Will Gov't Spending Cuts Crater the Economy?

Here's an interesting discussion on austerity vs. stimulus using the UK and the U.S. for examples. The UK has opted for reduced government spending and higher taxes to get their economy back on track, and it appears to be having the opposite effect so far. Conversely, the U.S. has been on a steady diet of stimulus and is weathering the global recession far better than the UK by most measures. Is this a vindication of the Keynesians? I think Dan Gross is way off base by discounting the food and fuel components of the CPI so heavily, but I'm interested to hear what you guys think.

 

We aren't even discussing real spending cuts. The current debate about government shutdown is over a paltry 40 billion. Real spending cuts would crater the economy. People are saving a far larger proportion of their income and the best investment opportunities are abroad.

Could you imagine returning spending to its rightful place (2000 levels)?

I am not cocky, I am confident, and when you tell me I am the best it is a compliment. -Styles P
 

Govt spending is the main driving force behind the US economy now. Whether it'll lead to self sustaining growth remains to be seen. I think food/energy inflation which is DEFINITELY there is not as huge a factor relative to the other nations right now because the US is a rich country that spends a smaller proportion of its income on food & energy. Also, large trading partners are trying to prevent their currency from strengthening which is helping with imported inflation.

I think the choice right now is keep spending and hope the economy starts to pick up by itself, growth probably won't be great. Real growth at least, but there won't be too much pain. On the other hand it's let the economy crash, and restart all over again. Although I'm all for a free market, I fail to see how allowing the shit to hit the fan would help the economy recover any faster. There might be great growth after the crash, but it's from a much smaller base.

 

Inflation is MONETARY... not prices.

Krugman is a clown on anything other than trade economics.

All government spending/borrowing ends up as taxation. Taxation is a DRAG on the economy, not a boost.

Government cooption of economic functions CROWDS out more efficient private sector work.

********************************* “The American father is never seen in London. He passes his life entirely in Wall Street and communicates with his family once a month by means of a telegram in cipher.” - Oscar Wilde
 

^^^ All important points.

But our problem is far more visceral. In this country, the ultra-wealthy have figuratively and literally waged war on the middle and working class. Look at what's happening in some of the mid-western states present day. It's like watching the 80's all over again, and I didn't witness the Reagan era which is credited as the start of the end. The rich are determined to limit their tax liability disproportionately while holding our economy hostage under the belief that if they are not able to, "there won't be any jobs." Additionally, the state budget deficits that states are experiencing are somewhat the result of corporations employing creative tax avoidance schemes that aid these deficits. Guess when this started? Two words. Bush & Bush.

The reason why it's not working in the UK is because the tax increase measure has been applied relatively evenly across the board instead of making those increases proportionate relative to income levels. In the US, we are not faring any better, (undulating employment statistics engendered by improper statistical tracking, a stagnant/declining residential market, select commodity price increases, declining healthcare management industry, etc. There is nothing to be sanguine about at the moment, unless you consider that we are the best of the worst.

"Cut the burger into thirds, place it on the fries, roll one up homey..." - Epic Meal Time
 
vadremc:
But our problem is far more visceral. In this country, the ultra-wealthy have figuratively and literally waged war on the middle and working class.
This is why the Tea Party make me laugh: it's funded by billionaires who convince the middle class to act against their own interest, and honestly I put them in the same category of shitheads as union bosses. We have a genereal economy serviced by the middle class and state funded from their income tax, but let the super rich + corporations keep most of the wealth they siphon out of the system: those same interests then convert this HUGE financial windfall into a massive political power differential....and the simple fact is that they don't give a shit about the average citizen.

This is all about who the fuck is in charge, not any of the ideological left/right bullshit the pundits push to keep the average clown confused. The current political debate is so far removed from this reality that the average person can not see what is plainly obvious to someone who isn't drinking the cool aid. This whole push for 'rugged individualism' sounds nice, but the practical application is 'divide and conquer'.

Just an analogy: do you think the citizens of Egypt had any idea that their dictator had siphoned off so much wealth from the system? Do you think our leaders were not complicit? .....and do you think it's just oh so different here?

America, wake the fuck up.

Get busy living
 

The rich are waging war on the middle class? How so? Seems to me that most of the federal budget goes to entitlement programs that don't benefit the rich or middle class. Revenues have declined because people are not spending or they lost their jobs. Couple this with high fixed costs and you have te budget crisis.

Please tell me how high a tax rate should the "rich" pay. Considering that 50% and growing pay no federal taxes, how much more should the rich pay for. I suppose you don't deserve what you earn past a certain point. Ethics are flexible when you are rich.

Government spending is always the most inefficient. Anyone who thinks otherwise is a fool.

The USA provides opportunity and a safety net. If you fail, go blame yourself. This isn't Russia with corrupt oligarchs.

I have a 401k. I want corporations to minimize their taxes. Any company that willingly hands over to the government one penny more than they should is a company I won't invest in.

 
ANT:
The rich are waging war on the middle class? How so? Seems to me that most of the federal budget goes to entitlement programs that don't benefit the rich or middle class.

Way off base there, bro. The entitlement programs I think you're probably referring to are Social Security and Medicare. The vast majority of the middle class relies upon Social Security to supplement their retirement income. You can make all the value judgments about that you want, but the fact is they paid into the system all their working lives and to use a somewhat "dirty" word, they are entitled to it for the most part.

As for Medicare, it doesn't matter if you're rich, middle class, or dirt poor - if you're an American 65 or older, you're on Medicare. Simple as that.

Now, if you want to step down to the next largest budgetary outlay - Defense - you'd be hard pressed to find anything else that enables the wealthy to better rape the poor and middle class in this country. From the human capital in the form of the cadres of ghetto kids who go off to fight and die in these bullshit wars to keep the machine turning, to the actual capital that benefits only the uber-wealthy. Pretty sure you have to be an accredited investor to throw in with the Carlyle Group.

I'm no socialist, but I think we're getting close (not very close, not imminently close, but close) to the stage where the peasants revolt. And, as in every peasant revolt in the history of man (including many we're watching in real time) the rich only have themselves to blame.

 

Yeah, comparing a corrupt dictator with a business owner maximizing profit is a correct analogy. Pathetic jealousy, that is what is ruining America.

Godforbid people got a college degree, lived within their means and saved and invested. Maybe create or invent something on the side.

Naaaaa. Let's cry like a bitch instead and moan about how unfair it is that te rich are not suffering as much as everyone else. I didn't realize equality f suffering was an American right.

Get your shovels boys. Lots of sand in the vagina action in this thread. Socialist pissing and moaning up ahead.

 

^ you are the yin and I am the yan. In reality, it's a blend of both viewpoints, and it depends on where you fit in a a given point in life. Howevern, since this is a Wall Street forum, I bid you KUDOS once again.

.....and dub you the Charlie Sheen of WSO.

Rock on dude.

