Where Is The Budget Problem?

OK, we’ve got a US Government that is trying to figure out why spending $1 Trillion you don’t have isn’t making them more wealthy, and they are arguing over whether cutting that by nearly nothing, or almost nothing, is the better “fix”.

Someone needs to give them a clue. So I guess it might as well be me.

First off, how serious is the increase of the deficit? How much “short” are we?

(All the revenue charts here are made from the web page at this site:

http://www.usgovernmentrevenue.com/downchart_gr.php

while the expenditures are from the web page at this site:

http://www.usgovernmentspending.com/obama_budget_11.html

Their charts look about right to me, but if you want to dig into the details of how the charts are made, that’s where you go.)

US Deficit FY 1950 to FY 2016

US Deficit FY 1950 to FY 2016

OK… The deficit is how “short” we are at the end of the month… so we find we’ve been putting it on the credit card pretty steady other than a short “blip” about 1998-2002. Just the last couple of years of Clinton and the first couple of years of Bush Junior. Then those “horrible Bush Tax Cuts” hit (along with that giant increase in entitlement spending for the drug gift plan and deficits shot up to… about where there were before… with 2007 / 2008 indistinguishable from prior years. Guess it’s not the tax cuts… But look at that spike in 2009 / 2010. What happened then? Oh, yeah, “Porkulus” the Congressional Gifts and Graft fund… So we dumped an extra $Trillion on “Friends of the Democratic Congress”, nationalized the car companies and a few banks, and generally screwed around with the economy… So now our annual deficit is about $1.4 Trillion and we’re looking at that level for a couple of years, eventually dropping down to “only” about $600 Billion per year for eternity after that… about 3 x the prior annual average. Um, I don’t think that is going to work…

OK, and as our deficit has shot up, post Porkulus, did we cut back the spending, or increase it? (This chart starts in 1996 rather than 1950 so we can get a close look at the spending ramp recently).

US Spending FY 1996 to FY 2016

US Spending FY 1996 to FY 2016

Well. On a $3 Trillion plus expenditure, that extra Pork hardly shows up at all. Looks like a pretty clean exponential to me. (Perhaps parabolic… hard to tell with that Stimulust Blip in it…)

At any rate, clearly part of the problem is that spending spiked up. But it also looks like a bit of a droop in revenues, too. Perhaps there would be a clue if we looked at the revenue side.

Revenue, Total & By Parts

US Total Direct Revenue FY1950 FY2016

US Total Direct Revenue FY1950 FY2016

Yup, by golly, there’s a “dip” in the revenue. And while there is a tiny little dip in 2004 / 2005 from those “Nasty Bush Tax Cuts”, revenue clearly shoot up after that. Looks like they were not the problem after all… In fact, looks to me like the $1.4 Trillion shortfall is about the same size as what looks like a $1.3 Trillion or so drop from 2007 to 2009. (The chart ends in 2016 so you can see that 2015 and 2016 come after the 2015 ‘pip’ on the legend. That makes 2005 the bar just to the right of the 2005 legend pip and 2007 the revenue high point).

OK, that puts us back at about the same “national revenue” as in 2004. Life was pretty good then, and I don’t see why that would constitute a Horrible Crisis, but then again I don’t understand a lot of things politicians get excited about…

So what happened in 2008? Oh, yeah, the banking crisis. Followed by 2009 and 2010 recession. Plus a load of socializing industry, The Fed printing money like crazy, and a generally hostile business environment. Maybe that’s a clue…

But we’ll look at some other revenue sources and see what they are showing.

US Ad Valorem Taxes FY1950 FY2016

US Ad Valorem Taxes FY1950 FY2016

Rising in a nice exponential. “Ad Valorem” is an “according to value” tax. Basically a VAT or sales tax on specific things. What, you didn’t think we already HAD a national VAT or sales tax? Does “excise tax” ring a bell? How about all those taxes on mineral extraction? About a $Trillion of them each and every year already…

US Fees And Charges FY1950 to FY2016

US Fees And Charges FY1950 to FY2016

Well, Fees and Charges are continuing to rise nicely… You know, things like paying a fee to use the National Park that you already paid for in your taxes and already owned to begin with…

US Social Insurance Taxes FY1950 to FY2016

US Social Insurance Taxes FY1950 to FY2016

This is all those Social Security Taxes that both you and your employer get to pay (yes, you BOTH get to pay and pay and pay… ) along with a variety of other taxes paid for other kinds of “social insurance”. They, too, don’t account for it… Yes, they have dipped a little, but not much really. Though it does give a bit of a clue. When folks are out of work, those taxes don’t happen. Work? Increase wealth? Make money? Business? Hmmmm…

US Business and Other Taxes FY1950 to FY2016

US Business and Other Taxes FY1950 to FY2016

Well, this is the last chart of all the selections available. I presume that they account for the bulk of the total government income and perhaps even all of it. And on this chart we see a spectacular “belly flop” in revenue.

It drops… about $1 Trillion. That is the “Lions Share” of the “issue”. So what we’ve done is basically drive business out of the country with high taxes and Sovereign Risk (all that “nationalization” and “tax the rich” stuff) and those that have not been driven out of the country or out of business have started making losses instead of profits so have no profits to tax.

But don’t worry, the Budget Office is projecting a nice recovery in business growth and profits just next fiscal year… Oh, what’s that you say? They moved to China? Some are just out of business and gone? Small business is being crushed by inflation in the prices of gasoline and raw materials while a broke customer is cutting back on what they buy? Not having a job making it just a tiny bit hard to buy things…

Oh… You’d like to get back to me on that? I see…

And even WITH that projected business recovery, the projected DEFICIT stays high at $600 Billion / year?

Oh… I see…

In Conclusion

We don’t have a revenue shortage. 2004 was a very nice year and there was plenty of money to run the country and even fight a few wars along with add a major drug benefit plan to the expenditure side.

We do have a recession. But it is one that is showing no signs of ending. A tapped out consumer without a job is not going to get the economy moving with demand-pull, and government spending on horridly wasteful Stimulus of the politically connected Cronies is not going to create new markets and new wealth creation.

Being under threat of increased tax burden is not going to lead companies to hire more people. Having higher medical taxes to fund the health care of each new employee does not make them more attractive. Taking $Trillion of government money and giving it to the competition does not stimulate growth in the widespread industry of the nation; then saying you need to either extort that $Trillion from those same business owners (either as a business tax or as a tax on the owner personally) does not encourage them to be “liberal” in their spending or investing in new businesses. The alternative of borrowing it from China and mortgaging the future while printing money like crazy to “tax the savings in dollars” held by everyone with a dollar denominated account (via inflation) breeds a different kind of fear. And no business likes to invest in new facilities nor hire new employees in a climate of fear.

Basically, Government has cooked the Golden Goose and there are no more eggs.

