    It is encouraging that some in Washington seem to be insisting on reduced spending, which is definitely a step in the right direction, but only one step. We have miles to go before we can even come close to a solution, and it will involve completely redefining the role of government in our lives and on the world stage. A compromise was struck at the last minute, but until Democrats agree to rein in entitlement spending, and Republicans back off the blank checks to the military industrial complex, it all amounts to political gamesmanship.

    Unfortunately, the compromises always seem to be just the opposite. Instead of the left agreeing to cut social spending and the right agreeing to cut military spending, the right agrees to more welfare and the left agrees to more warfare. In spite of all the rhetoric, we will go deeper in debt, the Fed will print more money, and the value of the dollar will continue to plummet. How long will it be before foreigners stop buying our debt, and hyperinflation arrives? Throughout history, empires have always overextended themselves through conquests and wealth transfers leading to eventual collapse, from the Roman Empire to the Soviet Union. We are headed in the same direction and it seems only the chaos of the collapse of the dollar will stop the spending spree. Arguing over funding for Planned Parenthood and NPR, though important, only shows that leadership in Washington either won’t face reality, or don’t understand how serious the problem is.

    Of course, an actual government collapse would create serious problems for many people who have come to depend on government payments for healthcare, retirement income, their children’s education, and even food and housing. However, these so-called entitlement programs are unconstitutional to begin with and have engendered a culture of dependence on wealth transfer payments that is out of control. It concerns me greatly that instead of dealing seriously with our situation, so many in Washington would rather allow the chaos that will ensue when all of the dependent people are suddenly cut off. Better to look reality squarely in the face and tell people the difficult truth that government is simply not capable of managing people’s lives from cradle to grave as was foolishly promised. We face trillions in deficits with any of the budgets under consideration. Keeping those promises is, sadly, just not one of our options in the long run. Better to admit the nanny state is coming to an end and we are no longer working on “compromises” but a transition – to a sustainable way of life, one that respects the constitution, the rule of law and property rights.

  36. Derek said

    http://factsnotfantasy.blogspot.com/2011/04/earth-day-and-environmental-insanity.html

    ” In news from the United Nations—a misnomer if ever there was one—Bolivia is proposing a UN treaty that will give “Mother Earth” the same rights as accorded to human beings. It has just passed a domestic law that grants these rights to bugs, trees, and all other natural things in its own country. ”

    ” The Bolivian law, if successful, will end the extraction of all natural resources in that nation, thus effectively plunging it into insolvency. That is a definition of insanity. It is also a description of the United States of America where access to its vast reserves of coal, natural gas, and oil is being systematically denied by the government. ”

    ” In America, there has been a resurgence of bed bugs, formerly controlled by DDT….
    So, instead of authorizing the use of a pesticide to rid us all of bed bugs, it (the EPA) wants to “educate” us to live with them. That’s insane. ”

    ” Environmentalism, worldwide and in the United States of America, is devoted to the collapse of every scientific and technological advance of the past century, along with the capitalist system that made them possible. “

  37. Steve S said

    Allegorical for sure but this is part of what Chris Hedges said in Union Square on 15 April:

    “The bankers and hedge fund managers, the corporate and governmental elites, are the modern version of the misguided Israelites who prostrated themselves before the golden calf. The sparkle of wealth glitters before them, spurring them faster and faster on the treadmill towards destruction. And they seek to make us worship at their altar. As long as greed inspires us, greed keeps us complicit and silent. But once we defy the religion of unfettered capitalism, once we demand that a society serve the needs of citizens and the ecosystem that sustains life, rather than the needs of the marketplace, once we learn to speak with a new humility and live with a new simplicity, once we love our neighbor as ourself, we break our chains and make hope visible.”

    What Hedges didn’t tell us is where the Really Big Bad Joke lies all this is!

    It is this.

    The Coonskin Cap Crowd are actually so goddamn bone headed they think they have something in common with the frickin’ Israelites.

  38. Titan28 said

    Steve # 29

    There never was a budget surplus ten years ago in the U.S. That was a PROJECTION. And like the usual WDC projection, it was based on a mixture of marshmallow and nothing at all. And yes, I know MSM keeps talking about the Clinton surplus. Which doesn’t make it so. MSM no longer reliably reports anything. And what happened to ruin any hope that budget projection would ever be the case? The Dot-Com bubble burst.

    As Jeff earlier stated about himself and you, there are no doubt commonalites in the thinking of many people on this thread. We all loathe waste. No one here is going to say the folks on Wall Street did the rest of us much good; and yes, they got away with it and don’t seem even now ready to change. But as Michael Lewis says, what would you expect? These people are motivated by money. It may even be all they care about.

    Matt Taibbi to some extent has their number. But he’s a conspiracy theorist. His work at Rolling Stone is long on emotion, short on reason. But yeah, it’s entertaining. I feel what he feels, but I sure as hell wouldn’t let him do my thinking for me, nor would I ever list him as a source for anything.

    And while it might be fun to castigate the wealthy, you might want to consider how much tax they do pay. The top 10% of U.S. income earners pay over 40% of the total federal tax load (& it may be higher than that). The bottom 50% of American workers pay no federal tax at all. There may well be free-loading going on at the top; there is also plenty of looting going on at the bottom end as well, as anyone even remotely familiar with the modern welfare state would tell you. You appear to have swallowed whole the HuffPo-DNC meme about the “Bush tax cuts.”

    It’s the bankers, the hedge fund managers, the Republicans and the Wall Streeters. Or so you say. It’s not that simple. For instance, how do you explain why so many of the evil-doers in your scenario voted for Obama? Goldman Sachs workers comprised the largest corporate doner source for The One. Those hedge fund dudes don’t live in Kansas. They live in CT, NY, NJ, CA; the pretty places. They also dominate politics in ME, VT, and MA.

  39. DeWitt Payne said

    Even if those with super high annual incomes were taxed at 100%, it wouldn’t balance the budget. There’s also the problem that states like California have noticed: when the economy goes south, so does the income of the highest earners. Tax revenues from highly progressive income tax regimes are leveraged to the economy. Legislatures have a nasty habit of assuming that revenues during booms are the norm and budget accordingly.

    I pay zero attention to what Warren Buffet and Bill Gates, Sr. say about taxation. They both advocate a high estate tax, for everybody else. Unless they can prove that their estates will be taxed to full measure when they die, no foundations, etc., their advice is hypocritical and disingenuous to the max.

  40. Steve S said

    “It’s the bankers, the hedge fund managers, the Republicans and the Wall Streeters. Or so you say. It’s not that simple. For instance, how do you explain why so many of the evil-doers in your scenario voted for Obama? Goldman Sachs workers comprised the largest corporate doner source for The One. Those hedge fund dudes don’t live in Kansas. They live in CT, NY, NJ, CA; the pretty places. They also dominate politics in ME, VT, and MA.”

    Agree 100%. They do live in CT, NY, NJ, CA; the pretty places. They do also dominate politics in ME, VT, and MA.

    Of course the Gnomes of Wall Street, the 1% Eastablishment, The Tribe, call it whatever you like, captured the Democrats long ago. In fact I’d say that they probably exert greater influence over the Democratic party than over the GOP.

    They not only voted for Obama they created and bankrolled him. That is why I said in an earlier post that the slogan “Yes We Can” actually is a joke, a pun, a double meaning, a finger in the air.

    Obama is probably the most sophisticated ‘implant’ to the Presidency of all time. The Tribe are nothing if not smart. After all, their alma maters are practically all the same. I’m only half joking when I say Obama is a silver tongued, long term memory free Blade runner replicant cooked up by tribal nerds in some underground laboratory in (where else?) the Negev.