Get busy living
 
I'm no socialist, but I think we're getting close (not very close, not imminently close, but close) to the stage where the peasants revolt. And, as in every peasant revolt in the history of man (including many we're watching in real time) the rich only have themselves to blame.
AFAIK, a democracy has never experienced a revolt other than a revolt involving voters casting ballots. So I'm not really worried Eddie. Regardless, wars these days are pretty darned capital intensive, so the US is not really the place for people without F-16s, Stealth Bombers, and plenty of riot control devices to make trouble in.

If people want change, there's 2012 or 2014. It's a lot easier- and safer- to run a political revolt than it is to run a military revolt.

 

1- New Social Security eligibility needs to END. Anyone under-18 or born after today should NOT receive SS.

2- It should also be means tested. Buffett doesn't need his $210 cheque.

3- Raise the eligibility age for anyone between 18-45 to reflect current life expectancies.

********************************* “The American father is never seen in London. He passes his life entirely in Wall Street and communicates with his family once a month by means of a telegram in cipher.” - Oscar Wilde
 
veritas14:
1- New Social Security eligibility needs to END. Anyone under-18 or born after today should NOT receive SS.

2- It should also be means tested. Buffett doesn't need his $210 cheque.

3- Raise the eligibility age for anyone between 18-45 to reflect current life expectancies.

There's no pleasant solution since Social Security is structured as a giant ponzi scheme. If we cut off new SS eligibility then a generation will have to pay into Social Security without receiving any benefits, but if we move to gut the program, then you screw people who have paid into the system their entire lives.

It's a shitty situation which brings the 7 Ps to mind.

 
Dying's For Fools:
veritas14:
1- New Social Security eligibility needs to END. Anyone under-18 or born after today should NOT receive SS.

2- It should also be means tested. Buffett doesn't need his $210 cheque.

3- Raise the eligibility age for anyone between 18-45 to reflect current life expectancies.

There's no pleasant solution since Social Security is structured as a giant ponzi scheme. If we cut off new SS eligibility then a generation will have to pay into Social Security without receiving any benefits, but if we move to gut the program, then you screw people who have paid into the system their entire lives.

It's a shitty situation which brings the 7 Ps to mind.

No one is "PAYING INTO" Social Security!!!.... the money isn't held in a trust!!! It just flows through government revenue. It's another tax with a special little name. It should be treated like any other expense of the gov't.

Unless we reach political consensus on ending SS right NOW for all but the poorest Americans, we are incurring these liabilities which will be paid from taxes, regardless of whether those taxes get a special little line-item on your pay stub.

********************************* “The American father is never seen in London. He passes his life entirely in Wall Street and communicates with his family once a month by means of a telegram in cipher.” - Oscar Wilde
 

1) defense spending is the actual job of the federal government 2) I never once said I do not support Medicaid/care, welfare, or SSI 3) the middle class might utilize SSI, but they should and hopefully do supplement it with private savings

Honestly, I really do hope the poor revolt. Hopefully the rich will simply move assets overseas, stop hiring and then we can have a wonderful America. Basically a poor utopia.

I am indifferent. Fuck em. Low cost education, freedom to move wherever. Bankruptcy laws to protect people from too much debt. Lowest cost and ease of becoming an entrepreneur. Safety nets galore. Half this courty pays nothing to the federal government. No draft. Copious freedoms.

This place is a shithole. No chance to succeed.

Everyday I become more and more embarresed to be ab American. Land of worthless slobs.

When immigrants can come from the poorest countries and succeed using the tools we have grown up with, while lifetime Americans moan that it is t enough, you know this place is a dump.

 
ANT:
1) defense spending is the actual job of the federal government 2) I never once said I do not support Medicaid/care, welfare, or SSI 3) the middle class might utilize SSI, but they should and hopefully do supplement it with private savings

Honestly, I really do hope the poor revolt. Hopefully the rich will simply move assets overseas, stop hiring and then we can have a wonderful America. Basically a poor utopia.

I am indifferent. Fuck em. Low cost education, freedom to move wherever. Bankruptcy laws to protect people from too much debt. Lowest cost and ease of becoming an entrepreneur. Safety nets galore. Half this courty pays nothing to the federal government. No draft. Copious freedoms.

This place is a shithole. No chance to succeed.

Everyday I become more and more embarresed to be ab American. Land of worthless slobs.

When immigrants can come from the poorest countries and succeed using the tools we have grown up with, while lifetime Americans moan that it is t enough, you know this place is a dump.

ANT,

Enough is enough. Maybe you can get away with that bull-shit with junior people but I am neither your subordinate nor your peer. I’m not going to tolerate your idiocy and presumption on this particular topic. The fallacy of your argument is only surpassed by your unjustifiable jingoism of America.

Now, if you were to actually “look” at a federal budget, you would see that the largest area of spending is on….DEFENSE. You could double the amount of government spending on these so called “welfare” programs and you still wouldn’t topple the amount spent on defense. I encourage you to do your research and not rely on any major cable network to spoon feed you shit that you should have picked up in grade school. This conveniently is a great segway into another budget line item, education. Another area that our government spends more in, wants to make cuts to, yet we’re falling behind the global learning curve and again, remains a more expensive item than those “bothersome” entitlement programs.

As far as a fair tax rate? (Laugh). Economists don’t even have a fucking clue how to answer this let alone myself. Do I have a proposed solution that I indentify with at some level? Yes, raise taxes on those making over 200K. 35% is a fucking joke and most wealthy Americans even know this. Behavioral economics (again, invest in your own human capital and READ Ant) postulates that even if you raised the tax rate, people wouldn’t stop working and the economy grinding to a halt is a well-known propagated myth. Is government spending inefficient? Absolutely. But allowing the 400 richest Americans to earn more than the combined wealth of the bottom 50% of the ENTIRE US population is what? Capitalism? or “inefficiency?”

Next up, your pathetic attempt to tell people to get an education and get over their pathetic jealousy. I wrote a post a little while back that asked at what point does education stop being a ROI? How about present day. The AVERAGE debt coming out of undergrad stands roughly between 22-27K. Graduate school? Upwards of 30K. Average salary of persons employed with a graduate degree? 55K. your debt is more than your fucking salary. Couple interest on that loan and what do you have? Indentured servitude. And if I’m State University, I don’t care if you default. I get paid regardless. Government loans are fully backed so if tuition reaches 70K a year in 5 years at Public State University and I dangle the carrot of better quality of life prospects over your head long enough, you’ll be jumping up and down to do better than your “peers” and gladly accept your serfdom. No wonder people are flocking to be IB monkeys, traders etc (http://www.hbs.edu/recruiting/mba/data-and-statistics/employment-statis…). It’s perhaps the only hope they have of climbing out of a mountain of educational debt. Unless you’re rich, then who the hell cares how high tuition gets?

US big business have run amuck amid relaxed regulation and their tax avoidance schemes. Hell, even the damn education system is price gauging students. The only person screaming about her vagina is you ANT; a faux-plutocratic guard laborer wants to protect the “prospect” of her joining the ranks of the wealthy. No one said America is a horrible place to live, but let's not act as though it's utopian. I’m not one to “cyber-fight” but I can no longer stomach your wretched and misguided indignation on topics such as the aforementioned. Buckle up bitch. We can do this all day.