If you want a recovery of the economy, stop being piggish and stupid. Create a climate where bond holders do not fear having their money taken (either by nationalizing as in GM, or by inflation as in every other bond holder) so folks will invest here, rather than stuff it into Swiss Banks. Cut the corporate tax rate (so we’re not one of the absolute highest in the world) and stop making it insanely expensive to hire a worker. Not just in actual wage and benefit terms, and direct taxes, but also in terms of work place regulations. The wall chart of “legally you must inform” has grown to about 3 feet by 4 feet of very tiny type. Every one of those represents a tremendous burden on an employer, especially a business of just a half dozen employees. That I had to have one to inform me of my rights as a one man consulting company was just insanely stupid. Then start cutting back the liability burden. A company can be sued for, and forced to pay, $Millions for having a bathroom that isn’t the right kind or a counter too high for someone in a wheel chair to see the food. (A real case against a Mexican restaurant…)

In short, get the hell out of our business.

Then we will start doing business again.

Until then, all the boot on the neck will do is drive more money to places where investment is appreciated and where the currency is sound.

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
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46 Responses to Where Is The Budget Problem?

  1. Nigel Brereton says:

    The amazing thing about the comments you made within this article is that if you replace the dollar with the pound you have an identical situation here in the UK.
    The ‘Big Society’ agenda that is being touted by our government boils down to the basic premise that someone has to be in control of everything. There is no room for logical thought or common sense everything has to be controlled within legaslative borders. Free market trade has existed for centuries without such tight intervention from bureaucrats whose intervention only serves to stifle or control growth.

  2. David says:

    I see spending, deficit and revenue. The revenue does not appear to equall the deficits? (It looks like the “total revenue” is adequat to cover the expenses?) It also looks like total revenue is too high of a percentage of GDP?I must be missing something.

    As they increase taxes I am afraid they will be pulling more and more income from the business “profit” source.” Between that, higher energy costs, and an eventual non voluntary intrest rate hike, this recovery may be short lived.
    This, plus pension and medicare deficits, as well as the fact that an increasing percentage of revenue is coming from govt jobs vs the private sector is all coming together in a not so pretty fashion.
    State fees have gone through the roof, at least here in Calif, so be careful when driving, the fines are huge. Imagine the poor $14 per hour guy working three days to pay one citation. This, as well as inflation and the energy green tax is a monetary burden that strikes the little guy with a very un-progressive equal force.

  3. David says:

    Just to emphasise the point. The individual saving rate has dropped to a low level. As this happens every additional dollar pulled from that individual, via taxes, fees, and govt green energy expense, has a far greater likelhood of meaning a reduced dollar spent on any private business, resturant, home project, new car, etc. The frugality of the 08 recession may be a spending spree compared to what can be done when an individual discriminates between real necessities and unnecessary necessities. We are near the bottom of any saving buffer, we have no where to go with interest rates, further stimulus may cause the dollar to be abandoned and force interest rates to rise, the international economy and the poor can not afford food with inflation, the bag of tricks is old, worn, and nearly empty.

    Getting the “hell out of business” as well as an energy policy such as you have described could work, save the day, but everything appears to be going in the direction of the progressive left, a headlong run of billions of souls into dependency on governments, a dependency of needs that government simply cannot fulfil.

    I grew up next to a single Mom, her children could do no wrong, everything that happened to them was not their fault. All three boys are now in prison. Our goverment is becoming more and more like that enabling mother.

  4. mt says:

    It looks like you’re comparing revenue for all levels of US government against the spending/debt of just the federal government. Total direct revenue numbers in your chart are higher then federal spending numbers. Business taxes are very low at the federal level, as are the ad-velorum (combined about 10% of revenue)

  5. I agree with your conclusion, “Basically, Government ‘has cooked the Golden Goose and there are no more eggs.”

    Was the demise of Western economies by design?

    I do not know. At a public gathering at the National Academy of Sciences on 26 June 2008 I asked Dr. Cicerone, Congressman Alan B. Mollohan (Chair of the Subcommittee on Science for the House Appropriations Committee), and the members of the Space Science Board:

    “Why did UN’s Intergovernmental Panel on Climate Change (IPCC) – and US federal research agencies like NASA, DOE, NOAA, NSF, etc. – work together to promote this web of mis-information:

    • CO2 from the tail pipes of Western economic engines caused global warming.

    • Earth’s climate is immune from the cyclic changes in sunspots and solar activity.

    • Hydrogen fusion in the Sun bathes planet Earth in a steady and unchanging flow of heat.

    • Solar neutrinos from Hydrogen-fusion in the Sun oscillate away before reaching our detectors.

    I do not understand the motives, but these actions damaged the reputation of space science and wrecked havoc on our economy by promoting the illusion of anthropologic global warming.”

    I did not receive an answer.

    With kind regards,
    Oliver K. Manuel

  6. pascvaks says:

    Vote for cost and tax cutting accountants with butcher knives NOT lawyers in 2012, and 2014, and 2016, and.. ad infinitum…. or buy a gun and get ready for another Civil War. (Seems we kind’a need to reboot the mainframe every 150 years or so;-)

  7. R. de Haan says:

    Oliver K. Manuel
    “I agree with your conclusion, “Basically, Government ‘has cooked the Golden Goose and there are no more eggs.”

    Was the demise of Western economies by design?”

    http://green-agenda.com

  8. R. de Haan says:

    Ross Perrot, during the Presidential electon campaign in 1992 was very clear about one of our biggest problems, the export of jobs and the decline of wages: http://wattsupwiththat.com/2011/04/12/californias-giant-sucking-sound/

    Last week, hardly reported by MSM we had the Bretton Wood 2 meeting sponsored by George Soros.

    The subject: “Crisis and Renewal: International Political Economy at the Crossroads”?
    With a mission to change the global economy in one event. http://modernsurvivalblog.com/current-events-economics-politics/government-shutdown-a-soros-diversion-bretton-woods-ii/

    In Europe country after country is going down the drain. Last week we had Portugal and Spain and the UK are next.

    With the current oil, resource and food price hikes the entire process of economic decline is only accelerated.

    The absolutely useless but increadibly costly green power investments that are pushed against all odds even if countries like the UK, the Netherlands and Germany have to eliminate their defensive capabilities (I say eliminate because that’s what it is), I can only conclude that we are dealing with a carefully planned and organized takeover.

    At Green Agenda the entire process we see today is discibed and it is called The First Global Revolution.
    http://green-agenda.com/globalrevolution.html

  9. gnomish says:

    heh- it’s only paper.
    did you ever google up how much gold there is in the whole world? calculate how many dollars that is at current prices.
    you may be very surprised.

  10. PhilJourdan says:

    OK, we’ve got a US Government that is trying to figure out why spending $1 Trillion you don’t have isn’t making them more wealthy, and they are arguing over whether cutting that by nearly nothing, or almost nothing, is the better “fix”.

    Someone needs to give them a clue. So I guess it might as well be me.

    First, I must take issue with the above. How can anyone even think that you can give an idiot a clue when they think they can spend their way to prosperity? While noble in goal, you are tilting at windmills if your audience are those that are crying wolf at the pittance just cut from the budget.

