How the Economy works

[MountainDon]

Re FairTax 

Enjoy your tax hike

Why does that have to amount to a tax increase? Do away with a system that no one can currently understand or believe in and replace it with something simpler, easier to understand.
Or at least do a FlatTax. I can not understand why a person with a higher income should have to pay a higher rate than somebody who just barely gets into the taxable income area. After a personal exemption, pay the same percentage. Do away with loopholes.

[Shawn B]

The so called FairTax advocates are looking at the tax issue all wrong. All they are doing is taxing the people differently, and by some analyst figures more. What needs to happen is for the tax flow to the Fed gov't to lessen. If you are for smaller, less intrusive gov't then continuing feeding the Federal monster the same amount of taxes or more is not the way to slay the beast.

If the FairTax was adopted every purchase and service would be taxed. I think it would hurt the middle class and poor the most. Gas would NEVER be under $4/gallon. Just think now labor would be taxed. Tree service company cuts down a hazzard tree and the bill is $500 labor, guess what you pay tax on that labor. go to the dentist for a check up and cleaning bingo! same thing. Mechanic puts a $30 part on, but has $300 labor same thing you are taxed on his labor.

Plus if you believe, as I do that tax protesting is one of the highest forms of patriotism. This makes it almost impossible for citizens to "avoid" the IRS Nazi's.

Someone should muzzle Neal Boartz. He is very far from being a true libertarian.

[MountainDon]

I believe you are missing part of the point. Yes you would pay "more" for the tree or tooth removal or the mechanics services. But you'd be starting with a full wallet or bank account, not one that was short a chunk with every paycheck received. No tax until you spend it.


Or for those who have problems with that why not a flat tax?

[ScottA]

I don't think every business in the US should have to act as a tax collector. This makes them all agents of the state. A better system would be an asset tax. You pay based on your net worth, maybe .01%. Eliminate all other taxes. All this new tax would be paid to your local government which in turn would forward a share to the state. The state would then send a share to the feds. Take the private sector out of tax collecting. The same asset tax would be applied to business but they would no longer need to do the IRS's job for them. If you fall behind you get a 4 year grace period to catch up before they take your stuff.

[OlJarhead]

Good points Erik but I must disagree about Bush. Let's not forget that the war spending in Iraq and Afghanistan is done through debt and of course a lot of military spending is never fully known because it is done "off-book". Bush also created the Department of Homeland Security (Stupidity) which was the single largest creation of Federal government employees since the days of FDR. More Federal employees means more taxes, or deficit financing. Deficit financing is done through China and other nations buying U.S.  debt, or Helicopter Ben firing up the presses. Either way is no good. Also the Bush's are more neoconservatives or neocons than Progressives.

Bush was a progressive -- so your point is what?  R or D it makes no difference when they are all the same 'Progressive' party in the end.

As for growing the Federal Government it's grown far far more under Obama then anyone else since FDR...but I digress.

The best way to see who spent what (and to get away from the whole 'off the books' nonsense) is to just look at the debt and how much it rose under Bush vs how much it's risen since Obama and the D's were in total control with large majorities....it's grown more then THREE AND A HALF TRILLION in less then two years with Obama and the bid D's in power....before that it grew about ONE AND A HALF Trillion.

So let's just set the record straight shall we?

Under Bush and the R's in power the debt grew 2.3 TRILLION in FIVE years 200-2005 then the Democrats took over the congress (purse strings) and the debt grew 1.5 TRILLION in TWO years.... (that means MUCH MORE then the previous 5 when based on a year over year number) and then when Obama took over and the democrats gained filibuster proof majorities in BOTH houses the debt grew THREE AND A HALF TRILLION DOLLARS IN LESS THEN TWO YEARS.

Spin that anyway you want but you cannot say that Bush was the biggest spender by any stretch...oh and my source?  The US Treasury  

http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo5.htm

So, friend, Bush = Progressive, Obama = Marxist, both are bad.

However the D's are bad with a big B and the R's are bad with a little b when it comes to bankrupting the country.

As for taxes, it's all nonsense.  Get rid of Personal Taxes -- all of them -- and return to the 'pre-income tax' period.