    Look, I am in favor of a balanced Federal budget under 95% of all contingencies (i.e. short of a WWII). That is one reason why I voted with my feet over 10 years ago. I saw the scams. I clearly saw that the Clintons had sold out to the corporations over Glass-Steagall. I was mostly scared of what the future held out for my kids. The last decade has shown my fears were well grounded. I am modestly wealthy myself. I believe in a simple, no exemptions flat tax rate (for all in work). I believe any government should be small, lean, clean and mean, balancing its books and keeping its nose out of anything other than basic fiscal management, defense, health and welfare (including religion).

    But I don’t believe in an inverted tax scale – for individuals OR ESPECIALLY corporations. I particularly don’t accept that a whole nation’s economy should be allowed to be captured and controlled by any sectarian minority which doesn’t support the core values of the nation and may even have largely transferred their allegiance to ‘an off shore proxy nation’…..(after the Golden Calf of course).

    This is why I am so pissed that the GOP allows itself to be sucked into supporting the goals and devious devices of the aforementioned sectarian minority. They are not only allowing the nation to get progressively screwed into the ground but they are too dumb to even see It’s Unamerican!

  41. Jeff Id said

    DeWitt, thanks for a bit of sanity to the discussion.

    Steve S, your ‘inverted’ tax scale is a fabrication. You claim to be a businessman, claimed to know the taxes of 3 coutries, yet I have very expensive accountants who constantly tell me different.

    I can promise you that between you and my accountants, I have made my choice. Your information on taxation is faulty.

  42. Steve S said

    The US has a de facto inverted tax scale especially when it comes to large US-based corporations such as Verizon, Boeing, Bank of America, Time Warner, Citigroup, General Electric etc., where the effective tax rate is in fact an obscene zero – with even tax credits are constantly claimed and carried forward . That is not to even to mention the very rich individuals.

    Large UK-based, Europe-based, Australia-based and Canada-based corporations I consult to such as Rio Tinto, BHP Billiton, Inco etc pay much much higher taxes – even on their US operations.

    Executives of any of those companies will freely cite chapter and verse over a few good beers.

    The US tax system is a geriatric old man with Alzheimers and gangrene, riddled by years of pork barrelling derived exemptions, scams and wholesale use of off shore havens like the Caymans.

    Between you and your US accountants and me and my 25 years of use of a single reputable international accounting firm across 3 continents I can promise you your information, whatever that is, is hopelessly naive ….

  43. RB said

    “Where does the Fed get the money to buy the debt? It prints it with the printing press.”

    True, but you also highlight why a sovereign country that issues its own currency can never have solvency issues quite unlike a household, inflationary issues aside. Regarding the Fed – it can also retire the money printed . If it prints the money while keeping the interest rate within its target range, it will be acting within its mandate. While potentially inflationary, the added money supply is not inflationary if people do not have the desire to spend and instead hoard the cash. That’s how I interpreted it at least.

  44. Steve S said

    Ratings agency Standard & Poor’s has just delivered a stunning vote of no confidence in US political leaders to come up with a solution for swollen budget deficits with its decision to cut its outlook on US government debt to “negative” from “stable” for the first time in history.

    S&P’s warning rattled markets even though the problem with mounting US budget deficits, and rapidly rising US government debt, are well known. In its World Economic Outlook released earlier this month, the IMF projected that the US budget deficit would reach 10.8 per cent this year – the largest among the advanced economies, and the US government’s gross debt would likely exceed 110 per cent of GDP by 2016.

    Indeed, it said, the US is the only large advanced economy where the government budget deficit is set to increase this year, despite the pick-up in economic activity.

    But S&P’s move – which implies a one-third chance that the US will lose its triple-A status in the next two years – forced markets to ponder the possibility that the US government debt might eventually be downgraded, which would push up US borrowing costs and could threaten the US dollar’s role as a global reserve currency.

    The S&P warning comes after President Barack Obama and Republican lawmakers have both released elaborate plans to slash the US budget deficit by at least $4 trillion over the next 10 to 12 years.

    The Republican blueprint, written by House Budget Committee Chairman Paul Ryan, proposes major cuts in spending on social programs and health care, particularly on Medicare, the health program for the elderly and disabled, and Medicaid, the health care programs for the poor. It also plans to cut the top individual and corporate tax rate to 25 per cent, from 35 per cent at present. In contrast, President Obama’s plan imposes tax increases on the wealthy, and there are only minor cost reductions in healthcare spending.

    S&P saw the two proposals as a good starting point for negotiations on cutting budget deficits, but added that it saw “the path to agreement as challenging because the gap between the parties remains wide.” And it warned that negotiations between the two sides could be stalled ahead of next year’s Congressional and presidential elections.

    Other analysts point out that even if the two sides manage to cobble together a decade-long deficit reduction program, it is unlikely to be fully implemented while the US economy remains weak, and unemployment levels remain stubbornly high.

    And a rapidly ageing population means that the deficit woes are set to become even more severe, because the US has larger unfunded commitments on social security and healthcare than most other developed countries.

  45. Pete H said

    RB said
    April 18, 2011 at 9:12 pm
    “Where does the Fed get the money to buy the debt? It prints it with the printing press.”

    China?

    I own up to being a Brit and I can take being told to butt out but were it not for Chinese RMB investment the $ would have lost its triple A rating some time back. Add that to the fact that the day that the RMB takes over as the trading currency of the world is approaching faster everyday Obama and his fools remain in power.

  46. Steve S said

    It’s a good thing the people in Standard and Poor’s in charge of sovereign credit ratings aren’t also in charge of say, inspecting rides at a carnival. They would wait until AFTER the roller coaster crashed and burnt to issue a warning. And the moles in the ‘Whack! a Mole’ game would have to be real moles with rabies and razor-sharp teeth designed to maim children for the S&P to rate them as “feral”.

    If you’ve been living on a different planet for the past five years, or perhaps have just woken up from a decades-long coma, then maybe you’d be surprised to learn that the S&P has changed its outlook on U.S. government debt from “stable” to “negative”.

    Oh S&P, what a fickle lover/ratings agency you are. Do you not like cheeseburgers anymore? Would you give Budwizzle a “negative” rating as well? Go on S&P. Tell us…why do you hate America? Or, more seriously, why have you issued your global wake-up call on U.S. debt now?

    For the record, the ratings agency said that, “Because the US has, relative to its ‘AAA’ peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable”.

    Shock horror! The United States government is running a deficit! Maybe this has something to do with the move by the gold price to $1,495 in overnight trading. According to my math, that’s five dollars below $1,500, which is $3,500 below $5,000 — which is probably where gold is headed once the rest of the world figures out the American government is bankrupt and the U.S dollar is becoming garbage.

    Why keep bleating on about this subject? Because the U.S. dollar is the world’s reserve currency. Changes in its value and in the credit worthiness of the U.S. government affect global interest rates, capital flows, and asset values. If you’re not following the story — and preferably ahead of i t— these events will be news to you. And by the time it is news, it’s way too late to profit from it.

    It’s possible the S&P’s outburst will prompt a backlash against the Fed and some sobriety in American fiscal policy. Genuine spending cuts — including in America’s ridiculous level of military spending — and interest rate rises might get the greenback back on its feet. But it’s unlikely.