"Cut the burger into thirds, place it on the fries, roll one up homey..." - Epic Meal Time
 

Leta just take 100% of the money the rich make. Fuck it. I'm sure some crackhead will utilize that cash much better.

I literally could fucking throw up. I pay for my entire education. Work 60 hours a week while eventually earning two masters so I could have a good job and career, only to be continually robbed for some loser who smoked pot throughout high school. Yeah, I'm going to maximize my earnings to support some worthless piece of shit.

America. What a joke. No wonder china and India are kicking our ass. You don't see whining, ungrateful losers in those countries.

Blah.

 
ANT:
Didn't realize you felt like my subordinate. Add inferiority to jealousy.

No, I think you've been experiencing delusions of "elitism" since people are always referencing your expertise. I thought your bubble needed to be deflated a bit. Like we all need from time to time. You're a smart guy ANT, you just have a warped sense of equity and opportunity.

You remind me of myself. But with a vagina.

"Cut the burger into thirds, place it on the fries, roll one up homey..." - Epic Meal Time
 

Actually, SSI, Medicaid/care are both equal to defense.

Get your facts straight.

Also, please quote me where I said I do not support a reduction in defense spending. I've said we should reduce it countless times in countless posts.

I guess 1/3rd of my earnings is not enough. Please tell me how much of MY money do you want to steal. I'll send you a check.

 
ANT:
Actually, SSI, Medicaid/care are both equal to defense.

Get your facts straight.

Also, please quote me where I said I do not support a reduction in defense spending. I've said we should reduce it countless times in countless posts.

I guess 1/3rd of my earnings is not enough. Please tell me how much of MY money do you want to steal. I'll send you a check.

Actually, get your facts straight. Healthcare and Welfare are mutually exclusive budget line items.

And secondly, I don't want any of your money. You don't make > 200K, guard laborer.

"Cut the burger into thirds, place it on the fries, roll one up homey..." - Epic Meal Time
 

Would the economy suffer if the gov't makes drastic budget cuts? Definitely. I think the more interesting question is whether that would be beneficial / harmful for the country in the long run.

The way I see it, gov't intervention and spending has delayed the clearing of several markets (labor & housing being the biggies). Until these markets clear, we can't have a true self-sustaining recovery. So do we take our pain now or prolong it? When it comes to politicians, the answer is always to push the pain into the future which only compounds the problem.

Once the government stops propping up economic activity that shouldn't naturally exist we will hit a floor that we can bounce off of. If the gov't does not, we will slowly approach that floor anyway through a long, painful process that will be damaging to the American psyche. In that case, I think it will be harder to bounce.

 

I'm only referenced when it comes to MSF knowledge. I do not consider myself to e an expert on anything else.

Let me scale back the rage.

30% of my income goes to the govt. That is 1/3rd. How much more dude? I mean am I the only one who thinks any more than that is fucked up?

 
Best Response

Ant,

You probably know how I feel about individual income tax, and if you don't it's very simple: our country thrived for well over 100 years without an individual income tax. Corporate and excise taxes were the only taxes levied for the first 137 years of our country's existence.

So guess who got pissed off and bought the government? The corporations who were being taxed.

Today corporate taxation is an absolute travesty. It's a competition in American boardrooms to see who can fuck the people of America the longest, the hardest, and with the least amount of grease. We shouldn't even be having a conversation about what is an appropriate individual tax rate. The corporations are laughing their asses off at this ongoing debate.

Corporations (and their high net worth controlling interests) have been getting a free ride on the backs of the American people for nearly a century. It's high time it stopped.

 

The rich might not have programs like welfare or foodstamps, but they get their share in the form of QUANTITATIVE EASING. Look at food/energy markets and equity markets since the implementation of this outrageous policy. This is an incredible transfer of wealth from poor to rich.

looking for that pick-me-up to power through an all-nighter?
 
illiniPride:
How did this discussion turn to "who should pay" vs. "how much should we spend?"

They are two sides of the same equation.

"Cut the burger into thirds, place it on the fries, roll one up homey..." - Epic Meal Time
 

Yawn. Medicare/caid, when put together are about 20%, along with SSI and defense.

Wow, little cunty response. I don't make 200k, but I still pay 30%. Oh well. I don't deserve anything I work for. The government knows how to spend my money better than I do.

Hope everyone is watching this discussion. Two sides.

Me- tax at an appropriate level. Have safety nets. Let people spend what they have earned.

Other side- take more and more from people who work and inefficiently redistribute it to everyone else.

I'm sure immigrants are going to flood to this country to innovate and work hard with such a punitive tax system.

@Eddie - yeah, tax system in this country is too complicated and fucked up. I agree. Let's fix it and make the government run more efficiently. This is a totally different discussion though.

 
ANT:
Yawn. Medicare/caid, when put together are about 20%, along with SSI and defense.

Wow, little cunty response. I don't make 200k, but I still pay 30%. Oh well. I don't deserve anything I work for. The government knows how to spend my money better than I do.

Hope everyone is watching this discussion. Two sides.

Me- tax at an appropriate level. Have safety nets. Let people spend what they have earned.

Other side- take more and more from people who work and inefficiently redistribute it to everyone else.

I'm sure immigrants are going to flood to this country to innovate and work hard with such a punitive tax system.

@Eddie - yeah, tax system in this country is too complicated and fucked up. I agree. Let's fix it and make the government run more efficiently. This is a totally different discussion though.

How does ANT make up the other portion of his income to get over the 200K threshold?

As a FOX News correspondent. I never said anything about wealth re-distribution.

Shut your mouth before you talk to me.

"Cut the burger into thirds, place it on the fries, roll one up homey..." - Epic Meal Time
 

The problem with the Keynesians pointing to the UK and saying "I told you so" is that the experiment isn't quite over yet. First, we have the reserve currency, so we won't have to worry about a run on the dollar (YET). But monetary and BOP issues aside, austerity = transferring resources back to the private, productive part of the economy. I have a cousin in the UK who's been on unemployment for 20 years. His entire adult life. Whereas his sister makes bucks as a law partner, but you see where the problem is, no? As they move resources to the productive sectors of society (not saying that my cuz should be tossed on the street, but he should get used to a smaller share of the national pie if he doesn't plan on working), their fundamentals will improve more than ours.

Our stimulus goes almost straight to consumption of goods from China and Europe, commodities from MENA and LatAm. It's not like we are taking that moolah and building factories and funding world-beating research (trust me on the latter point). Did I mention all the $$$ we are throwing down the hole that is the MIC complex as well? No money for California, but plenty for cruise missiles against a country that didn't attack us.