Ya I know the silly folks that argue that business will just put the taxes onto you anyway crowd will argue against this but that's because they don't understand that business does that now already, the difference is that when you no longer have to go to H&R Block because you no longer pay ANY personal taxes the class warfare (yes it is) can stop, we can stop demonizing people for working hard to earn a dime and we can start fixing the problem.

As for the rich not paying their fair share that's the most 'Marxist' thing I've heard all day.  There is no 'fair' and there is no 'fair share' that's just political bullcrap.  The reality is that the rich pay the taxes and the poor do not.  Plain and simple.  Demonize them all you like but 10cc had it right back in the '70s "Tax the Rich to Feed the Poor until there are no Rich no more".....that's what you'll get.

Wanna fix the problem?  Stop envying someone else, work towards ending government programs (all but the most necessary like the military) and return to independence from Government.

Life, Liberty and Property!

[ScottA]

Man you got it all wrong. All these government givaway programs are not about transfering wealth they are about keeping people from revolting. If you allow the rich to get richer and give nothing to the poor. The poor will kill the rich. Can't have that so they devised a system where the middle class pays the poor to not kill the rich. What a deal.

[OlJarhead]

Man you got it all wrong. All these government givaway programs are not about transfering wealth they are about keeping people from revolting. If you allow the rich to get richer and give nothing to the poor. The poor will kill the rich. Can't have that so they devised a system where the middle class pays the poor to not kill the rich. What a deal.

Nope.  Historically the poor get richer.

When one looks back in history it is clear that when Government DOES NOT have programs to help everyone then prosperity reigns.  It's only when jealous people try to manipulate who gets to be wealthy through regulation and government that things get crazy.

Take Rockefeller -- demonized and called a Robber Barron...but was he really?  It is a fact that he took Kerosene from $160 a barrel to $17 a barrel thereby making people live better lives, saving them money, allowing them to use their hard earned dollars for other purchases and saving the whales....During this period real wages ROSE for the average worker but the so called 'Robber Barons' were demonized by those who could not keep up with them.  Why do you suppose that was?

Because they could not gouge YOU and keep the poor poor so they went after the very people who raised the standard of living for the poor.

That's what is going on today too.  The rich are not the problem, government, government programs and socialists are the problem.

[muldoon]

tertiary trivia. 

socialism is great, until you run out of other peoples money.  thats all that really has to be said about how our economy works.  it works great, until you run out of other peoples money.  be it "taxing the rich" or "selling bonds to the chinese" or "making the tobigtofail banks sop up the offering" or "taxing the little guy".  the source does not matter, they are lines enacted to cause division and get people angry about how one side is advancing over the other.  The truth is we are all getting screwed.  But eventually they DO run out of other peoples money.  mathematically they are well past the insolvent line.  everyone knows it, but no one accepts it.  So we just plod along, nodding like fields of grain. 

[astidham]

I guess "Historically the poor get richer" depends on what the definition of rich is.
If so many people are getting "Rich" why Don't I know anyone who is?
If the middle class constantly get poorer from paying taxes for the rich, how is that poor getting richer?

[muldoon]

astidham,

I dont agree necessarily with the notion, but it is accurate.
100 years ago in 1910, many people in this country lived in mud huts, dugouts.  they had no electricity, no phone, no car, and faced real possibility of starving to death.  Now, everyone - even those on welfare - have food, vehicles, cable tv, internet, basically people have whatever is important to them.  From necessities to toys.  The quality of life for the poor has increased. 

What you are thinking is that the hardships on the middle class have increased, and that is accurate.  But again, this is just sqabbling over who gets what piece of the pie.  The notion the pie is shrinking is not discussed.  If you ask the rich you'll get "the savage poor are taking it in entitlements" and if you ask the poor its "those fatcat rich guys are keeping their money".  The entirel political system is arranged to divide and split the people.  The reality is that the pie is getting smaller and everyone is getting squeezed by it.  To understand why the pie is getting smaller you have to look further up the food chain.  hint- it's not by accident. 