    This is the other major historical event that’s guiding, or at least influencing, global investment values: the Welfare/Warfare State model is going bust. Note well this model is based on the ability of The Tribe to perpetually sell debt. That’s fine, as long as debt service payments don’t become too large a percentage of tax revenues, or debt too large in proportion to GDP.

    But in Europe and America and probably Japan, it’s become blindingly obvious that debts are now far too large to ever “grow” out of. There are only three ways to deal with too much debt: refinance them, restructure them, or default on them. Inflation via money printing, or debt monetisation when the central bank buys the debt issued by the Treasury, is a de facto default.

    There’s been a reprieve in the credit markets since March 2009. Synchronized easy money from central banks and outright asset purchases (quantitative easing; QE) made it easier for some borrowers to refinance (mostly large corporations). But hardly anyone has availed themselves of the opportunity to restructure debts with longer maturity periods.

    So you have over $3 trillion in bank debt that needs to be refinanced in the next two years. And on top of that you have America’s annual $1.5 trillion in new debt, not to mention maturing debt that needs refinancing. And then there is the rest of the sovereign borrowers.

    So much borrowing. But who will be lending? Ahhhhmmmm…….

    Now you see why the credit ratings agencies — which BTW were shamefully late to the scene of the subprime ratings crime (Are we surprised? No way!) — now keen to at least say what everyone now knows: a major sovereign or two will default before all this is over. It won’t just be problems at the edges of the EU (Ireland, Portugal, Greece) or with the worst-off American states like California, Illinois, and New York State.

    Too much sovereign debt is going to cost the world a reserve currency or two before all this is over. Of course, it’s likely that the G-20 and the IMF will try and accelerate their 2015 target for redefining the Special Drawing Rights (SDRs). This is a global currency made up of a basket of other currencies. It doesn’t yet include the Chinese Yuan (renminbi). But it will.

    Old Keynes’ skeleton must be spinning rapidly in his grave now recalling the way the US stomped hard on his idea of a world reserve currency (the ‘bancor’).

    Will the IMF and the G-20 be able to replace the dollar with a new global currency before the dollar breaks down even more? A dollar collapse destroys a lot of wealth. But it also destroys the belief people have in paper money. A lot of people stand to lose a lot of money if the managed decline of the dollar becomes an unmanaged debacle.

    Except those who have put their money into silver, gold, fertilizer, prime farming land, lithium, rare earths, and uhh….. armaments.

    That’s probably what’s keeping the Chinese up at night, with their $3 trillion foreign exchange reserves and hundreds of billions in U.S . Treasury bonds. And that’s why the Chinese and Indians are encouraging their own banks to offer gold to Chinese savers. Get out while the gettin’ is good.

    None of this seems like a terribly big problem to people like the Chinese, Indians, Canadians, Australians, Brazilians, Russians etc., at the moment. But another global debt crisis would send up interest rates; not exactly welcome news for venture financing or housing markets. Note China has already raised reserve requirements on major banks four times this year in an effort to quell inflation.

    We live in challenging times (and you don’t need to be an accountant to figure that out).

  47. Jeff Id said

    “Between you and your US accountants and me and my 25 years of use of a single reputable international accounting firm across 3 continents I can promise you your information, whatever that is, is hopelessly naive ….”

    “In a regulatory filing just a week before the Japanese disaster put a spotlight on the company’s nuclear reactor business, G.E. reported that its tax burden was 7.4 percent of its American profits, about a third of the average reported by other American multinationals. Even those figures are overstated, because they include taxes that will be paid only if the company brings its overseas profits back to the United States. With those profits still offshore, G.E. is effectively getting money back. ”

    GE and the others you list are unique monsters with tentacles spread throughout the world including a bunch of ecomonster projects. Tax law in the US encourages GE to leave its money overseas or make it appear to stay overseas. This is simple enough to do if you have a team of accountants. But this simply means GE can’t personally realize their own money in the US, and they don’t need to. I they bring the money to the US, they pay tax at a high percentage just like the majority of business in America.

    You are taking the example of a few multinational giants and comparing them to the bulk of American business. They are not the same thing at all.

    Again, you don’t have the skill set to call me ‘hopelessly naive’. We also operate internationally and while I have only owned my recent company for 6 years, some of my first work was consulting for BMW and Volkswagon in Germany 20 years ao now and then in Austria. Our ‘accountant’ is also the chief accountant for a famous multi-billionaire who buys and sells several companies per week. I can’t claim to know everything in the world, but this is the internet my friend, and you don’t know me, but I have been around the block before. Enough to fill passport stamp pages. I don’t write about myself here typically, just my opinions.

    With all your worldly skills, can you tell me the tax rate for Hong Kong business?

    Do you know how much the Hong Kong govt collects in the end? Perhaps they are broke.

    Why do global companies put teams of accountants in Hong Kong towers? To negotiate for how much cost the US government will allow them to accept for taxation purposes on imported goods and services! Even a 10% savings in imported profit justifies the existence of massive office towers. The US is not alone in these tax policies but it simply means that the money is incented not to be used here.

    If I manufacture x overseas and sell it to myself in country Y for z + cost, what is cost? Wallmart works this magic every day of the year. You have to state this cost somehow and justify it to the IRS. Done correctly, this leaves real profit overseas. If I want to own a big house in the US, some of the difference must be imported. If I want to buy a condo in HongKong (or dinner), some of the difference must be realized personally. This is heavily taxed money in both cases.

    Of course this leaves the door open for the largest groups to take advantage of the US. You contribute to your favorite political party enough, collect breaks and projects which look like expense yet are actually powerhouse shelters that the small/medium business never realizes. Except perhaps some eco-niches. However, when you make the statement that American tax law is upside down, you are not correct. It is twisted, and companies are disincented to operate here, but not because taxes are too low. It is because of the structure of the system and ‘high’ corporate tax.

    I have a friend who operates a C corp with an LLC. Through various means the C corp never shows profit. Does this mean the C corp doesn’t pay as much tax – yes. Is this unfair to the IRS – no chance. The IRS gets their share through him personally, just not as much as they would have if he ran it another way. We own an S and an LLC for various reasons. The S corp pays zero tax by default. Not one penny, except that the income is placed again on the shareholders and taxed at our personal rates. Does this mean that the IRS didn’t collect their share — not a chance. What happens is the employers of the US are the one percenters even though the corporations made the money and owners were able to touch none of it.

    Raising tax on the wealthy in the US is raising tax on business – period. The majority of American business is very heavily taxed. What really stinks right now is owning a rapidly growing business. We cannot expense inventory until sold. As our inventory expands, that’s nothing but taxable income that nobody has liquid access to. Instead we have assets as goods which we hope to someday sell – heavily taxed assets.

    You have quoted a mix of extreme and false crap here, for instance the flatly false poverty rates in the US, the ‘wealthy of America taking over’ (which are the small and medium size business owners), the multinational giants who have corrupted government, and all I read is a person who is reading too much leftist media. Changing the tax code to incent businesses to operate in the US requires a net reduced tax level on business – and quickly. Doing so could save the US from its current crisis if done correctly – and that hope is naive.

  48. Mark F said

    46: The RMB leverage will come into play, probably in some foreign policy arena, if history is any guide. Recall the USA pressure on the UK after WW2. “Go away or we’ll start calling in some chips!”. It ain’t just which currency, it’s the entire sphere of influence over the commercial interests of other countries we’re seeing. China in Africa, have a look.

  49. Mark F said

    46: SandP were the ratings agency the, along with Moody’s, put their gold seal stamp of approval on all of those derivatives and other funny money inventment “opportunities” that led to the whole collapse. Nice move, S and P!