    Second, although you made the statement:

    On a $3 Trillion plus expenditure, that extra Pork hardly shows up at all.

    for effect, it clearly does show up there and is very noticeable. What tends to hide it is TARP which occurred in 2008 (last Bush year) so that the increase from 2008-2009-2010 looks linear. But if you look at the increases from 2006-7-8-9-10 it is very noticeable. The estimates are pure wishful democrat thinking as of course they are unsustainable.

    I recently read Dr. Walter E. Williams latest column calling for the erradication of the rich so we could get to a sensible discussion on the budget crises (his call was of course tongue-in-cheek). What he did in that article however was to put down in dollars and cents what would happen if we stole very penny the rich had to pay for the graft and greed of Washington.

    It barely makes a dent. Even if we nationalized all companies and stole their profilts- that amounts to a mere $400b/year. And of course what the class envy instigators fail to realize is that you can do either or both only once before you have no more rich – and no companies willing to do business in this country.

    it is not rocket science as you well know. Most intelligent people already understand this and know the current spending is unsustainable. However, your call to educate the idiots is useless. As they left their brains at the alter of their gods – socialism, greed, envy and confiscation – long ago.

    We are headed for a fall that will make the great depression look like a Sunday outing. The American people have lost the spirit to fight stupidity and lost the intelligence to realize that you cannot print money to solve your problems.

    Gold is looking a lot better every day.

  11. R. de Haan says:

    It’s the taxes, the red tape and regulations and the fact that banks have become very reluctant to finance private citizens (mortgages) and small business.

    We lack about 8 million good, well paying jobs.

    I fully agree that Government has to make a full retreat from the economy.
    But we also need a complete shift in the mentality of the banking system.
    We need cheap credits, low (realistic) energy costs and we need to steer away from the mad quest of greening our economy and the craze Government project like the high speed railway.
    In Europe the much praised French TGV hasn’t made a single Euro profit in all it’s existence.

    At this moment the US is in decline and there is no way this process is reversed with the current political and administrative leadership.

    The same goes for Europe.

    As for China which is ‘creating’ economic growth by building 10 ‘ghost’ cities every year the crash is around the corner and when it comes it will be highly questionable if the current regime will be able to control the country.

    The German Wirtshaftswunder and the incredible rise in living standards was based on value added production and spending, inland spending and exports. Made in Germany, made in the USA and Made in Japan created the uplift of millions.

    We have to go back to that concept and power the third world, our future markets instead of cutting them off.

    We have all the resources to bring progress and prosperity to all people on the planet and take care of a good living environment for everybody.

    Unfortunately the political elite has declared war on our civilizations and prosperity based on the totally insane assessment that our planet can’t support a high living standard for everybody.

    As a consequence of the strategy to curb consumption and prosperity we see a massive waste of money, resources and human capital.

    This must be stopped.

  12. j ferguson says:

    I need to be reassured that when we look at these charts, the latency is equivalent. We all know who the spenders are, but what is the delay between the commitment and the expense?

    In short, what cohort gets blamed for the overruns in 2008, class of 2004? 2002? 1996? Us?

    Clinton likes to take credit for the budget surpluses in his term, but were they his or actually the Repubs’ doing? Both?

    it could be that the latencies are washed out and I’m just confused. Isn’t it also the case that at least some of the people who resist higher taxes are mostly against how they will be squandered?

    We’ve been astonished at the largess of the Medicare program, (especially via our Advantage Plan) and the tax system (believe it or not) which both seem to expect little from us no doubt given their mis-perception of our economic situation . I think I’m getting at more sophisticated means testing, which I would welcome – assuming they don’t turn around and squander whatever they get – a possibly hopeless wish.

    In my working career, I went through some periods when the taxation was staggering, real estate (no starter castles, either), income, state, sales, etc.

    I feel a bit like a freeloader now, but maybe I’m the only one who feels this way. I’m sure most of you would be appalled at our meager current contribution, and maybe also appalled at our discomfort with it.

    We do think we earned our way into this situation and having done it don’t feel that the government (the rest of you) really owes us anything, notwithstanding that social security and medicare were touted as insurance and of course we did pay our premiums all those years.

    Does any of this make sense?

  13. tckev says:

    Maybe the only way to make money is to (counter)sue wheelchair makers for making wheelchairs too low to see over the counter!

  14. George says:

    We have a problem where the government believes it is actually responsible FOR the people and not responsible TO the people.

    Chicago schools began producing lunches that taste like cardboard, so kids started bringing their own. Now they say no lunches from home, you MUST eat the government lunch.

    The government now believes that it is responsible for the body weight of Americans. It believes that the schools are somehow responsible for the health of the students rather than the teaching of them. This is completely outside the scope of the role of a school. Schools are NOT responsible for the body weight of the students or their health outside of maintaining an environment inside the schools that is not detrimental to health.

    When government begins to assume more and more of our personal responsibility, it is going to also require more of our money. As it sticks its nose into more aspects of our lives, it will need more of our resources.

    What we need to do is get government back to its proper role in society. We do not need nor do we want a patronizing government. Government is not our parent.

  15. E.M.Smith says:

    @David:

    YUP! Not in the posting is what I’ve heard talking to some local “Small Businesses”. You know, the only part of our economy that makes net jobs and is increasing national net wealth… They are:

    1) Scared. Not going to part with a penny if they can keep it. Have no idea what the government is going to do to them next.

    2) Pissed: Seeing ever larger mountains of “red tape” and law suits that can put them out of business at any time, all to feed a welfare state, that seems them just as sheep to be shorn. I had one guy tell me flat out “Not going to do nothing to help the recovery because I don’t want to help Obama and socialism.”

    3) Hunkered down for a long painful road. When you are trying to keep the bunker safe, that’s not when you take on new risks, new lines of business, and new employees.

    4) Suffering. Business is off. Folks are spending only the minimum possible and NOT going for any extras. The tire store said more folks are coming in with near bald tires and buying the low end, low performance, long lasting cheap tires. (“Gimme what’s cheap and is gonna last”.) That is also low profit.

    5) Against creeping socialism: They saw the government take their money and give it to “friends and palls” in the Porkulus bill, bail out large competitors who ought to have had the discipline of the market instead (or gone out of business… no business is ‘too big to fail” as someone ends up owning the assetts and just swaps management) and given an endless gravy train to government workers and the unemployed. So they know who the wolves are and that they are the sheep…

    So doing more of those things does not make those folks more inclined to expand and hire.

    I snuck some of that into the “in conclusion” but I suppose it needs a bit of “why”…

    On “Unfunded Mandates & Benefits”:

    There is about $100 Trillion of “unfunded mandates and transfer payments” lurking in the wings.

    Not on this budget. Not in the deficit. Just “IOUs” our government has issued that are ignored. Future Social Security payments. Future Medicare payments. Future government pensions. Etc.