[astidham]

astidham,

I dont agree necessarily with the notion, but it is accurate.
100 years ago in 1910, many people in this country lived in mud huts, dugouts.  they had no electricity, no phone, no car, and faced real possibility of starving to death.  Now, everyone - even those on welfare - have food, vehicles, cable tv, internet, basically people have whatever is important to them.  From necessities to toys.  The quality of life for the poor has increased. 

What you are thinking is that the hardships on the middle class have increased, and that is accurate.  But again, this is just sqabbling over who gets what piece of the pie.  The notion the pie is shrinking is not discussed.  If you ask the rich you'll get "the savage poor are taking it in entitlements" and if you ask the poor its "those fatcat rich guys are keeping their money".  The entirel political system is arranged to divide and split the people.  The reality is that the pie is getting smaller and everyone is getting squeezed by it.  To understand why the pie is getting smaller you have to look further up the food chain.  hint- it's not by accident. 

The majority of these increases are due to a more advanced civilization, event the "poor" Indians had guns and lived in mud or hide coated huts.
my Grandparents never owned cell phones.   lol

[ScottA]

Nope.  Historically the poor get richer.

On some level you are correct, however history also shows us that given enough power the rich will starve and murder the poor for their own gain. That's what we are seeing today except they are no longer starving them (at least not in this country). They are forcing you, and me to feed them so that other history doesn't repeat itself. Your argument would be 100% valid if the playing field was level. It's not and never will be. You are correct that the social programs are designed to keep the poor, poor, just like the schools are designed to keep the poor ignorant.

[OlJarhead]

Nope.  Historically the poor get richer.

On some level you are correct, however history also shows us that given enough power the rich will starve and murder the poor for their own gain. That's what we are seeing today except they are no longer starving them (at least not in this country). They are forcing you, and me to feed them so that other history doesn't repeat itself. Your argument would be 100% valid if the playing field was level. It's not and never will be. You are correct that the social programs are designed to keep the poor, poor, just like the schools are designed to keep the poor ignorant.

This is why the second Amendment to the Constitution is so important.

You should be free top earn whatever you can (by legal and moral means anyway) however if you drag yourself from rags to riches and then try to oppress the poor the poor have the right to rebel and shoot you.

Liberty is the key folks, socialism is evil.

Read the Constitution, understand it, read the Federalist Papers, read 'Patriots History of the United States', read 'Three Men of Boston' and then read 'The Real George Washington' and 'Common Sense' and finally 'The Creature from Jekyll Island' and 'Meltdown' and then ask yourself:  who's fault is it?

And the answer will be?  YOU and ME!

It's our fault and to fix it we must first cast out all incumbents.

[Ajax]

Re FairTax 

Enjoy your tax hike

Why does that have to amount to a tax increase?

For middle and lower classes, it has to be.  The math won't work any other way. 

But you'd be starting with a full wallet or bank account, not one that was short a chunk with every paycheck received.
Or for those who have problems with that why not a flat tax?

You won't get your whole paycheck.  If you make $50K and take home $40K under the current system, under the FT you'd be payed $40K.  The $10 grand are imbedded taxes that have to be eliminated. 

The whole concept is a shell game designed to prey on the average American's hatred of the current system to push through a huge tax reduction for the rich.  Plus it has numerous other flaws.

[Shawn B]

Good points Erik but I must disagree about Bush. Let's not forget that the war spending in Iraq and Afghanistan is done through debt and of course a lot of military spending is never fully known because it is done "off-book". Bush also created the Department of Homeland Security (Stupidity) which was the single largest creation of Federal government employees since the days of FDR. More Federal employees means more taxes, or deficit financing. Deficit financing is done through China and other nations buying U.S.  debt, or Helicopter Ben firing up the presses. Either way is no good. Also the Bush's are more neoconservatives or neocons than Progressives.

Bush was a progressive -- so your point is what?  R or D it makes no difference when they are all the same 'Progressive' party in the end.

As for growing the Federal Government it's grown far far more under Obama then anyone else since FDR...but I digress.