  50. RB said

    BTW, you can all look at ways of addressing the deficit here:

    http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html

    And check out the ratings agencies’ record with respect to Japan:

    http://www.businessinsider.com/sp-downgrades-of-japan-2011-4

  51. Adam Gallon said

    There are similar squawks over here in the UK about the “Cuts” that the Conservative/Liberal Democrat Coalition Government are making.
    Christopher Booker, in his columns written for The Daily Telegraph keeps pointing out, that they are “Cuts” at all, just that the rate of increase in Government spending is decreasing.
    They also seem to be able to find the money to throw a few bombs & missiles at Libya (But could you Yanks please come back out to play, as the Italians will only rent space on their airbases to us, rather than drop a few bombs themselves and our planes are getting too worn out, as we haven’t enough spare parts in the garage to keep them all flying)and also appear to be willing to stump up a few billion in Sterling, to bail out Portugal, even ‘though we aren’t actually using the Euro ourselves. Bail outs for Ireland already done, Greece will be next and Spain’s probably not far behind, unless Italy jumps the queue.

  52. RB said

    An elaboration to my post #43 where I linked to Krugman describing a hypothetical $200B loss on a $1T Fed portfolio of U.S. Treasuries. With regards to the Fed’s purchase of Treasury debt, any losses incurred essentially constitute fiscal expenditure financed by Treasury borrowing . Therefore, we will once again be back to the savings=investment identity with the Fed in charge of controlling the inflation as it was in the pre-QE era.

  53. RB said

    Hope this makes it past the spam filter. An elaboration to my post #43 where I linked to Krugman describing a hypothetical $200B loss on a $1T Fed portfolio of U.S. Treasuries. With regards to the Fed’s purchase of Treasury debt, any losses incurred essentially constitute fiscal expenditure financed by Treasury borrowing . Therefore, we will once again be back to the savings-investment identity with the Fed in charge of controlling the inflation as it was in the pre-QE era.

  54. RB said

    Looks like I’m having spam filter issues.. but to add to my post#43, the Treasury is on the hook for any losses for the Fed. Therefore, the hypothetical 200 billion loss that Krugman describes on a one trillion portfolio is essentially equivalent to fiscal expenditure financed by Treasury borrowing. Thus we are back to the savings-investment identity with the Fed controlling the inflation as in the pre-QE era.

  55. RB said

    Yikes, spam – I am it.

  56. jeff Id said

    haha. It was stuck in the filter and my current schedule doesn’t allow me to blog much. Most of the next post was written after 2:30 am.

  57. Steve S said

    Alarmed by rising national debt and increasingly downbeat about their country’s course, Americans are clear about how they want to attack the government’s runway budget deficits: raise taxes on the wealthy and keep hands off of Medicare and Medicaid.

    Those are among the findings of a national McClatchy-Marist poll taking the country’s pulse just as President Barack Obama and Congress launch what could be a multi-year debate on the role of government and how to finance it.

    On tackling the deficit, voters by a margin of 2-to-1 support raising taxes on incomes above $250,000, with 64 percent in favor and 33 percent opposed.

    Independents supported higher taxes on the wealthy by 63-34 percent; Democrats by 83-15 percent; and Republicans opposed by 43-54 percent.

    The ghost of FDR may yet rise out of the ashes of the post Reagan era. Watch those polls.

  58. jeff Id said

    Steve,

    “Americans are clear about how they want to attack the government’s runway budget deficits: raise taxes on the wealthy and keep hands off of Medicare and Medicaid.”

    Yup, the ignorant abound. People need to pay attention to the others on this thread who point out that even at 100% tax the evil wealthy business owners can’t cover the insane and flatly stupid deficit and at 100% tax, who’s going to hire the workers?

    Sorry but why resort to polls of the public after previously claiminng superior credentials? I know what the leftist media has pushed, I know what the public believes. I also know it is ignorant and naive. Much of the problem comes from those who claim knowledge yet produce nothing.

  59. jeff Id said

    I’m sorry Steve, I’m a grumpy businessman with too much work. You didn’t/don’t know my background so what can we do. I hope the jackalopes stop spending what they don’t have soon, so far there is no intent.

  60. Sam said

    Jeff, I’m glad to see that someone else finds the $40 billion figure absurd. I talked to a conservative friend about it, and he admitted it wasn’t nearly enough, but supported it because it was “a step in the right direction” I look at it more like this.

    The country is in a car heading off a cliff. Democrats are driving it at 90 miles an hour. Republicans in the passenger seat convince the Democrats to lift their foot off the pedal for a second. The car goes over the edge of the cliff, but have no fear! Because of the Republican’s insistence, the car was only going 89 miles an hour instead of 90. Disaster averted.

    If you want to understand why we cannot avoid inflation in the US, watch this video. It is from the Austrian perspective:

  61. Steve S said

    “Yup, the ignorant abound. People need to pay attention to the others on this thread who point out that even at 100% tax the evil wealthy business owners can’t cover the insane and flatly stupid deficit and at 100% tax, who’s going to hire the workers?”

    It’s always only a totally piss weak argument that has to resort to crude hyperbole and gross exageration. I’ve never advocated crap like a “100% tax” on “the evil wealthy business owners”, having clearly stated that I think any government system is best kept lean, clean and mean (i.e. what a government should be) with a flat tax rate for all in employment and for a system running a single payer health care system (and a sensible defense budget) that flat rate can be shown to lie in the 20 – 30% range. Yoyr the one who accuses me of tax ignorance. There are plenty of text books examining the flat tax approach for a range of social democratic scenarios.

    As I wrote early on, I hope you are not going to turn around and tell us FDR (who more or less ‘handled’ the Great Depression and WWII in a way we can all be proud-of; my Dad, a WWUI vet dying in ’83 a lifelong FDR admirer – even Reagan admired the New Deal), was ‘just a commie’.

    I totally reject the narrow implication in all your ‘steam venting’ that somehow those who believe America was, and could still be happiest and strongest as a well run social democracy with e.g. universal health care etc., etc., are fools.

    May I enquire if you ever lived for extended periods in well run democracies like Canada, Switzerland, Sweden, Australia etc.? In those countries much of your argument would appear downright antediluvian, even to those like myself who tend to vote towards the right. I even support the right the bear arms for chrissakes.

    Could it be that it would surprise you there there even are plenty of well-educated climate sceptics just like you and I around this world who also who take (say) a universal health care system and a sensible social safety net for the disadvantaged, crippled, ageing, dying etc., for granted? As a basic human right in a mature civilization? Have you ever held a dying parent costing your family $1000 a day for the previous couple of years?

    I for one am not ashamed of holding such beliefs.

  62. Mark T said

    Yeah, we need to keep in mind that half of the people in the US have below median intelligence… but still have half the vote. They also tend to be more closely related to those receiving the most aid and paying the least in taxes.

    Keep harping on the tax the rich ideology, eventually you will run out of other peoples’ money to take, then what?

    Mark

  63. Sam said

    I totally reject the narrow implication in all your ‘steam venting’ that somehow those who believe America was, and could still be happiest and strongest as a well run social democracy with e.g. universal health care etc., etc., are fools.

    I don’t know if that is what Jeff was implying, but I’ll be happy to say it outright. Those who believe a “social democracy” can be well run and result in a happy and strong society are fools.

    Not in the short run. In the moment, that society looks great. Yippee for free health care, etc! But it simply cannot work long term. Even Europe is being forced to recognize this.

    You claim FDR navigated the Great Depression well. I don’t know what this means exactly, considering that it lasted over a decade. But the programs that FDR started are now impossible to continue today. We simply can’t pay for them.