    Sadly, THIS picture is only about 1/10th of “the issue”… but I didn’t what to be “piling on” in the first cut ;-)

    Oh, and per things not “balancing”… well, that’s government for you… If any private business did their books like the government does, they would be in jail.

    There are $Billions (who knows, maybe even $Trillions) of “Off Books” things. IIRC all the recent wars have been “non-budget” expenditures. Also not in these graphs as near as I can tell are some forms of “agency bonds” and other agency indebtedness (it may be in there, I’m not sure, that’s why I said folks who care can go dig and the sites for all the caveats). So if the “Bureau of Mines” issues a “revenue bond” is is in, or out? Not clear. Then there are the Non-Government government “branches”… like, oh, The Fed. Technically, it’s “not the government”, just like Fanny and Freddie and Amtrak and all the other neo-Socialist enterprises congress has constructed since The New Deal. If Amtrak issues a bond, that’s not “Government debt” even if the government guarantees to pay it…

    So yeah, there will be “slop” in the government numbers. By design…

    BTW, I have a similar set for California “coming soon” ;-)

    Oh, and in your litany of “issues” for the average Joe and Jane, remember to add “inflation reducing the savings they have to less headed to zero”…

    BTW, my kids frequently were complemented on their good behaviour. It was great fun to watch the California Liberals with Terrible Ivan children when I would reply “That’s because when they were infants and did something bad I’d SMACK them. Spanking works.” One is now graduated Suma Cum Laude and the other is working on it… Oddly, after about the age of 2 or maybe 3, we never did need to spank again. Just the glare / question “do you want to be hit?” would be enough… Oh, and each time a spank was given, it was accompanied with a statement of the form: “Do you know why you are being spanked? You were told to stop and didn’t. What could you have done to avoid this?” or “That is a very bad thing (like a wall socket) and you were told never to stick things in it. It can burn you or kill you if you do that. You were told to stop and didn’t. What could you have done to avoid this?” Communications AND consequences. Works wonders. IMHO, congress needs a good spanking.

    @Tckev:

    Don’t give them any ideas! (Though there are “stand up” wheel chairs…).

    @mt:

    Could be. The sites are a bit, er, disjoint. Without the granularity I’d have liked.

    I’d originally intended to put in a sample state (California) but had to put it off to today).

    But the facts stay the same. Business is “at the beach” and not interested in hiring. That’s the cause of the revenue plunge.

    @R. de Haan:

    Wouldn’t surprise me. The Green Movement has fascist roots and comes directly out of the “government is good” schools of the Socialist Progressive movement. George Sorros made his first $Billions betting against the Bank of England and saying publicly that they could not fund their social programs. That is what led to the UK Pound being abandonded as the world reserve currency and his $Billions as he was ‘short the pound’.

    So, think he learned a new trick? Or is he just angling for a repeat with the US dollar and giving it a nudge with his support for The Socialist Agenda?

    I vote for “Greed and Power” over “Friendly George”…

    BTW, the banks were given 2 contradictory “orders” by their new Socialist Masters: 1) Raise Capital Ratios. Don’t do it and you will be nationalized. 2) Lend some money if you get a chance.

    So, lend and be nationalized, or “raise capital” (largely by having the government “gift” it to you in the bail out bill, then sit on it as your competition goes under… Decisions decisions…

    Generally speaking, your discription is about right. The “spend to wealth” notion (“breaking windows to make jobs”) is rampant. Folks have lost the anchor to the natural increase of wealth and real measures of wealth.

    IMHO, more folks need a couple of years out on the farm.

    There, you see pretty quick that if you want more cows, you don’t run around shooting them all. You increase the herd (wealth) slowly over time by natural increase of the wealth not eating them all… and the more you have, the faster the herd grows.

    Unfortunately, on of the major failures of the Socialist Agenda is that it does not distinguish between growing your own cows (and the pasture to feed them) or stealing your neighbor’s cows… and modern economics would count poisoning a cow so someone had to dig a hole to burry it an increase in “Gross Farm Product”…

    Oddly, Europe worries me more than the USA. That the PIGS are lining up for “round 2” (or is it round 3?) tells me they have not changed and that Germany is OK with being their enabler.

    I don’t mind re-running the (constantly failing) Socialst Experiment every few years somewhere in the world. It lets others learn from their bad example. What bothers me is that we have it happening Globally all at the same time. Europe a bit ahead. The USA at the rear. (Modulo some small libertarian country somewhere I’ve not found but to which I would love to emigrate…) China entering from the dismal land of Communism so anything else looks like a great success. All forgetting that “A little Socialism is a Very Good Thing, right up until it collapses…”

    We can take a collapse of a Nazi Germany or a USSR or a Fascist Italy, or a Red China, every so often. We can’t take
    a general collapse globally. It will be a horrific war as a result. But my theories on that are for some other, more speculative thread…

    So I find myself in the “odd position” of hoping to see Europe “Auger In” and crash spectacularly. As long as they do it fast enough for the USA to “learn from it” in time. If not, it won’t be pretty…

    Per China:

    It’s a very complex situation. They are tying to let go of central planning, sort of, and still have one of the highest rates of migration off the land in into the city ever seen. There will be times things are not coordinated. BTW, we have our own “ghost cities” too… Speculative builds that didn’t sell, and old cities in decay.

    The big problem, IMHO, is what happens when the “One Child” generation is left trying to support “2 parents” each along with their own child. IMHO, that is the SHTF moment.

    The good news for them is that they will own most of the global debt and have all the physical manufacturing capital stock by then, so they can just demand more tribute from the rest of us…

    @PhilJourdan:

    I can hope someone will “catch a clue” can’t I? ;-)

    “Hardly shows” is in the eye of the beholder. Yea, it’s a bit of wiggle, but not a giant leap.

    FWIW, I’ve seen the “take everything of the top N%” comparisions. Yeah, “one and done” and not much changes.

    What all of them forget is that “Net National Wealth” is not the same as National GDP… That is the fundamental error made. ( I think I coined the term “Net National Wealth” but I’m not sure, someone else might have done it too. But the idea is the real increase in real “goods” and not some phoney number where ‘removing a bad’ is counted as a good. In GDP if I break a window and fix it, that’ an increase in GDP. So we have a lot of folks wanting to break windows…)

    At any rate, take out the folks who can invest for growth of national wealth and you are eating your seed corn. Then you end in poverty.

    FWIW, Gold is fairly political (remember that FDR had a gold confiscation / prohibition …). I’d be more inclined to less visible things in a great collapse. Platinum coins, diamonds, works of art, pearls, etc.