The best way to see who spent what (and to get away from the whole 'off the books' nonsense) is to just look at the debt and how much it rose under Bush vs how much it's risen since Obama and the D's were in total control with large majorities....it's grown more then THREE AND A HALF TRILLION in less then two years with Obama and the bid D's in power....before that it grew about ONE AND A HALF Trillion.

So let's just set the record straight shall we?

Under Bush and the R's in power the debt grew 2.3 TRILLION in FIVE years 200-2005 then the Democrats took over the congress (purse strings) and the debt grew 1.5 TRILLION in TWO years.... (that means MUCH MORE then the previous 5 when based on a year over year number) and then when Obama took over and the democrats gained filibuster proof majorities in BOTH houses the debt grew THREE AND A HALF TRILLION DOLLARS IN LESS THEN TWO YEARS.

Spin that anyway you want but you cannot say that Bush was the biggest spender by any stretch...oh and my source?  The US Treasury  

http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo5.htm

So, friend, Bush = Progressive, Obama = Marxist, both are bad.

However the D's are bad with a big B and the R's are bad with a little b when it comes to bankrupting the country.

As for taxes, it's all nonsense.  Get rid of Personal Taxes -- all of them -- and return to the 'pre-income tax' period.

Ya I know the silly folks that argue that business will just put the taxes onto you anyway crowd will argue against this but that's because they don't understand that business does that now already, the difference is that when you no longer have to go to H&R Block because you no longer pay ANY personal taxes the class warfare (yes it is) can stop, we can stop demonizing people for working hard to earn a dime and we can start fixing the problem.

As for the rich not paying their fair share that's the most 'Marxist' thing I've heard all day.  There is no 'fair' and there is no 'fair share' that's just political bullcrap.  The reality is that the rich pay the taxes and the poor do not.  Plain and simple.  Demonize them all you like but 10cc had it right back in the '70s "Tax the Rich to Feed the Poor until there are no Rich no more".....that's what you'll get.

Wanna fix the problem?  Stop envying someone else, work towards ending government programs (all but the most necessary like the military) and return to independence from Government.

Life, Liberty and Property!

Erik,   You miss my point. I'm not saying that Bush spent more than Obama. What I am saying is he GREW the size of Federal employees more than Obama by creating the Dept Of Homeland Security. Remember that act Federalized ALL airport security. 100,000's of NEW Federal employee's that you and me and everyone else that pays taxes has to support. It will take an almost act of God to un-Federalize these people....which means it will probably never happen. Governments never historically relent power that they granted themselves (usurped) or unknowing voters granted to them. You seem to have took my criticism of Bush has support of Obama? Not so. I'm a libertarian like yourself, and being so criticize all big gov't types regardless of political party. I agree we should return to the pre-income tax period.

On Bush's spending you forgot to include the first bailout package that occurred prior to the 2008 election, that one was around $850 Billion. He asked for $700 Billion then Congress added another $150 Billion extra.

Historically every President outspends the other. It's just we have not seen this level of spending increases in many decades, until the Bush-Obama era. When one adjusts Reagan's spending for inflation he would have fit in nicely too at the Bush-Obama table too.

To understand the last decade of politics one has to understand what a neo-conservative or neocon is. To lump then in with Progressives is not totally accurate.

You are right that gov't programs need to be downsized, eliminated, and Federal workers put back into private business. I would also cut and downsize some of the military. It is either the 2nd or 3rd most expensive Federal department. Plus it allows the American Empire to exist over sea's which is another major expense

Anyway it appears we are basically on the same page.

[Shawn B]

Erik,

Nice reading list. I've read and own many of them already. Still need to pick up a couple.

[Ajax]

On Bush's spending you forgot to include the first bailout package that occurred prior to the 2008 election, that one was around $850 Billion. He asked for $700 Billion then Congress added another $150 Billion extra.

TARP was authorized for $700 billion, never disbursed near that amount, has already had a great deal paid back, and is currently esitmated to have a total cost to taxpayers of $30 to $50 billion.