Let's see in 5-10 years where they are and where we are. I think the next time around it will result in a dollar collapse, $15 a gallon gasoline, food prices through the roof (or shortages, if they decide on price controls), PM confiscation, IRA confiscations perhaps (look at Argentina 2000-2001) and real chaos.

 
ivoteforthatguy:
The problem with the Keynesians pointing to the UK and saying "I told you so" is that the experiment isn't quite over yet. First, we have the reserve currency, so we won't have to worry about a run on the dollar (YET). But monetary and BOP issues aside, austerity = transferring resources back to the private, productive part of the economy. I have a cousin in the UK who's been on unemployment for 20 years. His entire adult life. Whereas his sister makes bucks as a law partner, but you see where the problem is, no? As they move resources to the productive sectors of society (not saying that my cuz should be tossed on the street, but he should get used to a smaller share of the national pie if he doesn't plan on working), their fundamentals will improve more than ours.

Our stimulus goes almost straight to consumption of goods from China and Europe, commodities from MENA and LatAm. It's not like we are taking that moolah and building factories and funding world-beating research (trust me on the latter point). Did I mention all the $$$ we are throwing down the hole that is the MIC complex as well? No money for California, but plenty for cruise missiles against a country that didn't attack us.

Let's see in 5-10 years where they are and where we are. I think the next time around it will result in a dollar collapse, $15 a gallon gasoline, food prices through the roof (or shortages, if they decide on price controls), PM confiscation, IRA confiscations perhaps (look at Argentina 2000-2001) and real chaos.

You made my point better than I could. +1 SB.

 
ANT:
So wait. I vote. Are you supporting lower taxes and more government efficiency?

HAHA, of course dude, who in his right mind wouldn't?

Even when I was a broke ass grad student the IRS was riding my ass to grab every last cent out of my pittance fellowship income. If this is how they treat poor people, I thought, I wonder what happens to people who make money.

There is such an incredible amount of fraud and rent-seeking in Medicare and the MIC I can't even begin to tell you. When doctors figured out the magic formula for squeezing money out of Medicare en masse in the '60s and beyond, our doom was written. I was at a party recently with some guy with a rather marginal education but a good sense of how to get the max reimbursements out of Medicare through a chain of rehab centers he runs. Imagine that times 2,000,000 and you can see why we are so deep in the hole (putting aside the fact that Congress spent every penny out of the trust fund in real-time anyways). The MIC waste, of which I play my humble part, I can go on for days for. The days of paying $300 for a toilet seat aren't over. I'll leave it at that.

 

I'm all for tax reform. I have a friend that works for the IRS and he says they have no idea what is all in the tax code. I won't have my taxes raised one cent without a law that any extra tax revenue will go to deficit/debt reduction, period. The 50% that don't pay taxes need to start paying taxes. Incomes >$1,000,000 need a different rate staggering upwards.

My ideal tax would be the fair tax, my opinion only of course. I am all for consumption taxes versus income taxes.

 

Ok, just checking. Sometimes I doubt myself lol.

Yeah, I remember seeing my fellowship money jacked also. Sucked.

I'm all for paying taxes, but when you are continually attacked and told you should pay more and more while fewer people actually pay into the system, you get pretty pissed.

I'm going to start reporting kids truant and having their parents arrested. You want to live off what I earn, I'm going to start treating you like my child.

 
ivoteforthatguy:
happypantsmcgee:
This is a race issue. From beginning to end. There I said it.

Yeah, as a guy who is 1/32 Cherokee, I'd like all you immigrants to GET OFF MY LAND.

You can thank Jackson for that.
If I had asked people what they wanted, they would have said faster horses - Henry Ford
 

Shut my mouth before I talk to you? Wow buddy, you debate a topic real well.

You want to increase taxes on the rich for the fun of it? Of course it will be redistributed. You come off telling me how defense is the biggest line item, when in fact it is equal to the other large entitlements.

I agree with illini. Before we talk about increase taxes we should discuss waste and where the money is going to.

Oops, let me "shut my mouth"

Yah right .

 
ANT:
Shut my mouth before I talk to you? Wow buddy, you debate a topic real well.

You want to increase taxes on the rich for the fun of it? Of course it will be redistributed. You come off telling me how defense is the biggest line item, when in fact it is equal to the other large entitlements.

I agree with illini. Before we talk about increase taxes we should discuss waste and where the money is going to.

Oops, let me "shut my mouth"

Yah right .

My attempt at humor in the preceding post. Don't take it personal ANT. Just wanted to inject some humor into our convo.

And on the wealth re-distribution thing. That topic has been exhausted beyond discussion. If in terms of using that additional tax revenue to improve our public school system, develop some sort of tradeable domestic industry (loose idea) and equitably pay select groups of our public service employees, then yes. I'm all for re-distribution.

"Cut the burger into thirds, place it on the fries, roll one up homey..." - Epic Meal Time
 

To the original point, a false argument has been presented about what "Keynesian" economics is. Keynesian economics involves temporary and very targeted federal deficit spending. I think only a fool would say that you won't see the GDP increase when you throw trillions of dollars at the economy. We ALL agree with this. It's nearly a matter of mathematical certainty that $1.6 trillion in DEFICIT spending will increase the GDP of a $14 trillion economy. But this is NOT Keynesian economics. This spending is no longer temporary and it NEVER was targeted; this spending is wanton and structural. And maintaining $2 trillion budget deficits is impossible. For every $2 trillion we borrow, we will spend about $80 billion to service this debt. Over the course of a decade, this is another $800 billion in annual debt service plus a balloon payment at year 30.

Literally in 10 years the size of the national debt will have more than doubled, interest rates will probably be higher, and the rest of the federal budget will be snuffed out by debt payments with the only solution from a politician's standpoint is to raise taxes and cease spending on infrastructure.

The real comparison of Obamanomics is to Reaganomics. Reagan's economy responded with a roar, so much so that Reagan won re-election to the tune of 49 of 50 states. Most economists aren't predicting post recession growth anywhere near the post recession Reagan growth.

Array
 
happypantsmcgee:
So who is supposed to defend the populace UFO? If not the government then who would you suggest?
....exactly why I deleted that post. Military is a GOOD idea, and I was wandering off into abstraction. Truth is, modern government is to the constitution what modern religion is to the bible......
Get busy living
 
ANT:
Spend more money on public schools huh. Seems to me we are always spending more on schools with lower returns.

How much, hard figure, so we have to spend on schools?

The problem is the public school system is so diverse that there is no solution other than scrap it and come up with something entirely new based off of a charter school system. Of course with the teachers union that will never happen its just a cycle of gimme gimme and no I wont work any harder or smarter, same goes for 95% of the students out there.

Follow the shit your fellow monkeys say @shitWSOsays Life is hard, it's even harder when you're stupid - John Wayne
 
heister:
ANT:
Spend more money on public schools huh. Seems to me we are always spending more on schools with lower returns.

How much, hard figure, so we have to spend on schools?

The problem is the public school system is so diverse that there is no solution other than scrap it and come up with something entirely new based off of a charter school system. Of course with the teachers union that will never happen its just a cycle of gimme gimme and no I wont work any harder or smarter, same goes for 95% of the students out there.