    Perhaps your contention rests on your caveat “well run”. Maybe those programs were ill-conceived, or they have been distorted over time? Perhaps you should submit your own name into the central planner’s pool. You might be able to devise a “sensible social safety net”, but it certainly hasn’t yet been established.

    Or, you could read F.A. Hayek or Ludwig Von Mises and understand that central planning never works.

    If, in our democracy, the majority of people desire to have a social safety net, what is to stop them from doing so voluntarily through private charity? Or, if the majority of people do not want that safety net, then as a democracy, why should we implement it?

  64. Amabo said

    http://angloaustria.blogspot.com/2009/05/why-youve-never-heard-of-1921.html

  65. Mark T said

    Ultimately, social “safety nets” require the threat of violence (imprisonment, fines, etc.) to implement. That should serve as a good indicator of their usefulness. If stealing from the few was a viable means of providing for the welfare of the many, force would not be required.

    Forced compassion is not compassion, it is tyranny. It always has, and always will, fail.

    Von Mises was great, btw, Hayek, too. More recently, George Reisman (a student of Hayek’s, I believe) has been carrying the torch.

    Mark

  66. Jeff Id said

    Steve S,

    It is not a piss weak observation to point out that at our current spending levels, even if you take ALL the money, you can’t cover it. Just how is that piss weak? I know you didn’t make the point, that is why the point has my name on it.

    The money is being spent stupidly in too many instances, the thread was about the insane overspending on things like the department of education and government unions. We need neither of these, or do you believe that without collective bargaining the government would somehow pay minimum wage and no pensions to idiots who do little work for massive pay? Hell the UN needs to be cut, that would save a few billion right?

    We don’t have the money so we have to stop spending it. That’s it.

    Could it be that it would surprise you there there even are plenty of well-educated climate sceptics just like you and I around this world who also who take (say) a universal health care system and a sensible social safety net for the disadvantaged, crippled, ageing, dying etc., for granted? As a basic human right in a mature civilization? Have you ever held a dying parent costing your family $1000 a day for the previous couple of years?

    You won’t get me to say that. Universal health care is a stupid concept. Fixing the liabilities of health care and deregulating some of the institutions would help. I’ve got some background in that area as well. Helping those who cannot provide their own is a different story. Help with a little financial pain for the individual involved is not a problem for me and that is not what is being offered. There are levels of service in the US available for those with proper insurance that cannot be found in the rest of the world. Applying that across our society by mandate is as destructive an adventure as I could imagine. US health care leads the world in every way, it isn’t perfect and it has a ton of problems but if you get your news from the BBC or CNN you get the impression that people aren’t cared for — bovine scatology as pure and fresh as you could imagine. Most of the health care problems are actually created by government in my opinion.

    Of course you can live in your world where you believe that these socialized nations are equal, they are not. You can quote ridiculous poverty numbers to me, but they are also bogus. My ‘hasn’t worked in 30 years’ neighbor isn’t rich but he has 6 cars and a bigscreen TV just off of govt programs. That’s more than most middle class could imagine in China and more than I have myself. Too materialistic, nope, he was able to get what he needed out of life.

    And regarding taxation 20-30 percent would be a fantastic cut for me. I would be thrilled to see that level of taxation. We are way way over that my friend, so yes on that aspect you are quite ignorant of the reality of what is taxed here.

  67. Steve S said

    Hhhmmmm

    Strange how amongst all the ultra right wing, ‘my neighbour is a rich 30 year parasite’, ‘Von Mises and Hayek have it right’, ‘universal health care is a stupid concept’ ‘US health care leads the world in every way’ blah blah blah chest beating BS here there ain’t any complaints about the long standing insane over-spending of the US state on arms, esoteric military technology and overt and covert warfare, propping up dictators etc.

    Of course if you believe that your poor decaying empire has to remain armed to the teeth to the very end to fight off all the ghosts in your closet there ain’t gonna be much left over for anything else.

    I’ll just say it once:

    Between your ‘fools, fools they’re all blind fools or parasites’ frontier ideology and the uncontrolled super greedy, crafty usurers locked onto your collective back (comprised 90% of you know who and caring squat about America the nation)…..

    you’re f****d and you know it.

  68. jeff Id said

    Steve,

    Don’t call my neighbor a parasite, what a dick move. He’s legitimately unable to work and one of the best neighbors I’ve had. Universal health care is stupid because you lose any control over your own needs. Universal health care already exists here, it’s just that they want to collect money after the service is performed. Peoples assets get seized, lives get reset. These situations would happen a lot less if liabilities and regulations didn’t force a broken leg with surgery here to cost 90,000 USD. Of course you don’t know that either right?

    ‘My’ Empire has been coopted by the big corporations and banks you referenced. Bush and Obama are right in the middle of it. The corruption is killing us, not the capitalism. You have made a convincing case that you are without any understanding of why this country was the powerhouse it was, it has little to do with government help.

    Frontier ideology is a euromyth, super greedy is a leftist myth, crafty userers are the problem.

    We are all people, all we need for bulk sucess is opportunity to do what we individually think is right. Limited safety nets, limited interference, and limited government control are the keys we all need.

    The successes of the United States of America has proven this fact. The media and leftists, have nearly won the war of propaganda that has confused so many. Believe what you will, I’ve changed few minds here but the reason were f****d is not what you describe.

  69. jeff Id said

    Oh yeah, BTW, if the guys on poverty incomes have big screen 52 inch LCD’s, why would you call that rich? It is just a damned TV.

  70. kim said

    Oooh, he talks like a ‘rough man’. Wonder can he walk the parapet?
    ==================

  71. Sam said

    Strange how amongst all the ultra right wing, ‘my neighbour is a rich 30 year parasite’, ‘Von Mises and Hayek have it right’, ‘universal health care is a stupid concept’ ‘US health care leads the world in every way’ blah blah blah chest beating BS here there ain’t any complaints about the long standing insane over-spending of the US state on arms, esoteric military technology and overt and covert warfare, propping up dictators etc.

    Of course if you believe that your poor decaying empire has to remain armed to the teeth to the very end to fight off all the ghosts in your closet there ain’t gonna be much left over for anything else.

    I’m sorry, but you clearly don’t have a good understanding of different political views. You lumped Mises and Hayek in with “Ultra right wing”, which is absolutely untrue.

    It isn’t left versus right, it is government control versus individual control. Should I be able to make decisions for myself, or can government legitimately make decisions for me (even against my wishes)? Both the left and the right want government to make the decisions, they simply differ on what those decisions will be. Libertarians want individuals to make their own decisions. I’m a libertarian, which you can’t fit on your silly left-right spectrum.

    I can’t speak for anyone else here, but I believe some other TAV commenters are libertarians, and they probably have an issue with the large military also. But simply claiming that military spending is a problem doesn’t make the other problems go away.

  72. Jeff Id said

    Sam,

    I also just want to have the govt. leave me alone. Spend less on military and everything else and I’m happy.

  73. Amabo said

    Steve lives in a mindset that can’t accept the existence of people who are against government spending on both social programs and military industry. It’s a common mindset, but one of the few things that are worth changing and must change in order to get a rational economic philosophy going. (rational economic philosophy being synonymous with austrian economics.)

  74. DeWitt Payne said

    We’ve tried drastically reducing spending on defense. The results, WWII, weren’t pretty. UN peacekeepers are a joke. I’ve actually had someone tell me that he wanted to buy his own island so he wouldn’t have to pay taxes for defense. I asked what would happen if his island were attacked. He said he would appeal to the US government for protection. Like it or not, we’re the only ones willing (sort of) and able to be what passes for a world police force. I’m a libertarian, more or less, not an anarchist.