[dug]

Some interesting quick facts on the growing wealth gap.

http://www.businessinsider.com/15-charts-about-wealth-and-inequality-in-america-2010-4#the-gap-between-the-top-1-and-everyone-else-hasnt-been-this-bad-since-the-roaring-twenties-1

I would hope that no matter where you stand politically you could agree that these are ominous trends, unless of course you happen to be one of the top 1%. Where do these charts lead us? Not too hard to read.

A runaway train.

[Pox Eclipse]

I, as a Libertarian, do not support the idea of big government in any form and tend to think that Benjamin Franklin had it right.

I am surprised to hear that from you, as Franklin was a socialist.  Welcome to the dark side!

[Shawn B]

Ben Franklin a socialist......

[John Raabe]

Ben Franklin was a consummate politician, social commentator and statesman with a wicked sense of humor. As such he can be claimed by just about any political persuasion.

The Rational Optimist by Matt Ridley. A great book that points out that (almost) all boats are rising even though the percentage of income flowing to the most wealthy is rising the fastest. At some point the wealthy will be forced to more equitably share their income. Some of the most wealthy (Bill Gates, Warren Buffet) are already asking for this.

We live in unusual times however. In the early 1930's the poor or stalled lower middle income folks where demanding social solutions from government and actions that would benefit their economic sector with a greater share of the country's wealth.

Now, at least part of the lower and middle income classes have been captured by a Tea Party mentality that seeks to reduce the role of government and end support of the very programs that improve their economic well-being.

It's like the working class folks who have not participated in any of the wealth increases of the last 40 years are saying "We want the wealthy to keep more for themselves and quit having to share with us".

I don't quite understand how we got in this position. I thought self-interest was a basic fact of how modern economies and political systems work... doesn't seem to be true now. Is this just the natural result of wealthy corporate ownership of media and the manipulation of emotions though talk radio and such?

Or is there a more rational reason for this political shift?

[Pox Eclipse]

Ben Franklin a socialist......

From a letter by Ben Franklin to Robert Morris in 1793:

All the Property that is necessary to a Man, for the Conservation of the Individual and the Propagation of the Species, is his natural Right, which none can justly deprive him of: But all Property superfluous to such purposes is the Property of the Publick, who, by their Laws, have created it, and who may therefore by other Laws dispose of it, whenever the Welfare of the Publick shall demand such Disposition. He that does not like civil Society on these Terms, let him retire and live among Savages. He can have no right to the benefits of Society, who will not pay his Club towards the Support of it.

Sounds like socialism to me.

[astidham]

Ben Franklin was a consummate politician, social commentator and statesman with a wicked sense of humor. As such he can be claimed by just about any political persuasion.

The Rational Optimist by Matt Ridley. A great book that points out that (almost) all boats are rising even though the percentage of income flowing to the most wealthy is rising the fastest. At some point the wealthy will be forced to more equitably share their income. Some of the most wealthy (Bill Gates, Warren Buffet) are already asking for this.

We live in unusual times however. In the early 1930's the poor or stalled lower middle income folks where demanding social solutions from government and actions that would benefit their economic sector with a greater share of the country's wealth.

Now, at least part of the lower and middle income classes have been captured by a Tea Party mentality that seeks to reduce the role of government and end support of the very programs that improve their economic well-being.

It's like the working class folks who have not participated in any of the wealth increases of the last 40 years are saying "We want the wealthy to keep more for themselves and quit having to share with us".

I don't quite understand how we got in this position. I thought self-interest was a basic fact of how modern economies and political systems work... doesn't seem to be true now. Is this just the natural result of wealthy corporate ownership of media and the manipulation of emotions though talk radio and such?

Or is there a more rational reason for this political shift?

I agree John.
The talk radio majority is educated from the opinion of a bias Idea instead of FACTS.

[cbc58]

Here's a result of how the economy works in Greece...

http://globaleconomicanalysis.blogspot.com/2010/12/video-fire-bombs-stones-fly-in-greek.html

How long before it becomes this way here?

[Phssthpok]

Here's a result of how the economy works in Greece...

http://globaleconomicanalysis.blogspot.com/2010/12/video-fire-bombs-stones-fly-in-greek.html

How long before it becomes this way here?

Hard to say.... how long would it take for YOU to run out of ammo?