Absolutely agree. Sorry for the late response, I do have to remember that I'm at work.

But who says you can't get rid of unions? Why can't we enact a "Wisconsin" like approach to this dilemma? I hate to get all conspiracy theorist, but if the vast spawn of the wealthy are being educated in private schools or in wealthy districts, I believe there is no real incentive to correct the public system. After all, that would mean giving equitable resources to the impoverished to provide them with a high quality education. Unless you really don't care to do that so you set up NCLB Act to just throw bureaucracy at the problem and give the "appearance" that something is being done.

"Cut the burger into thirds, place it on the fries, roll one up homey..." - Epic Meal Time
 
txjustin:
The department of education holds the states hostage. What kind of dumbshit came up with No Child left Behind?
I dunno, some guy that used to be president....who never set foot in a public school until he needed a photo op. Oh, I'm sorry, was that cynical? I'm thinking that Bush should probably have taken a gov't 101 class somewhere along the line.
Get busy living
 
ANT:
Yeah, because Obama is a man of the people.

Righhhhhtttttttt.

Did I miss something? What's this in reference to?

"Cut the burger into thirds, place it on the fries, roll one up homey..." - Epic Meal Time
 
vadremc:
ANT:
Yeah, because Obama is a man of the people.

Righhhhhtttttttt.

Did I miss something? What's this in reference to?

I was slamming Bush, so the assumption was that I'm pro-Obama.

Truth is, I just don't like the gov't and I don't care who's in office. The realities of the world are what they are, and Obama is just another politician: http://online.wsj.com/article/SB100014240527487040502045762189706521198…

Get busy living
 

The British example is faulty, sure when government cuts spending its gonna have a marginal negative effect on the overall economy when you bundle that with higher taxes it turns into something noticeable. I think the real reason it is so pronounced in the UK and Europe in general is because for the most part they are ending decades and generation long cycles of government welfare dependence. It is this shift that is really pushing the effect of a slower than US economic recovery ( not that we really have anything meaningful here either). Spending cuts are painful but more than 100% necessary. Think about it, even if it is remote what happens if we loose our currency of reserve status, if you think shit is bad now you will prob consider jumping off a building at that point when the shit really hits the fan.

Follow the shit your fellow monkeys say @shitWSOsays Life is hard, it's even harder when you're stupid - John Wayne
 

Am I wrong to think the real issue is world population growth and finite resources? Seems like the impossibility of EVERYBODY living a happy life combined with the feeling of a moral obligation to help those who can't help themselves is going to lead to chaos and suffering for everybody. Malthusianism comes to mind.

"One should recognize reality even when one doesn't like it, indeed, especially when one doesn't like it." - Charlie Munger
 
cplpayne:
Am I wrong to think the real issue is world population growth and finite resources? Seems like the impossibility of EVERYBODY living a happy life combined with the feeling of a moral obligation to help those who can't help themselves is going to lead to chaos and suffering for everybody. Malthusianism comes to mind.
M...A...R...S...Mars bitches.

Grow or die.

 

I was not saying that anyone is pro Obama, just saying that most presidents are not men of the people.

I agree that unions are a problem, but aren't unions protecting te middle class???

Cpl, completely agree. Population has grown too much. I wrote a paper on the human parasite like 8 years ago. My beliefs still hold true. We will infest and destroy everything until we ultimately kill ourselves. Much deserved I might add.

 
ANT:
I was not saying that anyone is pro Obama, just saying that most presidents are not men of the people.

I agree that unions are a problem, but aren't unions protecting te middle class???

Cpl, completely agree. Population has grown too much. I wrote a paper on the human parasite like 8 years ago. My beliefs still hold true. We will infest and destroy everything until we ultimately kill ourselves. Much deserved I might add.

Always a pleasure to meet a fellow misanthrope.

"Cut the burger into thirds, place it on the fries, roll one up homey..." - Epic Meal Time
 
cplpayne:
So depressing, same conclusion I keep reaching.
Malthus was a pessimist. His projections get disproved generation after generation, and there's more than enough resources to go around provided a few don't hoard them. Smile a bit, sunshine
Get busy living
 

Me too.

I think the only sustainable method of life is social Darwinism. Nature seems to have survived pretty long on that principal. Once "society" decided that life is a right, Darwinism becomes unacceptable. Because survival of the fittest under social Darwinism "isn't fair," we've decided to doom everyone.

How long before we have private space transport evacuating the wealthy?

 
illiniPride:
Me too.

I think the only sustainable method of life is social Darwinism. Nature seems to have survived pretty long on that principal. Once "society" decided that life is a right, Darwinism becomes unacceptable. Because survival of the fittest under social Darwinism "isn't fair," we've decided to doom everyone.

How long before we have private space transport evacuating the wealthy?

I'm a big believer in Darwinism...

 

My friend has a theory that we will have to have limited socialism. As robots develop we will need unskilled people less and less. The more well off will simply provide for their existence.

Pretty sad. We will cut down every tree, kill every animal. Suck every mineral out of this planet and leave it looking like the moon when we are done. A lot like termites or disease.

 
ANT:
My friend has a theory that we will have to have limited socialism. As robots develop we will need unskilled people less and less. The more well off will simply provide for their existence.

Pretty sad. We will cut down every tree, kill every animal. Suck every mineral out of this planet and leave it looking like the moon when we are done. A lot like termites or disease.

I agree with your friend. The productivity gap between the top and bottom of society will only keep widening, but people need to eat or there will be war. Sadly, a population culling through war or disease would be the most effective way to prolong the life of the planet.

And we will suck the life out of this planet, but that is inevitable no matter what form society takes. Everything that begins must end. Ashes to Ashes my friend. All it is is a matter of (how much) time.

 

The problems aren't new. The solution isn't new. Unfortunately, our decision to choose the WRONG path is also not new.

We KNOW what brings prosperity:

  • Transparent, Enforceable Laws
  • Simple, Low Tax Structures
  • Competition among firms
  • Free trade/specialization of labor
  • Non-interventionist Monetary Policy
  • Limited, Long-term Gov't Spending (not drug-like stimulus)

If you are proposing the opposite of these KNOWN solutions, then you might have wonderful intentions but you are moving far away from TRIED AND TRUE methods for raising wealth and living standards.

********************************* “The American father is never seen in London. He passes his life entirely in Wall Street and communicates with his family once a month by means of a telegram in cipher.” - Oscar Wilde
 

I think we can all agree that you cannot have a world of 8 billion Americans/japanese/Europeans.

But that is the end game. We will all be poor or we will destroy the world.

I don't think a replacement birth rate can do anything either. We won't be at global replacement until 10+ billion people.

Massive famine and break outs of disease could reduce population a little, but we are too good at surviving.

 

Not to mention advances medical technology that is saving lives and people living much longer.