    @J Ferguson:

    Latencies are not accounted for. There is a several year lag between The Fed changing rates and a full economic response. (Part of what makes running The Fed a challenge. It’s like a shower where you can turn the hot water up, but it takes 6 months to get the first feedback and a year to really feal it. Easy get scorched, then it’s a year to get too cold…)

    So yes, Clinton takes the credit for an economy he did not build. The “Housing Bubble” was started by the CRA under Clinton, but didn’t pop until the end of Baby Bush’s term. No president reaps the wirlwind he sows… (Look at FDR and the Social Security unfunded entitlement mess, showing up a generation later…)

    FWIW, yes “it makes sense”. I get a “slow boil” going whenever I see the “Hoverround” commercials pushing “power chairs” on folks “With no money out of your pocket”. Well, it comes from SOMEBODY’S pockets!

    That’s the problem with subsidy. A “free good” is not valued. Folks will get one just to see if they like it. If granny then decides she’s not interested, it goes in the garage for to the dump.

    The basic problem is that the “feel good” rule then results in a “non-frugal wealth squander”.

    And you can only have negative “net national wealth” so long before all the windows are broken and it’s cold and drafty…

    @Pascvaks:

    Frankly, if the Tea Party can not overcome the Socialist Parties of America (Republicans, Democrats, etc.) then we are toast. It’s that simple.

    The Republicans like a bit more “Socialism for the Rich” with a load of payments to corporations for things like TARP and the subsidies to large companies to do stupid things. The Democrats like more “buy votes with free stuff for the kiddies” programs (though Baby Bush got on that bandwagon with the Drug Benefit and Nixon did a load of it too with the Supplimental Security Income “gift”).

    I’ve taken a “passive agressive” approach. My son was on a full scholorship. I (partially) chose to be unemployed during that time so there would be no ‘means test’ failure. Yeah, the initial unemployment came as the California Economy augered in, but I just wasn’t all that excited about fighting for a job. I let my staff run down from 12 to just me (and THAT meant a free ride for one year as the “float” off the money I had “in recievables” came in, but my “payables” ran down to nothing). Then just didnt’ “hustle for contracts”. The effort to keep a company going was just not worth the small rewards I got.

    Net result:

    $30,000 / year (or so, I’m not really sure) of “subsidy” to my son to attend a State Funded Univeristy.

    12 folks out of work, with a huge cut in payments To the government at all levels.

    Me enjoying quality time in the garden.

    Now:

    OK, it’s been about 5 years. I ought to get a job. But frankly living a “poor lifestyle” has meant a much happier one. I look at that $30,000 / yr ( that would have taken my being paid $60,000 extra each year … that would have taken about $400,000 of net sales increase by the company each year…) and it’s just SOOOooo much easier to “accept the gift” and stop being the giver. Now, being accustomed to not being shorn, it’s much harder to decide to go back into the pen and volunteer for the shears…

    That’s the problem of the socialist enterprise. It becomes ever harder for the wealth creators to justify the effort, and ever easier for those “taking the gift” to just take more. That continues until it breaks and we start over.

    My mechanic is no longer talking about building a new shop dedicated just to transmissions. He is talking about hunkering down and maybe moving to Latin America (not to work there, but as it would be cheaper to just coast and live off his assets). Wealth creation is stopping and wealth consumption is increasing…

    Mervin’s has closed. The building has been empty for a couple of years now…

    2 local grocery stores have closed. Buildings still empty.

    A local bar with a large parking lot was demolished at the peak of the “boom” and replaced with a small shopping center. All sit empty.

    The list is a very long one.

    And it all comes from making it too much trouble to try and run a business and too easy to just line up at the trough.

    I’d much rather be running my business.

    But not with the present “rules”, or rulers…

  16. boballab says:

    EM:

    You missed one example of a VAT once removed: Corporate Taxes.

    You know those things that the left screams about increasing and even some on the right complain about GE not paying. The bottom line is you Tax the corporations they just raise prices and/or cut payroll. Either way all you did was increase the amount of money coming out of Taxpayers pockets to pay for that. If they raise prices, you pay more at the register, if they lay people off well the state has to payout more to things like foodstamps and medicaid which in turn means they want more taxes collected.

    PS. People shouldn’t be mad at GE for not paying any taxes if they followed the rules that every other corporation follows. Now if they got special rules that only apply to them because of political payoffs that is what people should be mad about, not how much or little they pay.

  17. E.M.Smith says:

    Nigel Brereton

    The amazing thing about the comments you made within this article is that if you replace the dollar with the pound you have an identical situation here in the UK.
    The ‘Big Society’ agenda that is being touted by our government boils down to the basic premise that someone has to be in control of everything. There is no room for logical thought or common sense everything has to be controlled within legaslative borders. Free market trade has existed for centuries without such tight intervention from bureaucrats whose intervention only serves to stifle or control growth.

    Nigel, that if for the simple reason that the Socialist Agenda is the same in all places, works by the same means, has the same ends, and the same consequences (though the consequences never reach their goals or ends…)

    But yes, the “control freaks” love the Socialist Agenda as it puts THEM in charge via government. They are certain that if they only had more Central Planning and Central Control they could make things ‘better’.

    What this misses is that it is impossible to controls something as complex as an econonomy (not even getting to the horridly more complex social system they wish to control) without distributed control.

    What works is to shove the decision making out to the edges with only the absolute minimum flowing ‘to the center’. Let individuals run their lives. Let individual companies plan their desitinies. Etc.

    Unfortunately, the “benefits” of central planning and control show up fairly quickly while the “deficits” and defects take longer to arrive. This gives the Fascist “Third Way” those golden early years when FDR and Progressive friends praised it. Only later does it hit the rocks and sink.

    With “nationalism and militarism” blended in, as in Italy and with added “racism” as in Nazi Germany, the crash happened spectacularly fast. (About 20 years for Italy, just about 5 for the Nazis) While the USSR took a full 50. China about the same.

    So, how long ago were Woodrow Wilson and FDR?…

    What did England do just post W.W.II ? (Then Maggie fixed it for a few years, followed by a return to trend).

    Yup, it’s that direct.

    @Boballab:

    It isn’t quite that simple. The corporation has other ways to pass on the taxes as well:

    1) Pay their providers less. Squeeze the suppiers.
    2) Cut dividends (last resort, but it happens, usually on the path to final collapse).
    3) Issue Debt. (Only works for a while, but it can be a long while. Eventually ends in bancruptcy. The “screw bond holders” option.)
    4) Bankruptcy. The “screw all the debt holders and suppliers and pension obligations” option.

    and a couple of more that are really too small to matter (like buy political relief and / or move to places with susidy payments) on the macro scale.

    The thing ALL of these have in common? Someone has a net reduction in accumulated wealth. Taxes impoverish. Not only do they not create new wealth, the discourage others from creating new wealth…

    So your point holds true, just some more ‘details’ to add…

  18. George says:

    One major problem we have is that 50% of the wage earners of this country pay only 3% of the income taxes. We should spread that burden a little more evenly. How many would vote for a tax increase if it is across the board for everyone?

  19. Earle Williams says:

    FYI, there is no more Bureau of Mines. It was abolished by Congress in 1995.

    http://en.wikipedia.org/wiki/United_States_Bureau_of_Mines

    Worked there, got the t-shirt.

