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Old 08-03-2011, 11:58 AM  
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Originally Posted by rivalarrival View Post
The comparison between household finances and federal budgets simply can't be made accurately. Individuals can't print money; the federal government can. Individuals can't set interest rates; the federal government can. Individuals can't devalue their currency, reducing the real value of their debt; the federal government can.



Hauser's law says that whatever the federal income tax rate, the federal government will collect approximately 19.5% of GDP in tax revenue. The only way to reliably increase revenue is to grow the GDP. Whatever tax rate you set will have no long-term effect on revenue. The primary consideration MUST be what effect that tax rate will have on the economy.

The average American seems to think that reducing taxes will always benefit the economy. They forget that a tax on profits serves as an incentive for a person to reinvest in their business rather than pull their money out of that business as a profit. Multiply this incentive times every person doing business in the US, and the GDP is forced to grow. No, this doesn't hold true for all income tax increases. There is a point where the effect peaks and further increases become counterproductive to GDP growth. All evidence suggests that we are well under that peak rate
The average American also thinks the government can raise GDP by excessive spending but Obama has provided ample evidence against such a notion. Getting rid of some government regulations would have a better chance of growing GDP. A caller on the Bobby Mac show just said he stopped fighting it and sent all employees home closing the doors of his business. Others hold employee count under 50 employees to avoid Obamacare. Then there's that $20 trillion or so debt to worry about by 2020.
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Old 08-03-2011, 01:04 PM  
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Originally Posted by Eddie_T View Post
The average American also thinks the government can raise GDP by excessive spending but Obama has provided ample evidence against such a notion. Getting rid of some government regulations would have a better chance of growing GDP. A caller on the Bobby Mac show just said he stopped fighting it and sent all employees home closing the doors of his business. Others hold employee count under 50 employees to avoid Obamacare. Then there's that $20 trillion or so debt to worry about by 2020.


In 2020, we'll be in roughly the same position relative to other nations, just as we were in 2000, just as we were in 1980. The fact is that our creditors need us more than we need them. If the American economy collapses, the entire world economy collapses.

The Brinkmanship we just witnessed is far more damaging to the economy than our debt load.

What industry was that caller in? Sounds like his competitors just gained market share and higher profits.
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Old 08-03-2011, 03:59 PM  
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Originally Posted by Musicinabottle View Post
What the stats don't tell you is the amount of people having emergencies such as medical expenses, or car repairs with no saftey net, I'm talking about the poor now.... People don't realize that while some well off folks live debt free, others who live from hand to mouth, suppliment their incomes with credit cards, by an industry that blaitently promotes borrowing with pre approved checks and on the spot credit to people who probably shouldn't be granted it so there certainly is a bit of irrisponsibility on the the part of borrowers as well as the lending industry. But the fact remains that some people on low incomes do use credit to fulfil absolute needs like medical or car repairs, a reality that the well off cannot evebn relate to. ...................
The folks who are truly in need are one thing. The ones who must have cable, internet, the latest fancy phone, a car payment.....(most of the recipients of assistance)... Those are the ones I have little or no sympathy for. Do you defend those as being in need??
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Old 08-05-2011, 12:04 AM  
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To retain my debt free status and avoid insurance payments as well I once cashed in a $10.000 whole life insurance policy to purchase a car. My boss suggested that it would be better to borrow from the cash value of the policy. However, a whole life policy really diminishing term insurance and a low interest savings account. Dividends are not taxable as they are overpayment of premium (as the cost of the term insurance is calculated for the year). The policy was good while I was in college and starting my family, however term insurance would have served the need better. So I became self insured using credit union.
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Old 08-05-2011, 09:41 AM  
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Originally Posted by YelloJeep View Post
The folks who are truly in need are one thing. The ones who must have cable, internet, the latest fancy phone, a car payment.....(most of the recipients of assistance)... Those are the ones I have little or no sympathy for. Do you defend those as being in need??
I would argue that basic high speed internet and a basic used car payment are justifiable, yes not absolutely required but neither is a refridgerator but I wouldn't hold that against them either.

welfare police would do some good, require action plans and goals towards becoming self sufficient, there are too many people abusing the system although I think the current trend now is getting disability for those that don't really need it or staying on it far longer then justified. however at the end of the day abuse is not the primary cause of what is bringing this country down financially.
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Old 08-05-2011, 11:35 PM  
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The Tea Party, Take Two

Ban the Debt Limit

related

http://www.nytimes.com/2011/08/06/op...-take-two.html

OP-ED COLUMNIST
The Tea Party, Take Two
By JOE NOCERA
Published: August 5, 2011


Quote:
In the four months since I began writing an Op-Ed column, the thing that has most surprised me is how darned liberal I sound sometimes. I know that seems like a strange thing to say, so let me explain.

Early in my career as a journalist, I had a mentor, Charlie Peters, who believed strongly that it was important for liberals to criticize various wrongheaded tenets of liberalism. He used his magazine, The Washington Monthly ? and his young editors, of which I was one ? to do so regularly. I remember once writing an article so critical of teachers? unions that my mother was moved to complain in a letter to the editor.

In Texas, where I started writing about business, my views evolved further. Businessmen were not the embodiment of evil, as liberals sometimes seemed to think. Some regulations made sense, but others did not. And so on. I came to see myself as a pragmatist who favored common-sense solutions over ideology.