"One should recognize reality even when one doesn't like it, indeed, especially when one doesn't like it." - Charlie Munger
 

Again, maybe I'm crazy, but I don't think it'd be so out of line to put income tax rates back to the levels they were at in the 1990s while also cutting government spending a good bit. And by cutting government spending, I don't mean arguing over a bunch of drop-in-the-bucket bullshit, I mean scaling back defense and entitlements. Guess what, you stop having so many overseas adventures (i.e. Iraq and Afghanistan), then the Defense budget comes down substantially.

Of course:

--If someone making $208,000 a year has that last $8,000 taxed at a rate of 39% vs. 35%, all of the job creators will move to Singapore, the economy will tank, and unemployment will go through the roof

--If we don't fight the terrorists "over there," we'll have to fight them "over here."

So, instead, why don't we just do the right things to fix the deficit and the economy. You know, things like working on getting rid of a woman's right to choose and not letting gay people get married (since it would ruin normal marriages). Oh wait, the republicans swept into power and are doing that while arguing over cuts to bullshit that won't make a dent in the budget.

 

I'm not liking the pessimistic conversion over to self serving ideology here, so I'm playing devil's advocate today:

illiniPride:
Isn't it interesting how the fate of our planet is similar to an individual life? The destination is known (death), its the journey that is uncertain.
The planet isn't going anywhere. We are.
txjustin:
I'm a big believer in Darwinism...
Everyone is....until you're on the shit end of the stick and then people get pretty populist pretty quickly.
TheKing:
--If someone making $208,000 a year has that last $8,000 taxed at a rate of 39% vs. 35%, all of the job creators will move to Singapore, the economy will tank, and unemployment will go through the roof

--If we don't fight the terrorists "over there," we'll have to fight them "over here."

Not necessarily. What percentage of $200K jobs can you just up and move to in Singapore?
Get busy living
 

Dear Population Alarmists:

The entire population of the USA can fit into the state of New Hampshire using a population density of Brooklyn, NYC.

********************************* “The American father is never seen in London. He passes his life entirely in Wall Street and communicates with his family once a month by means of a telegram in cipher.” - Oscar Wilde
 

Too many straw man arguments. ANT assumes that if we raise income taxes to 39.6%, we might as well raise them to 100%. Millions of rich people will leave and the US will turn into Atlas Shrugged.

Others claim that the US is turning into a plutocracy and there will be a civil revolt despite the fact that we're a democracy where we can vote out pols that we don't like.

 

@UFO:

I was being sarcastic. I'm poking fun at the absurdity of people who actually make those arguments (some of whom post on WSO and often quite aggressively.)

I just think it's fun to shed light on how stupid some of these talking point arguments are.

"OMG, you think it's ok to take an extra 4% of my $8,000? You liberal fascist elitist communist pig!" - aka the response of someone out of touch with reality.

I've seen posters on this site say, point blank, that they'd move to Singapore if taxes are increased. Just complete and utter non-sense.

 

You might be cool with nearly half your salary gone, but a lot of people are not.

Yes. We could fit tons of people in a tiny area. Not everyone wants to live like Brooklyn. Also, you need about o land to grow food. As the world gets richer, people want more meat and more food.

 
ANT:
You might be cool with nearly half your salary gone, but a lot of people are not.

Yes. We could fit tons of people in a tiny area. Not everyone wants to live like Brooklyn. Also, you need about o land to grow food. As the world gets richer, people want more meat and more food.

Your abrasive and extremist arguments are unproductive.

It's not nearly half unless you make a very high salary. I think long-term, I'd want taxes lower, but if we need to clean up our mess, then I think a combination of sensible tax increases on income for everyone, along with simplifying the tax code for individuals and businesses, along with cuts in spending are sensible ways of getting our house in order.

Note that I do not want to touch long-term capital gains rates.

 
TheKing:
ANT:
You might be cool with nearly half your salary gone, but a lot of people are not.

Yes. We could fit tons of people in a tiny area. Not everyone wants to live like Brooklyn. Also, you need about o land to grow food. As the world gets richer, people want more meat and more food.

Your abrasive and extremist arguments are unproductive.

It's not nearly half unless you make a very high salary. I think long-term, I'd want taxes lower, but if we need to clean up our mess, then I think a combination of sensible tax increases on income for everyone, along with simplifying the tax code for individuals and businesses, along with cuts in spending are sensible ways of getting our house in order.

Note that I do not want to touch long-term capital gains rates.

Called ANT on his bs and summed our solution up in less than a paragraph. (sigh) If only it were that simple... +1 SB for you The King.

"Cut the burger into thirds, place it on the fries, roll one up homey..." - Epic Meal Time
 
TheKing:
ANT:
You might be cool with nearly half your salary gone, but a lot of people are not.

Yes. We could fit tons of people in a tiny area. Not everyone wants to live like Brooklyn. Also, you need about o land to grow food. As the world gets richer, people want more meat and more food.

Your abrasive and extremist arguments are unproductive.

It's not nearly half unless you make a very high salary. I think long-term, I'd want taxes lower, but if we need to clean up our mess, then I think a combination of sensible tax increases on income for everyone, along with simplifying the tax code for individuals and businesses, along with cuts in spending are sensible ways of getting our house in order.

Note that I do not want to touch long-term capital gains rates.

How is saying that not everyone wants to live in Brooklyn extremist? How is saying that as people become more wealthy, they eat more meat which uses more grain?

Fuck you dude. Go pay more taxes if you want. 30% of my total income is plenty.

Everyone is always so cavalier with other peoples money.

Yeah, saying people should be able to keep what they earn is extremist. Kiss my ass.

 

Then you should be happy. My Dad is a fiscal conservative, but come tax time every year, he is happy to pay taxes. His comment is "Better to HAVE to pay taxes than to not have a lot of income to tax."

Look, my overall tax rate is higher than yours- before city tax and FICO (but including state). I am thrilled to be able to live in a country where people can pursue what they want and still aren't quite fed to the dogs when they fail. It would not be fun to see my total tax rate go from ~33% to 37%, but I'd rather pay that and see balanced, sustainable budgets than see our country slide deeper and deeper into debt.

The middle-class is tapped out, but us white-collar yuppies can afford to pay a little more if we figure out a way to fix medicare and keep discretionary and military spending under control.

 
IlliniProgrammer:
Then you should be happy. My Dad is a fiscal conservative, but come tax time every year, he is happy to pay taxes. His comment is "Better to HAVE to pay taxes than to not have a lot of income to tax."

Look, my overall tax rate is higher than yours- before city tax and FICO (but including state). I am thrilled to be able to live in a country where people can pursue what they want and still aren't quite fed to the dogs when they fail. It would not be fun to see my total tax rate go from ~33% to 37%, but I'd rather pay that and see balanced, sustainable budgets than see our country slide deeper and deeper into debt.

The middle-class is tapped out, but us white-collar yuppies can afford to pay a little more if we figure out a way to fix medicare and keep discretionary and military spending under control.