  20. j ferguson says:

    I vote for George’s tax proposal. Let everyone chip in.

  21. George says:

    Well, then they went and created the Office of Surface Mining
    (silly name, who mines on the surface? Most mines dig under it)

    I suppose they decided they didn’t need both a “Bureau of Mines” and an “Office of Surface Mining”.

    http://en.wikipedia.org/wiki/Office_of_Surface_Mining

  22. j ferguson says:

    But George, it’s a government office. Did you really think they’d be interested in anything beyond the superficial?

  23. George says:

    The other problem with the idea of setting the bar of “the rich” at $250,000 is inflation can move people over that line. Unless that amount is indexed for inflation, it is a trap.

  24. Ed P says:

    The UK is screwed by the same burden of overheads on industry (imposed by the unelected, undemocratic European Union parasite) – most manufacturing has moved to China too.

    Where is John Galt?

  25. H.R. says:

    @David

    “[…] …as well as the fact that an increasing percentage of revenue is coming from govt jobs vs the private sector is all coming together in a not so pretty fashion. […]”

    People miss this point. Government employees are paid with tax dollars. You’re paying your taxes and paying their taxes. Government employees aren’t paying taxes.

    I wondered for years why the government(s) didn’t pay their employees less and then not tax them on their government salary. The answer is obvious.

  26. boballab says:

    EM:

    Lets look at your list for a second:

    1) Pay their providers less. Squeeze the suppiers.

    Really now, how are they going to be able to squeeze any of their suppliers when said suppliers just had his/her taxes raised too. Remember I worked in management for Wal-Mart (granted the lowest level, but still in management and I had to run budgets) When Coke has to raise what it charges everyone they supply more because of higher corporate taxes (and the price of it’s supplies increasing. Remember they sweeten with High Fructose CORN syrup). Corporations have already squeezed that low hanging fruit a long time ago and the the Juice is already consumed.

    2) Cut dividends (last resort, but it happens, usually on the path to final collapse).

    Not all Corporations pay dividends, as an example I know of since besides working for Walmart I am a Walmart Stockholder and that Corporation as an example does not pay dividends.

    3) Issue Debt. (Only works for a while, but it can be a long while. Eventually ends in bancruptcy. The “screw bond holders” option.)

    Again not all Corporations can play that game. Private family owned Corporations such as Koch Industries have no Bond Holders. Also in this economic climate who is investing in Bonds right now? Not too many.

    4) Bankruptcy. The “screw all the debt holders and suppliers and pension obligations” option.

    And this leads right back to Taxpayers taking it in the shorts. Again using Walmart as the example (not only because of my familiarity with it but because it is the largest private employer in the US), it really would be the company that would be “too big to fail” in DC parlance.

    Unlike GM and Chrysler which both have relatively small workforces, Walmart employs over 1 million employees (The only entity in the US that employs more is the US Government). Imagine after “restructuring” they get cut down to half size. Think what that does to the US economy and not just the direct impact of 500,000 lost jobs in one week.

    I have done this myself while working for Walmart as sales went down. You would start getting tons of price increases from Home Office when the problem was company wide and not just a store/district problem. Then you would get hiring freezes and just before Christmas a message from district telling you how many positions you have to do away with.

    So my statement about cutting jobs and/or raising prices is not based on theory but actual hands on experience as a manager. Payroll is the easiest expense for large corporations to cut. Also when they cut payroll they lower other expenses such as healthcare.

    So either way that is what you will see if you raise Corporate Rates, especially when inflation is rising.

    And on that note the Inflation rate would be 9.6% if we still used the methods we used in 1979/80 when the last time inflation went into double digits:

    Inflation, using the reporting methodologies in place before 1980, hit an annual rate of 9.6 percent in February, according to the Shadow Government Statistics newsletter.

    Since 1980, the Bureau of Labor Statistics has changed the way it calculates the CPI in order to account for the substitution of products, improvements in quality (i.e. iPad 2 costing the same as original iPad) and other things. Backing out more methods implemented in 1990 by the BLS still puts inflation at a 5.5 percent rate and getting worse, according to the calculations by the newsletter’s web site, Shadowstats.com.

    http://www.cnbc.com/id/42551209

  27. R. Shearer says:

    If one examines the “surplus” around 2000, one will find that in actuality, the federal deficit increased (admittedly not by much).

    The operating budget only showed a surplus because of favorable demographics resulted in a surplus of social security income. We are paying for that now accounting trick now.

  28. E.M.Smith says:

    @Earle Williams:

    Sorry to hear that, even if a bit late… I always liked the Bureau of Mines. They actually did things of merit…

    @Boballab:

    Yes, you can squeeze the suppliers. While you are correct that it doesn’t always work, it can, and does work some of the time. Walmart exists largly as it can squeeze the suppliers and has a lower wage rate by not having the union squeeze on it.

    Per dividends: Never said all companies would all the things all at the same time. Look, I’m not fighting you on your list of the “biggies”, just pointing out that SOMETIMES and for SOME companies, they do other things too. And “cut the dividend” is a key on in the finanical news. When a company starts doing that, you head for the door, as much of everything else is in doubt…

    Even private companies issue bonds.

    http://gatewaypundit.rightnetwork.com/2011/03/figures-wi-state-worker-retirement-system-owns-5-5-million-in-koch-industries-bonds/

    The Wisconsin Retirement System owns $5.5 million in Georgia Pacific corporate bonds. GP is owned by Koch Industries.

    Who buys them? Just about everyone. From countries to pension funds to individuals to other companies needing to park cash to…

    The Bond market makes the stock market look like a pair of rollerskates at the Indy 500… One year, $3 Trillion in sales:

    http://www.bloomberg.com/news/2010-12-30/ge-leads-3-trillion-in-company-bond-sales-as-yields-fall-credit-markets.html

    That’s $3T of corporate bonds only. Treasuries add a whole lot more on a global basis… Per Year. Note that year was 2010. Middle of the “Aw Shit”… The bond market is just staggering in size…

    Per Bankruptcy: Doesn’t mean the company has to slow down operations or lose any headcount. “Strategic bankruptcy” is sometimes used to dump pension costs on the Pension Benefit Guarantee Corp (and thus onto every OTHER company with a pension who pays the premiums into it… not the taxpayer directly). Airlines did this more or less ‘en mass’. Walmart could do it and not shrink at all. Screws all the stockholders and unsecured debt holders too, so it’s not a “first choice”, but it is a choice.

    And that is all I’m saying. There was nothing wrong with your list and it gets the “biggest lumps”. But it is important to realize there are other lumps too as those sometimes whack folks on the head.