  75. Steve S said

    “The results, WWII, weren’t pretty”
    “UN peacekeepers are a joke.”
    “Like it or not, we’re the only ones willing (sort of) and able to be what passes for a world police force.”
    “I’m a libertarian, more or less, not an anarchist.”

    I’m a libertarian, more or less, but that doesn’t sound at all like libertarianism to me. That sounds like imperialism…..with dollops of that oh so typical imperialist hubris. In between the imperialist hubris and the so-called libertarian rational economic philosophy/austrian economics there doesn’t seem to be much going for you guys. Ayn Rand was such a crazy bitch.

    Have you noticed BTW how repetitiously the president, various presidential candidates, and others now insist that the US is “the greatest nation on Earth” (as they speak of the U.S. military being “the finest fighting force in the history of the world”)? That phrase should leave ash in your mouths. Does anyone honestly believe that anymore?

    However, don’t lose heart, your little empire will sleep walk on regardless for a while yet. Rome did. Just where it’s going is quite another matter. Oh and BTW it won’t last very long. Oh and BTW, Obama will really piss you and win the election! Why?

    Conventional D.C. wisdom, which Obama vowed to subvert but has done as much as any President to bolster, has held for decades that Democratic Presidents succeed politically by being as “centrist” or even as conservative as possible. That attracts independents, diffuses GOP enthusiasm, casts the President as a triangulating conciliator, and generates raves from the 95% crap US media — all the while keeping more than enough Democrats and progressives in line through a combination of anti-GOP fear-mongering and partisan loyalty.

    That’s exactly the winning combination that will produce Obama’s re-election. Consider the polling data on last week’s budget cuts, which most commentators scorned. Americans support the “compromise” by a margin of 58-38%; that support includes a majority of independents, substantial GOP factions, and 2/3 of Democrats. Why would Democrats overwhelmingly support domestic budget cuts that burden the poor? Because, “just about anything Obama does will be met with approval by most Democrats.” In other words, once Obama lends his support to a policy — no matter how much of a departure it is from ostensible Democratic “beliefs”, most self-identified Democrats will support it because Obama supports it, because it then becomes the “Democratic policy,” by definition. Adopting “centrist” or even right-wing policies will always produce the same combination — approval of independents, dilution of GOP anger, pulp media raves, and continued Democratic voter loyalty — all ideal for the President’s re-election prospects.

    That tactic in the context of economic policy has the added benefit of keeping corporate and banking money on Obama’s side (where BTW it overwhelmingly was in 2008), or at least preventing a massive influx to GOP coffers. Just look at the team of economic advisers surrounding Obama from the start: does anyone think that Bill Daley, Tim Geithner and his army of Rubin acolytes and former Goldman Sachs executives are sitting around in rooms desperately trying to prevent budget cuts and entitlement “reforms”?

    If Obama doesn’t have sufficient buckets of rat cunning, at least the gnomes who put him in the Oval Office certainly do. They well know that in the US, Only Success Counts. Not compassion, not hunger, not unemployment, not austrian economics, not private health care, not guns, not unions, not fast food, not obesity, not rational economics, not libertarianism, not….. That’s because in this little old empire Success = Money = Success = Money =……

    Y’all going to be very disappointed. But that is not the point.

    I’m also a libertarian, more or less, just trying hard to not be a dumbass. BTW, it sure helps to be on the outside, looking in.

  76. jeff Id said

    “Does anyone honestly believe that anymore?”

    Yes. And rightfully so. Our forefathers showed the way, only fools filled with propaganda spurn it. Less government, more freedom, big success. We didn’t even have a department of education until recently, it sure hasn’t helped much since. Nobody seems to remember or care.

    “Why would Democrats overwhelmingly support domestic budget cuts that burden the poor?”

    You just referred to the ‘poor’ as rich a comment ago….Perhaps a cut is in order? Perhaps the fools will listen to anything the overwhelmingly left media says.

    By your comments, you are looking in through the glass of leftist media. Keep looking and your beliefs will continue to be confirmed. I believe globally we will experience a full collapse because of US policy and you will see just how well your ‘well run socialist’ countries do. You have made one false claim after another, moving on when they are pointed out. The only thing we agree on is that America is screwed and that a 20 – 30% tax would be highly beneficial (though you think it is a tax hike instead of a truly massive cut for some insane reason).

    In the hopes that you might understand more, Obama has paid off Unions, government workers and every minority sect the government could find with the bailout money. Even Acorn which was caught scamming elections for the Democrats got big payouts. That is what happened to a huge chunk of the stimulus money not handed over to the major banks which really pull the puppet strings. His reelection will be very well funded by government dollars passed through unions, 501c’s (don’t know if you’ve heard of those) and I fully believe foreign nations.

    Any way you cut it, the thread here proves people haven’t seen through the BS. Hell, most aren’t even looking. One of my employees lectured the guy next to him on the benefits of solar power and how we’re screwed because we didn’t implement solar in the 70’s.

    Public education rocks, and that is change you can believe in.

  77. jeff Id said

    DeWitt,

    I would like to see cuts in deployment spending and increases in research (not to be shared). Nation building hasn’t been good to us and I’d like to see what happens when we turn over a government like Iraq and let them fix it.

    Leave a note on the border that if others try and take over the vacuum, we’ll do the same to them.

    It’s a harsh policy but a hell of a lot less expensive, and a lot scarier to those who don’t fall in line with basic human rights.

  78. CoRev said

    I’ve seen a lot of angst and emotion but very few actual numbers.

    Some numbers to ponder: 2011 deficit ~$1.65T. Lost annual revenues, AMT extensions loss ~$80B/Yr, Medicare Dr. pay correction ~$50B, Bush tax cuts on top $250K earners ~$82B, lost because we are not at $??? full employment revenue.

    Let’s think about this full employment issue. If we have 9% unemployment that means we have ~91% of those employable actually employed, and they provide $1.090T and $.865T revenue in 2010. So ~9% of that total represents 100%/full employment, or a gain of $.0981T Income tax and $.07785T FICA possible revenue gains for 100% employment.

    We now can calculate the deficit 1.65T-($80, $50B, $82B) – ($.0981 + $.07785) = $1.26205. And that’s after massive tax raises, and some pixie dust implementation to get us to “full” employment.

  79. jeff Id said

    CoRev,

    The reduced unemployment rate is false. It is going up but less people qualify.

  80. CoRev said

    OK, how do we solve the spending cuts issue? Clearly asking the Pols to decide which program and how much needs to be cut is a loser proposition. So….

    Do not raise the Debt Ceiling!

    That forces the Executive Branch to immediately prioritize spending within the available revenues, ~$2.2T. spending would include paying the principal on the treasuries as they came due. No defaults, just reduced spending.

    While the Executive Branch is Racking and Stacking, Congress will be busy rewriting spending authorizations and appropriations bills. Using that Executive Branch list of priority spending, the lowest ranks can be completely cut. all other programs will require some salami slice cuts to maintain spending in balance with available revenues.

    All of this will take ~ 60 days. Congress at this point should eliminate all income taxes, personal and corporate, and institute some form of VAT, or flat tax to make up the difference to cover the remaining high priority programs. That will eliminate most of the sweet heart tax deals and force them to restart them in the bright light of the pain their prior actions created.

    Not raising the Debt Ceiling creates an automatic balanced budget. No amendment needed.