A lot of conservatives would be OK with raising the income tax rate if--IF, IF, IF--Congress would reform its ways: attempt to rid the federal government of so much waste (GAO just said as much as $200 billion annually could be saved through consolidating superfluous spending), reform the entitlement system, cut spending, and stop spending money on pork, abortion (Planned Parenthood) and partisan public radio (NPR). But we all know that raising additional revenue will merely result in raising the level of spending. Raising the income tax rate is simply feeding the addict. It's of no benefit by itself.

Array
 
IlliniProgrammer:
Then you should be happy. My Dad is a fiscal conservative, but come tax time every year, he is happy to pay taxes. His comment is "Better to HAVE to pay taxes than to not have a lot of income to tax."

Look, my overall tax rate is higher than yours- before city tax and FICO (but including state). I am thrilled to be able to live in a country where people can pursue what they want and still aren't quite fed to the dogs when they fail. It would not be fun to see my total tax rate go from ~33% to 37%, but I'd rather pay that and see balanced, sustainable budgets than see our country slide deeper and deeper into debt.

The middle-class is tapped out, but us white-collar yuppies can afford to pay a little more if we figure out a way to fix medicare and keep discretionary and military spending under control.

You really need to stop taking your opinions and applying them to everyone else. We are tapped out because we piss money away and run up debt. I think the government reducing spending and removing restrictions will stimulate much more than draconian taxes.

 
ANT:

You really need to stop taking your opinions and applying them to everyone else. We are tapped out because we piss money away and run up debt. I think the government reducing spending and removing restrictions will stimulate much more than draconian taxes.

ANT, I'm not sure what you deal with all day that makes you so exasperated about government spending to incessantly rant about it, but you don't hand out food stamps or welfare checks. Most people just take this stuff in stride and vote for sane politicians who support sober budgets. Taxes are at 80 year lows, but apparently they are still too high for some. Frankly, I'm happy that I get to be in a high tax bracket. You should be too.
 

Newsflash for all, if you want to pay more taxes you are more than welcome to do so.

Now King, I would be willing to pay a slightly higher tax rate, temporarily, if it goes 100% to deficit/debt reduction. I've said this many times before. Obviously along with aggressive cuts and everythign that has already been beat to death in this thread.

 
txjustin:
Newsflash for all, if you want to pay more taxes you are more than welcome to do so.

Now King, I would be willing to pay a slightly higher tax rate, temporarily, if it goes 100% to deficit/debt reduction. I've said this many times before. Obviously along with aggressive cuts and everythign that has already been beat to death in this thread.

Exactly. I only want to pay more in taxes if I get to see the "Your Family Share" clock on the national debt turn backwards. If I could pay extra taxes that would only go to reducing my share of the national debt, I'd be happy to do it. But I can't unless everyone else does it.

We deserve a federal government that lives within its means like we do. Part of that means cutting spending, which it seems like Congress is having a serious conversation about; part of that means increasing taxes.

Yes, it stinks, but short-term pain usually means long-term gain.

 

Social conservatives like to tell themselves that abortion increases the federal government's costs, but the fact is that over the long run, fewer babies that parents cannot afford decreases those costs.

I'm not saying it's necessarily moral public policy, but by definition, reducing the abortion rate creates more unwanted mouths to feed, so I would not factor in a reduction in costs from reduced abortion spending.

Incidentally, since the hyde amendment, planned parenthood's federal funding mostly goes to pre-conception birth control, family planning, and pregnancy services. And NPR's funding only costs $500 million/year, though I do agree that after the debacle a few weeks ago with the Muslim and partisan comments by the CEO, NPR has a political bias that should probably not merit federal funding.

 

Illini, you're missing the point. Half of the United States thinks abortion is immoral, and yet the federal government uses THEIR (the tax payers') money to fund Planned Parenthood. In South Dakota, for example, they are the SOLE provider of abortions. In turn, Planned Parenthood turns around and gives all of its money in support of Democrats. Same thing with NPR (in terms of broadcasting support). We're not talking about the AMOUNT of money. $500 million is a lot of money to these organizations, but not to tax payers. Ok, I agree. But it's the principal. The government has no right involving itself in abortion or the press.

The thing is, your side will never have a good argument for raising taxes because you know--YOU KNOW--you're CERTAIN--that Congress will simply use its additional revenue to increase spending and won't fix a damn thing. Past performance is the greater indicator of future performance. That's a basic HR concept. It's the elephant (or donkey) in the room that your side REFUSES to address. Your side assumes greater revenue = a step closer to balanced budgets. That's a false belief.

Array
 

I also love how I clearly state that 30% of my income is taken from me. Nothing progressive. Money gone/ money earned.

This isn't even factoring in sales tax, fines, fees, tickets etc.

Wow, 30% isn't enough? I am sorry, people work for themselves, not the over bloated, inefficient government. How about you donate some of your time to actually helping people instead of pissing and moaning that the level of government sponsored theft isn't high enough. You are always free to pay and donate above and beyond.

Nope. Not good enough until you can force your opinions and beliefs on other people.

Not touching capital gains tax? Wow. Isn't that the whole Warren argument. Rich people make more and more of their income from capital gains. By not increasing that you give them another loop hole.

 
ANT:
I also love how I clearly state that 30% of my income is taken from me. Nothing progressive. Money gone/ money earned.

This isn't even factoring in sales tax, fines, fees, tickets etc.

Wow, 30% isn't enough? I am sorry, people work for themselves, not the over bloated, inefficient government. How about you donate some of your time to actually helping people instead of pissing and moaning that the level of government sponsored theft isn't high enough. You are always free to pay and donate above and beyond.

Nope. Not good enough until you can force your opinions and beliefs on other people.

Not touching capital gains tax? Wow. Isn't that the whole Warren argument. Rich people make more and more of their income from capital gains. By not increasing that you give them another loop hole.

30% is too much. The worse part is that as we inflate the currency, we keep the marginal rates as they were 20 years ago. So we are getting slammed with the same top rate. The medieval serfs only owed 10% of the time as corvee to their manorial lords, yet here in supposedly free America we are working for Uncle Sam 30% of the time. What's next, prima noctis for Harry Reid?

We should convert SS/MC to pure welfare programs for the poorest of the poor and try to refund what we can to the suckers who have already paid into that ponzi scheme. We pull our military out of the 110 countries they are currently occupying. And the only cabinet departments we need are State, Justice, War and Treasury.

Finally, if we can get a Supreme Court who takes their jobs seriously, let's review the constitutionality of the passage of the income tax.

 
Edmundo Braverman:
As if on cue:

G.E's Strategies Let It Avoid Taxes Altogether

Now, somebody justify this travesty to me. I dare you.

Even IF, and that's a big IF, it's justified, the public perception is bad. While people are unemployed this kind of windfall makes the current structure impossible to justify. They can't afford too hire new people, don't want to pay taxes, and think gov't creation of jobs is a farce. What is the solution? I don't know...I just don't know.
Get busy living
 
Edmundo Braverman:
IlliniProgrammer:
Honestly, I'm not sure why we have a corporate tax. Let's tax dividends as ordinary income and treat C-corps like S-corps. Problem solved.