    I got whacked for a “Five Figure Receivable” when one of my clients did a “strategic bankruptcy” (AND I still met payroll to the staff who had worked that gig…) so it’s not a hypothetical…

    In fact, what ought to have happened with GM is they ought to have gone to bankruptcy court, shed their pension costs to the PBGC, tossed their stockholders, handed the company to the bond holders, and reopened the next day…

    That the ObamaNation decided to give a “gift” to the union as their pension payout (instead of dumping to the PBGC) and screw the bondholders by only letting them have a part of the “new stock” was just a political payoff to the unions for their support. “Redistribution” of the wealth from the bond holders to the union retirement fund. It has no real impact on the viability of the “new GM”. It would have the same viability in either case. (Probably a bit more with the bankruptcy route as they would have less union say in operations and somewhat better financail posture).

    So just to be clear: YES, they would cut jobs and raise prices IF POSSIBLE. But if not, there are “other means”.

    The best example of this would be a company that trades gold in the open market. They simply cannot “raise prices”. The “price fix” happens in London. If their trading is computer driven, there are not a lot of “jobs” to cut… So you have to go looking to other places if hit with a ‘windfall tax’ and don’t have the cash…

    (Even if you have traders doing the trades, cut the trader and you cut the income in direct proportion… not going to work…)

    BTW, I knew a guy once who made a living making screws. Had a large screw machine. Would get custom contracts from aerospace firms, set up the machine, and come back next week… So, only staff was him. Can’t really ‘cut staff’ then… at least not and stay in business… competative bid sets the price, again not his to control. So you look at who is selling you your wire stock and janitorial services and …

    @R. Shearer:

    There are a whole load of “demographic issues” that are glossed over in this. The biggest is the $100 T of unfunded obligations… but others are the various bumps and wiggles of who is in what age group when.

    Right now, “Boomers” are at the end of their carriers, so paying the most into things like SS Tax. When they retire (as my eldest siblings already have) they then get the biggest payouts. That Baby Boom is headed to a giant Baby Bust… Which is why our congress critters are in a tizzy to herd more folks into the Ponzi Scheme (via illegal imigrants or via “kids must buy national health insurance”… anything to get fresh money into the Ponzi Scheme as it nears the crash…)

    Glad to see you are “digging in” to some of the details ;-)

  29. mt says:

    These should help:

    Federal Spending:

    Federal Revenue (broken down by class):

    Federal Deficit:

    For 2009, a decrease in income tax revenue (-$400B) combined with an increase in spending (+$530B) caused the sharp increase in deficit (+$954B).

    Not that I disagree with your conclusion, but business tax rates have little to do directly with federal income. The 2009 dip in income tax is likely the recession. But the current anti-business policies will delay any recovery.

  30. E.M.Smith says:

    @mt:

    Thanks, I’ll take a look at them a bit later.

    Income tax derives from companies making money and hiring people… Same room, different window…

  31. PhilJourdan says:

    George on 13 April 2011 at 10:09 pm

    The other problem with the idea of setting the bar of “the rich” at $250,000 is inflation can move people over that line. Unless that amount is indexed for inflation, it is a trap.

    Spoken like someone who has seen it happen! What most of the lemmings (the ones that are not really socialists, but listen to the siren call) fail to see is that in the end, almost all of us are ‘rich”.

  32. George says:

    The AMT is an example. It was never indexed for inflation. I got burned twice with AMT on “paper gains” that were never realized. My late wife was working for a dot-com that went public during “the bubble”. She had a large number of stock options and exercised them at the IPO price. We had to pay AMT on the difference between the option price and the IPO price even though she had not sold the shares to realize any gain. It was a tax on a potential gain that was not realized. We paid more in AMT that year than the average American makes.

    To make matters worse, the company quickly went belly-up when the bubble burst. The stock started falling in March of 2000, the company was bankrupt by September.

    The ONLY party that made anything off of that was Uncle Sam.

  33. George says:

    Oh, lookie here:

    http://www.cnbc.com/id/42582344

    The world’s banks face a $3.6 trillion “wall of maturing debt” in the next two years and must compete with debt-laden governments to secure financing, the IMF warned on Wednesday.

    I would say the bond market is about to get “interesting”.

  34. PhilJourdan says:

    @George

    What most people do not remember (or were not around to remember) was that until the early 80s, NO TAX was indexed for inflation. Thus the “70%+” rates were hitting the middle income groups.

    But even though they are now “indexed” (well, only the tax rates – nothing else), they depend on the GOVERNMENT to declare the inflation rate. Recent estimates by Gallup and others put that at approaching 10% now, yet the government says we are still at 0%!

    As for you and late wife – I heard the horror stories of that. You got burned big time. Many people had to declare bankruptcy since they could not pay the tax on the imaginary money!

    I was hit with the AMT once – during the Y2K scare. I was making money hand over fist (working 4 contracts at once – 2 of them full time), so my income exceeded 6 figures (and I was single as well). Fortunately since then, my income has backed off and I have not had to worry about it.

  35. George says:

    It is impossible for an increase in oil prices to not cause general inflation of the economy.

    For example: what product has no pigments, paints, or dyes made from petrochemicals? What product has none of the above and no synthetic fibers or plastic derived from petrochemicals? What of the above two is no shipped, flown, or trucked without petroleum fuel? Of all of the remaining from the above, what has had no chemical fertilizer or shipped with fuel that has had chemical fertilizer derived from petrochemical applied?

    If you increase the cost of petroleum, you increase the cost of EVERYTHING. Even that organic apple that was trucked to the grocery store.

  36. E.M.Smith says:

    Philjourdan:

    “Fortunately since then, my income has backed off and I have not had to worry about it.”

    That kind of sums it all up. When folks put “fortunately” along with “income reduction” we have a very broken system. I was in the “6 figure” group about y2k also. (a decade or two around that point). Strangely, being at ‘near zero’ isn’t all that much different… (Wife works now, so really it’s about a 1/2 that much instead of zero.. but still…)

    @George:

    While in much of the world “petro” chemicals are made from petroleum, they can be made from coal (the original source and what Eastman Chemical still uses) or natural gas (what Dow and Dupont like in the USA where gas is cheap) and even garbage (Rentech and Syntroleum). But your point still stands.

    “Energy” and in particular oil, underpins just about every product cost, and so price, in the market… As energy sources have some substitution, when one rises it tends to pull up the others anyway (modulo natural gas in the USA where we have found so much it just lays there nailed to the floor…)

    So oil rises, count 6 months. If it’s holding the new high, everything else will inflate accordingly. OPEC learned this in the ’70s when they jacked up prices and we cut the value of the buck apace…

    On that “wall of debt”: I’ve put the TBT trade back on as a day trade on the MACD crossover. Not yet a “recommend as a trend trade” as DMI is still saying “not so fast” and MACD is below zero… but … as interest rates rise the ‘bond short’ wins big…

    Frankly, a large part of the “Clinton Balanced Budget” and a large part of the “Bush unbalanced”… oh, yeah, “budget” ;-) was that Clinton got to ride 2 bubbles and then hand the collapse to Bush.

    1) The housing bubble: Loads of cap gains payments…

    2) The dot com bubble: More cap gains…

    Also, they had the push for Roth IRA conversions. TONS of money got taxed as it was pulled out fo regular IRAs, taxed, and moved into a ROTH. Never to be taxed again.