Then came the financial crisis. I like to joke that there?s nothing like a good financial crisis to turn you into a liberal. But it?s not really a joke. The more I learned the back story that led to the crisis, the more horrified I became. The lack of regulation and oversight of Wall Street and the big subprime companies like Countrywide, driven by the ideology of deregulation, was thoughtless and irresponsible. The refusal of bank regulators to stop subprime abuses bordered on the criminally negligent. The unwillingness of the Obama Justice Department, even now, to hold anyone to account for their role in the crisis has been disheartening.

Once the Republicans gained control of the House of Representatives, they began to systemically undermine the Dodd-Frank reform law, pushing back against new, and mostly sensible, regulations designed to prevent another meltdown. The worst was the way Republicans took a hatchet to Elizabeth Warren as she tried to set up the new Consumer Financial Protection Bureau. Such an agency, had it been in existence prior to 2008, might have prevented millions of Americans, many of them poor and financially unsophisticated, from being gouged by mortgage companies. Watching it all unfold made me angry.

That anger reached its apex on Tuesday, when I wrote a column comparing the Tea Party Republicans to terrorists. The words I chose were intemperate and offensive to many, and I?ve been roundly criticized. I was a hypocrite, the critics said, for using such language when on other occasions I?ve called for a more civil politics. In the cool light of day, I agree with them. I apologize.

I still think it was terribly wrong for the Republicans to use the threat of default to insist on massive spending cuts, though President Obama also deserves blame for playing his hand so poorly. Putting on my pragmatist hat again, I also think Congress could not have chosen a worse time to rein in spending. Yes, the country?s enormous debt ? and the entitlement programs that are driving the federal deficit ? needs to be brought under control.

But look at how sick the economy is. Standard and Poor?s just downgraded U.S. debt for the first time in modern history. Despite the better-than-expected job numbers on Friday, unemployment remains stubbornly, and unacceptably, high. So far this year, G.D.P. growth is under 1 percent. The stock market is skittish. Companies have cash, but they aren?t hiring because there is no demand for their products.

Choking off spending can only make matters worse. Mark Zandi, the well-known economist at Moody?s Analytics ? who applauds the debt ceiling deal ? acknowledged to me that if major spending cuts take place in 2013, as is currently envisioned, they will cost the country 1.5 percent of G.D.P. The debt ceiling deal, it seems to me, practically guarantees another recession.

Most frightening of all, the hand-to-hand combat over spending is going to resume shortly when Congress returns from the August recess, and its supercommittee will start to look for an additional $1.5 trillion in cuts. It is hard to see how the outcome of those negotiations will be any different from this last awful go-round. In all likelihood, they will inflict more damage to our battered economy.

Undoubtedly, I?ll write columns about those negotiations. But I won?t be calling anybody names. That I can promise.

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Old 08-05-2011, 11:57 PM  
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Here is the S&P rationale which is about what I would expect with so little a chance for deficit/debt resolution.
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We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We also believe that the fiscal consolidation plan that Congress and the Administration agreed to this week falls short of the amount that we believe is necessary to stabilize the general government debt burden by the middle of the decade.

Our lowering of the rating was prompted by our view on the rising public debt burden and our perception of greater policymaking uncertainty, consistent with our criteria. Nevertheless, we view the U.S. federal government's other economic, external, and monetary credit attributes, which form the basis for the sovereign rating, as broadly unchanged.
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Old 08-06-2011, 11:26 AM  
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Ban the Debt Limit

Nevertheless, we view the U.S. federal government's other economic, external, and monetary credit attributes, which form the basis for the sovereign rating, as broadly unchanged.
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Old 08-07-2011, 08:58 AM  
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. . . . again, consider the purchasing power the US would have if not for that pesky interest payment!
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Old 08-07-2011, 02:16 PM  
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Originally Posted by Eddie_T View Post
. . . . again, consider the purchasing power the US would have if not for that pesky interest payment!
Borrowing can increase purchasing power, even with the interest payments. This may seem counterintuitive to the average consumer. The issue is that the interest rates available to the average consumer are quite high. MUCH higher than the interest rates the government pays on its debt.

The following example is quite simplistic and ignores most market forces. If we're looking at the market in general, those forces average out. While the exact situation I'm speaking of doesn't scale upward, the concept described by this situation does.

Let's say that an hour of the work you did today has a real value of A. ("A" can't be measured in "dollars", at least not without referencing the value of a dollar at a specific point in time.) If you had done the same work 5 years ago, the value would have been A. If you did the same work 5 years from now, the real value would be A. The dollar cost of A will vary with time due to inflation.

Let's say I want to purchase a widget with a real value of B. This widget currently has a dollar cost of X. If I purchase this widget in the future, I will spend X+Y dollars, due to inflation. If I borrow X dollars today and purchase that widget, I will have acquired a widget valued at B for X+Z dollars, where Z is the sum cost of borrowing the money.

Generally, when a consumer borrows money, Z will be greater than Y; the interest rate will significantly exceed the inflation rate, and the consumer pays the difference between Z and Y for the convenience of purchasing sooner.

The interest rate the government pays is nearly the same as the inflation rate, and is frequently lower. For the federal government, on average, Y and Z are virtually equal.

This means that even though we pay interest on the money borrowed, our purchasing power is not actually affected by our debt. Where the purchases make it easier for people to do business, the GDP is improved, tax revenue is increased, and total government spending power is increased.

AGAIN, smart household finances DO NOT SCALE UP to the federal level. If one could borrow money at a guaranteed interest rate that is practically identical to historical inflation rates, the smart approach is to take on every last cent of debt possible and invest it into low-risk, appreciable assets. Even then, though, this would only work so long as the person doing the borrowing can't significantly alter the market.
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