Agree with you in theory, couldn't agree less in practice. This country needs to shift the burden of paying taxes away from the individual and back to the corporations, as it was prior to 1913.

Disagree. Corporations were the best thing to ever happen to the middle class. Prior to corps, it was impossible for a middle-class family to invest in anything but a house, a (non-FDIC insured) bank account, or perhaps a small business or farmland that was heavily correlated to their income.

Today, a middle class family that reduces its lifestyle to save can invest in oil stocks, REITs, utilities, and more. All because of corporations. But the problem is that they pay roughly the same income tax as the rich do. Want to make the tax system more progressive? Eliminate the corporate income tax and treat dividends/cap gains as ordinary income.

Yes, there needs to be a lot of reform around the management of corporations and giving shareholders more say. But net-net, corps are very good news for middle-class savers.

 

http://abcnews.go.com/WN/google-loophole-dodge-corporate-taxes-bloomber…

They all avoid taxes. I agree, if Corporations would just pay their share of taxes then the individual could pay less. But, who really thinks the individual would actually be allowed to pay less even if Corporations paid what they are supposed to? Like another post above stated.......the Gov. would just waste the extra tax revenue on bullshit.

"One should recognize reality even when one doesn't like it, indeed, especially when one doesn't like it." - Charlie Munger
 
Edmundo Braverman:
People invested in all kinds of things ever since the beginning.
Wall Street forgets this a lot. Before I made money peddling financial instruments, I sold other stuff. Computers are what changed the face of investing
cplpayne:
But, who really thinks the individual would actually be allowed to pay less even if Corporations paid what they are supposed to? Like another post above stated.......the Gov. would just waste the extra tax revenue on bullshit.
I don't know. How about we just make the change and make new decisions based on the results. Theoretical abstractions like this have been used to gum up the debate so that nothing changes for a long time. Make the switch and adjust the tax system based on the outcome. It's not like we can't undo the changes if they don't work........
IlliniProgrammer:
Honestly, I'm not sure why we have a corporate tax. Let's tax dividends as ordinary income and treat C-corps like S-corps.
Well this is a cool idea. Anyone have some more on this?
Get busy living
 
Edmundo Braverman:
IP,

Corps have been around since before our country was founded., and the NYSE opened up in 1792. Not sure what you mean by "prior to corps, it was impossible for a middle-class family to invest in anything but a house...". People invested in all kinds of things ever since the beginning.

Well, we had "patents" and trade companies dating back to the Amsterdam Exchange in 1602, but corporations did not really enter their modern form in the US until we had the railroads, trusts, and then the Southern Pacific Railroad SCOTUS ruling- which guaranteed corporations' right to property. Before ~ the 1880s, the biggest business entities in the country were almost exclusively based on the wealth of rich people.

So I really don't see what is so awful about letting a bunch of middle-class and upper-middle-class savers team up to form an entity that can compete against the rich. Before the 1880s, the wealth distribution and opportunities afforded to the middle class to grow their assets were even narrower. Today, the top 1% control 1/3 of the country's wealth; the top 10%-1% control another 1/3, and the bottom 90% control 1/3. It's because of corporations- and the growth that happened in the late 19th century- that the top 10% less 1% have as much control over the country's wealth as the top 1%.

So IMHO, equity securities are a good thing and to the extent that shareholders actually get to control the corporations they own, they help enhance democracy by giving the more ordinary top 10% less 1% of households more control over the country's resources relative to the top 1%.

 

The problem with treating C-corps like S-corps is twofold:

First, no one would ever buy stock if they knew they were going to get a tax bill for the company's profits at the end of the year.

Second, by a wide margin the bulk of the liquidity in the market is pension funds, which are tax deferred. If corporations are passing through income to individual shareholders (that's how an S-corp works), how are people going to pay taxes from a tax-deferred account?

 
Edmundo Braverman:
The problem with treating C-corps like S-corps is twofold:

First, no one would ever buy stock if they knew they were going to get a tax bill for the company's profits at the end of the year.

Well I guess a better term would be REITs. You would only levy tax on the dividends/distributions. You would probably have to require a company to distribute some of their income.
Second, by a wide margin the bulk of the liquidity in the market is pension funds, which are tax deferred. If corporations are passing through income to individual shareholders (that's how an S-corp works), how are people going to pay taxes from a tax-deferred account?
When they withdraw their income. Bear in mind that most tax-deferred accounts are ultimately owned by the middle class, so any tax benefits would be helping to make the system more progressive. Folks can already invest in REITs, taxable bonds, certain non-UBTI generating MLPs, and royalty trusts in their IRAs- I use this strategy all the time for tax efficiency. What is the big deal with extending the same tax benefits of fixed income to equities when most corporations aren't paying tax anyways and the biggest holders are still going to be better-heeled investors in taxable accounts anyways?

Long-term, shifting taxes to dividends rather than corporate earnings helps strengthen middle class savers- who often have a lot of their assets in non-taxable accounts or at least pay lower tax rates- while quietly making the tax system more progressive. It's a win-win and helps keep the country more Democratic. Best of all, we do not scare business itself out of the country when we need to raise taxes. We only scare away foreign investors, who yes make up a sizeable chunk of US investment money, but are a smaller chunk than domestic and foreign investors combined.

 
Edmundo Braverman:
I thought of that, but kept coming back to what do we do in the interim before people start drawing down their retirement funds? Zero tax revenue? And then only a trickle when it begins? Can't see it working.
Corporations are, on average, taxed at 4% of their reported net income. I agree with your original post on this Eddie- corporations don't pay taxes. And by hiking capital gains and dividend tax, which actually do make up a sizeable part of federal revenues- we're going to more than offset those losses.
 

It is absolutely absurd to tax capital gains, dividends and income.

We want people to save/invest.

We want companies to grow, to reinvest in their business, to repay their owners (from Buffett to the tiniest pensioner).

All taxes should be property and consumption based.

Reminder: GDP is a FLOW. Wealth is STOCK.

Artificial and temporary attempts to influence GDP are just borrowing from future growth.

********************************* “The American father is never seen in London. He passes his life entirely in Wall Street and communicates with his family once a month by means of a telegram in cipher.” - Oscar Wilde
 
veritas14:
It is absolutely absurd to tax capital gains, dividends and income.

We want people to save/invest.

Yes. And everyone can save/invest $21.5K/year and have the capital gains, dividends, and income be tax-free until they retire.
We want companies to grow, to reinvest in their business, to repay their owners (from Buffett to the tiniest pensioner).
Yes, which is why we might as well eliminate corporate income taxes and treat dividends and capital gains as ordinary income.
All taxes should be property and consumption based.
Another good idea, but probably politically infeasible. It's tough enough transferring corporate income taxes to individuals.
 

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Career Advancement Opportunities

March 2024 Investment Banking

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  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
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Overall Employee Satisfaction

March 2024 Investment Banking

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Professional Growth Opportunities

March 2024 Investment Banking

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