    Those things ended. End of a load of income to the government…

    Which of them will come back in the next year or two to “fix” the budget shortfall? Oh, yeah, none of them…

  37. George says:

    There’s no telling what it is going to look like once President Erkel is done with it.

    I am serious, I have not seen such a horrible state of affairs since Jimmy Carter. His administration was a watershed for me. I was originally a Carter supporter. I guess it was in about 1979 that things began to sour with me. I was in Europe at the time and every time Carter opened his mouth, the dollar would drop. It was getting hard to get anyone to buy US debt because the value of the dollar was falling so fast (went from about DM4.00 per dollar to less than DM2.00 per dollar in less than three years). I was getting paid in US dollar and suddenly my pay was half of what it used to be on the local economy. He froze pay raises. Then he started issuing bonds in Europe denominated in Swiss Francs because nobody wanted to touch the dollar with two ten-foot poles connected end to end.

    The whole Russian invasion of Afghanistan, hostages in Iran, Russians in Nicaragua, it was just a mess.

    I don’t know who coined the phrase “Jimmy Carter on steroids” when it came to Erkel, but they hit it dead on the money.

    On the other hand, this guy is giving us the blessing of educating yet another generation of Americans why you don’t hand the national check book to “progressives”. They are the sort that believe just because they have checks, there must be money which which to cover them.

  38. George says:

    Favorite quote so far out of this financial mess:

    “Please, nobody tell Obama what comes after trillion”. — Sarah Pallin.

  39. pascvaks says:

    Ref – George
    “It is impossible for an increase in oil prices to not cause general inflation of the economy.”

    I know there’s probably madness in my method but I tend to look at everything the other way around anymore. ie- it is impossible for an increase in general inflation of the economy to not cause everything but the value of money to go up. As I said somewhere before, our sense of value is burned into our brains at an early age. What’s the value in my mind of a candybar – $.05, of a movie ticket – $.10 (I was a Navy brat;-), of a gallon of gas – ~$.289. Said another way, what’s the value of $1.00 today? About $.05 pr less. Why is everything going up? Because the dollar isn’t worth the paper it’s printed on.

    It’s time to pay the piper and it’s going to hurt.

  40. PhilJourdan says:

    EM Smith

    That kind of sums it all up. When folks put “fortunately” along with “income reduction” we have a very broken system.

    When you summarize it that way, it is depressing. Yes, it is broken, and does not look to be fixed in my lifetime.

    pascvaks

    What’s the value in my mind of a candybar – $.05, of a movie ticket – $.10 (I was a Navy brat;-), of a gallon of gas – ~$.289.

    Sounds like you are about as old as I am. ;)

  41. Richard Ilfeld says:

    I suppose there are a few leftwing types who are true believers in a socialist economy — but I think most of the politicians have grasped the notion that the bill for a couple of generations of profligacy is coming due, and all of the traditional revenue sources are pretty well tapped out. This is why one sees proposed grand theft like taking the real assets out of IRAs and replace them with govt IOUs – ‘to keep us from losing money in the bad old capitalist market’. Lets face it, asking folks to share pain, especially if some of them are your supporters, is not a part of most political skill sets.
    On Cynical days, i think the administration has figured out if there is a “real” emergency, they can get a “temporary” “emergency’ tax (sort of like an income tax to finance a war) from a terrified congress, and not take the hit for exercising the policy that has been their desire all along.
    And there seems to be one more thing going on, that we can say is characteristic of socilaist economies. I’m also old enough to think of a Hershey bar as a nickel treat — and in my neighborhood there are lots of folks who have semi-retired from business. But the ‘stub’ is now all cash – the business form has folded up. I’ll bet there is still some younger entrapeneurship around as well, but its moved into the shadows where a dollar collected is a dollar of revenues.

    I love your site – it is one of the few that makes me think without making me mad.

  42. E.M.Smith says:

    @Richard Ilfeld:

    I suspect you are right. I forget which one, but one of Obama’s guys said something like “Never let a disaster go to waste”… so they are thinking along those lines…

    Glad you like the place. I try to keep folks from being to dark about things and from getting wound up in shouting matches and name calling…

  43. PhilJourdan says:

    I suspect you are right. I forget which one, but one of Obama’s guys said something like “Never let a disaster go to waste”… so they are thinking along those lines…

    Rahm Emmanuel, Mayor of Chicago.

    And while I respect Richard Ilfeld’s view, I do not agree with it. If the body of liberals had indeed awakened to the reality of the current spending and debt, they would not be vilifying the rich. They do so because they failed to learn life’s lessons as a child and forgot about killing the golden goose. So instead of looking at getting eggs from the goose, they are looking at roast goose for dinner.

  44. E.M.Smith says:

    @PhilJourdan:

    I saw the “few leftwing types” as true believers in spending and then a shift to “most of the politicians” as a shift to a broader group.

    So I think there is less air between your points of view than it looks on the surface. I see Richard’s statement as describing a spectrum with two points. On one extreme, the “leftwing true believers in a socialst economy” but as one passes the “average” (or “most politicians”) there’s is an awareness of “overspent”. That does not necessarily mean “against socialism”, unfortunatly… I can just mean “damn bad economy won’t let us deliver social justice yet, need to take over more banks and industry”…

    FWIW, I was on a Board Of Directors of a significant medical institution for a few years. Many of the other board members were doctors or lawyers. Every so often we’d have a financial downturn… Their answer to “revenue shortfall” was always raise rates. Little to no awareness of “price elasticity of demand”, of “investing to grow business”, or of feedback loops in general. I was the only one with a real understanding of how the economy works. It was a bit startling.

    I then thought about how our political system has become dominated by folks with law degrees… trained to argue, but not solve systems problems. Then I understood why they spend so much time talking about raising taxes, arguing over things, and never fixing anything…

  45. P.G. Sharrow says:

    Maybe they think that if they argue long enough “the little people “will fix the problem.

    I keep hearing ” this is a rich country and there is lots of money out there” an old Lindon”bird brains”Johnson line. “We just need to tax the rich, make them pay their fair share”.

    The progressives have been living on “the never,never” so long that they have no idea of reality. Only by heavily taxing the not rich can they cover this shortfall. Use the FDR and LBJ method, jack up the employment taxes.
    The Supreme Court said that Social Security was a tax and not an investment in your retirement. What the Congress gives, they can take away. pg

  46. PhilJourdan says:

    I was the only one with a real understanding of how the economy works. It was a bit startling.

    My moment of revelation came about in a conversation with my mentor (I was learning computer networks and this guy was as smart as they come). I tried to explain basic economics to him and he just did not get it! I know he was intelligent (is, we are still friends), but he had no grasp at what an economist takes for granted – i.e. the law of supply and demand.

    Once you have been surprised the first time, you learn to expect the ignorance. Your comment about lawyers and govrenment is very appropriate. And that is why we are on the fast train to ruin.

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