    There’s more, but that is the gist of how it could be done.

  81. CoRev said

    Jeff, the unemployment rate was there just to make the point that the difference of full employment doesn’t make that much difference in increasing revenues.

    The bottom line is we can not get close to a balanced budget by raising taxes and relying on improved economic conditions. The other common claim is we need to stop spending on the wars, and even that only takes ~$100B off the deficit.

  82. Steve S said

    “I believe globally we will experience a full collapse because of US policy and you will see just how well your ‘well run socialist’ countries do.”

    Once again hyperbole and exaggeration:

    (1) There will be no ‘full collapse’ because of ‘US policy’. That is just yet another example of US-centric hubris. There are many affluent and developing countries which do not rely on the US economy for anything of any great importance. Most of the world’s IT moved offshore years ago. The US doesn’t even have large strategic reserves of anything such countries need, not even gold. Maybe I forget helium ha, ha. A few well used space shuttles? Guns? SUVs? Tasers? Iphones? Sure Canada (only 34 million) may get stressed out by refugees streaming into Canada. Sure Mexico may have to cope with forced deportation into it of millions of non US citizens. But most of the rest, China, Brazil, India, Australia, Western Europe, Russia etc., aren’t really going to lose their shirts or their sleep any time soon. haven’t you noticed that the US consumer and US industry became a side issue some time back? You’ve only got millions of over paid accountants left to export. Unfortunately the rest of the world knows how to add up.

    (2) Note I never used the term ‘socialist countries’. I simply described so-called social democracies such as most of the developed nations outside of the US (e.g. Canada, Germany, Sweden, France, Switzerland, Australia, Taiwan, Japan, etc) where there is no need to fudge the numbers of real unemployed, nor the numbers of real people below the poverty line, where ‘food stamps’ are a ‘what’s that?’, where the state sets a minimum wage and provides at least a reasonable level of basic health care in return for taxes collected. And where I might add the local currencies are generally rising strongly against the US dollar.

    No, for a true ‘full collapse’ you are really going to have to pray that something like this:

    http://www.stratfor.com/analysis/20110420-dispatch-truckers-strike-shanghai

    gets out of control.

  83. Jeff Id said

    Steve, The reasons for the strong rise against the dollar are well described in the McKitrick link left above and have not one bit to do with the need for raising taxes. I fully believe the US is in big trouble and am quite certain of that trouble’s origin. You have confused and blended a bunch of issues and sit there and mock us as the crooks destroy our lives. Good for you but this is about our lives. I also have a good idea what the solutions will be when our currency collapses and you would be foolish not to worry.

    I believe the world will be surprised as to just how global the problem will be when it happens and just how bad it will be for humanity in general when our country’s hard won freedoms are destroyed. Of course if we were to experience the most massive tax breaks for business in my lifetime – which you accidentally proposed as increases, change the rules to allow businesses to operate here profitably and we were to further slash the size of our federal government by even 30%, the whole thing would turn around.

    In my opinion, that ain’t happening without a collapse. We’ll see if people figure it out before the next election round but there is little evidence of any new-found wisdom in the polls.

  84. RB said

    McKitrick in his eagerness to apportion blame to the Dems perhaps forgot to blame Reagan also for the mess, but that is understandable. There is the conservative party line to play up to. There are higher quality analyses of Fannie/Freddie by first-tier economists such as here which concludes that the most egregious problems were not caused by Fannie/Freddie. The most egregious problems were caused from 2004-2007 by private sector lending companies not bound by any CRA regulations.

  85. Jeff Id said

    RB, In my opinion the big banks are in far too much control of government and there aren’t any clean political parties on this. That schemes can transfer from one administration to the next is frightening by itself. Money drives the world and a few are driving the money.

    Calling Krugman first tier or even hinting that McKitrick isn’t is a bit painful on a nice Friday morning though.

  86. Neil said

    Jeff, I pretty much share your view that not much will happen without a collapse. The financial crisis has stretched government (our collective) balance sheets around the world. Another shock in a short time will not be so easily dealt with. I have been reading up on work about the effects of the size of government on economic growth, and putting aside that economics is a bit like tree ring analysis when it comes to hard cause and effect, there is a strong inverse relationship between the size of government and economic growth. Too often (always?) government size is compared relative to other current governments. This hides the absolute change in the size through time. So we get analysis that says we (insert country name) are about the OECD average, so we are okay. Ignoring that 30 or 40 years prior when growth and productivity we increasing quickly and higher that the size of government was 20%,30%. 50% etc smaller.

    Too often this debate falls to discussions about social safety nets, especially where I come from (but I live outside my country temporarily). Again people forget that once upon a time these nets were means tested or last resort, whereas now they are universal and that really matters. Incentives matter and changing some of these policies after decades is hard on the people who are caught between them, but they just don’t work in a dynamic sense or are unaffordable or both. But really, I pay three times the average pre-tax household income in tax in my country, I have access to universal health care, free quality education, but I have health insurance and my son will go to a private school. Why, well the universal health care uses queuing and although I live in a wealthy area the state high school is not good. On the flipside after state subsidies most middle to low income people don’t pay tax. But why not just make the bottom tax rate zero. Why suffer the dead weight loss of government re-distribution, why create a monster government, why remove the very incentives that are needed to increase the wealth of the whole country.

    I don’t have a problem with paying the tax that I do, I just have a problem with the size and cost of the government and the stupid policies that require such a government. We all know the problems with monopolies, but few people think about the fact that a government is just a mega monopoly!

  87. RB said

    Jeff,
    I know you dislike Krugman, but I have seen numbers elsewhere and McKitrick is, by far, not even on the same plane as Jim Hamilton , who can hardly be called a member of the liberal mafia. Krugman makes a good point that the big explosion in Fannie/Freddie was an outcome of the disintegration of the role of the thrifts after the S&L crisis. Better real-world analyses includes the ability to handle nuance.

  88. Jeff Id said

    Neil,

    Incentives are the key. Why remove the very incentives that are needed to increase the wealth of the whole country? – well said. That is exactly the issue at stake here.

    When everyone shares equally, we have seen the result of that policy enough times in this world. We have also seen the opposite extremes in the US when business was allowed to pay whatever it wanted to workers. Recently, we have seen the extremes of CBA and the effects that had on US business as well as the quality of work to be had from unions. They are all similar problems and all to do with the balancing of incentives.

    If I work 90 hours a week and someone sits intentionally on 2 years unemployment (very common here) and our potentials for outcome are the same, which should I chose? Again, it sounds extreme but that is what the corruption will leave for us all. I have met many people through my business who have sat on the government checks for the full extent.

    Incentives of elected government officials rarely align with the best path for the people.

  89. Jeff Id said

    RB.

    “Better real-world analyses includes the ability to handle nuance.”

    Like the ‘nuance’ of whether throwing out disagreeing data might be a problem? After the climategate comment, Krugman is a demonstrable tramp for whatever political cause he wishes to support.

  90. RB said

    Jeff,
    you bring up a good point that I also make to people who say “Freeman Dyson said this, Hal Lewis said that.” In the sphere of economics, McKitrick’s contributions are substantially smaller than Krugman’s.

  91. Sam said

    In the sphere of economics, McKitrick’s contributions are substantially smaller than Krugman’s.

    Really? How has Krugman contributed to the economic field in the last decade?

    He has written books and NYT articles, there has been very little actual contribution to economics. His main contributions were made decades ago. He has recently become more and more a Democratic Party cheerleader.

    His Keynesian economics are also substantially flawed, but that’s another story.

  92. Jeff Id said

    Dyson hasn’t made any statistically demonstrably false comments with intent. At least to my knowledge.

  93. CoRev said

    RB said: “In the sphere of economics, McKitrick’s contributions are substantially smaller than Krugman’s.” Please provide objective metrics for this subjective statement. Amount of press is not one.

  94. RB said

    OK, this is Krugman fest now. Enjoy!

  95. DeWitt Payne said

    The thing is that it wasn’t just a housing bubble, there was a bubble in commodities as well. Copper is still booming. There was a temporary collapse in 2008, but the price now is even higher than at the peak in 2006 (or whenever). It’s likely that if Julian Simon had made his bet on the prices of copper, chromium, nickel, tin and tungsten with Paul Ehrlich in 2000, he would have lost. CRA, Fan/Fred and unregulated private banks don’t explain the commodities boom. The Fed pumping out too much money fits a lot better.

  96. RB said

    Securitization was at the heart of the crisis too. Philippon says that this was due to the needs of financing the IT revolution . There is also a high correlation with deregulation in the financial sector that in Philippon’s words “unleashes creativity and innovation and increases demand for skilled workers” . The securitization infrastructure probably was a happy confluence with easy Fed money and the “Greenspan put” and the search for yield.

  97. RB said

    Further out, there are other theories such those described here and here that claim that this was all but inevitable.

  98. RB said

    Jeff probably agrees with this line from “The Fourth Turning” in the first link above :)

    Around the year 2005 [give or take a few years], a sudden spark will catalyze a Crisis mood. Remnants of the old social order will disintegrate. Political and economic trust will implode. Real hardship will beset the land, with severe distress that could involve questions of class, race, nation and empire. Yet this time of trouble will bring seeds of social rebirth. Americans will share a regret about recent mistakes – and a resolute new consensus about what to do. The very survival of the nation will feel at stake. Sometime before the year 2025, America will pass through a great gate in history, commensurate with the American Revolution, Civil War, and twin emergencies of the Great Depression and World War II. Why, maybe Bush’s economic advisor, Greg Mankiw too .

  99. RB said

    Forgive the spam, but Freeman Dyson says not to despair .. yet …
    To conclude this piece I come to my third and last heresy. My third heresy says that the United States has less than a century left of its turn as top nation. Since the modern nation-state was invented around the year 1500, a succession of countries have taken turns at being top nation, first Spain, then France, Britain, America. Each turn lasted about 150 years. Ours began in 1920, so it should end about 2070. The reason why each top nation’s turn comes to an end is that the top nation becomes over-extended, militarily, economically and politically. Greater and greater efforts are required to maintain the number one position. Finally the over-extension becomes so extreme that the structure collapses.

  100. kuhnkat said

    Just a short wake up to all those who think the nominal tax rate is the total tax story. There are excise, state and local taxes on all kinds of transactions, fees… Anyone want to hazard a guess as to how much a large corporation pays outside of that federal income tax?? How much they pay in matching unemployment and social security taxes (that have been stolen by politicians to finance their contributors and constituents unending desire for handouts) taxes yadayadayadayada….. You have to consider that many of the exemptions and loopholes were written into the laws to coerce the businesses and individuals to act the way the gubmint wants them to act. So, who has really created the total mess of our economy?? Greedy individuals voting for the crooks promising unreasonable handouts mostly. That includes those who think we can go to war to support our ideals without a cost in more than direct dollars.

  101. Steve S said

    Nice to know a day can arise on which I agree 100% with Kuhnkat.

    Taxation in both practice and theory is a complete mess in the US and in most other countries.

    That is why we should go back, for the Fed, to a flat rate of true income tax across the board with no exemptions mandated by law.

    That would eliminate all the special interests and endless class warfare. The legislature should only have the power to only vary the rate depending upon the current political consensus in the lower house on what the Fed needs to be doing but should have no power to grant exemptions, variations, tax subsidies etc. That would largely eliminate pork barrelling, etc. The Senate then becomes a true house of review as the Founding Fathers intended.

    A real democracy should mean equal commercial rights for every individual and every corporation.

    The states should only be allowed to extract e.g. a flat rate sales tax, again with no exemptions, and be forced by law to apply it to everything. That would force the states to compete amongst themselves for commerce.

    A democracy should mean equal commercial rights for every individual, every corporation, every province, every state, every municipality etc. I believe Margaret Thatcher was the only politician to perceive that point accurately.

    That’s libertarian!

  102. Anonymous said

    With no warranties or representations I provide a link to the attached paper on, “The Inequity of Progressive Income Taxes”.

    http://kiphagopian.com/

    Still need to look at the other side too, government spending!

    Neil

  103. Steve S said

    How the Gnomes of Wall Street bilked the US government through the crash of 08/09 and why we don’t deserve any government that is so frickin stupid:

    • In the 1st quarter of 2008, JPMorgan Chase had an average of $1.2 billion in outstanding Fed loans with a 2.1 percent interest rate while it held $2.2 billion in U.S. government securities with an average yield of 4.6 percent.

    • In the 4th quarter of 2008, JPMorgan Chase had an average of $10.1 billion in outstanding Fed loans with a 0.6 percent interest rate while it held $10.3 billion in U.S. government securities with an average yield of 1.7 percent.

    • In the 1st quarter of 2009, JPMorgan Chase had an average of $29.2 billion in outstanding Fed loans with a 0.3 percent interest rate and held $34.6 billion in U.S. government securities with an average yield of 2.1 percent.

    • In the 2nd quarter of 2009, JPMorgan Chase had an average of $7.6 billion in outstanding Fed loans with an interest rate of 0.25 percent interest. Meanwhile, it held $34.6 billion in U.S. government securities with an average yield of 2.3 percent.

    • In the 1st quarter of 2008, Citigroup received over $5.2 billion in Fed loans with a 3.3 percent interest rate and held $7.9 billion in U.S. Treasury Securities with an average yield of 4.4 percent.

    • In the 4th quarter of 2008, Citigroup received $15.8 billion in Fed loans through the Fed’s Primary Dealer Credit Facility with a 1.2 percent interest rate; $11.6 billion in Term Auction Facility loans with a 1.1 percent interest rate; and $4.9 billion in Commercial Paper Funding Facility loans with a 2.7 percent interest rate. It simultaneously held $24 billion in U.S. government securities with an average yield of 3.1 percent.

    • In the 1st quarter of 2009, Citigroup received over $12.1 billion in Fed loans with an interest rate of 0.5 percent while holding $14.3 billion in U.S. government securities with an average yield of 3.9 percent.

    • In the 2nd quarter of 2009, Citigroup received over $23 billion in Fed loans with an interest rate of 0.5 percent while holding $24.3 billion in U.S. government securities with an average yield of 2.3 percent.

    • In the 3rd quarter of 2009, Bank of America had an average of $2.9 billion in outstanding Fed loans with an interest rate of 0.25 percent while purchasing $23.5 billion in Treasury Securities with an average yield of 3.2 percent.

  104. [...] Ugh! « the Air Vent [...]

  105. Pete H said

    Jeff.
    Interesting to come back ad read the comments after a few weeks. Back up at #45 I mentioned the triple A rating and the US. is now looking very shaky with regards to its credit rating.

    http://www.telegraph.co.uk/finance/financialcrisis/8663287/Why-the-credit-rating-agencies-are-keeping-a-close-eye-on-the-US.html

    Some heads need knocking together very soon Jeff!

  106. isis solar said

    isis solar…

    Ugh! « the Air Vent…

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