Nice cut and paste Rocco. Did you actually write any of that yourself.
My wife started a business two years ago. We had to utilize funding of someone "wealthy" to start that business. We are creating goods and services marketed to the public, employing people, paying wages, and (hopefully) making a profit. Leaving the money sitting in a "bank account" because the rich can't find anything else to spend it on is silly and presents little relation to reality. The wealthy aren't any different than you and me as to their interest in investing and growing their wealth.
I am working with a friend of mine on another business venture. We are currently seeking funding for this venture. Wealthy people will be providing their wealth to aid us in that venture. We will be able to grow our wealth via sweat equity. They will be able to grow their wealth through growth of the company and profitability. We will provide goods and services that are available to the public.
"Wealthy" people have only two options for the wealth they possess, spend it or invest it. They buy cars, they build houses, they buy furniture, they buy electronics, they buy motorcycles, they buy horses, they take trips, they stay in hotels, they buy food, they drink wine, they buy clothes, they buy jewelry, they go to sporting events, they buy aircraft, they buy boats, they buy computers. Each of these were built by someone, packed and shipped by someone, warehoused by someone, sold by someone.
What economy is built on another foundation other than consumption?
The other option is that they invest. They invest in ventures hoping to grow their wealth through owning stock in a company that is eventually sold for more than they have invested in it. The wealthy buy bonds. Why are bonds sold? They buy bonds that allow companies to borrow the money they need to expand production, complete R&D, build factories, hire new employees, launch new products, and consolidate and vertically integrate with other companies.
The wealthy buy stocks. Why are stocks sold? Companies sell stocks in order to raise capital to expand production, complete R7D, build factories, hire new employees, launch new products, and consolidate and vertically integrate with other companies.
The wealthy buy muni bonds. Why are muni bonds sold? Muni bonds allow local and state governments to raise the capital they need to pave roads, build schools, improve infrastructure, launch technology initiatives, build bridges, or provide welfare benefits.
What if the wealthy leave their money in the banks? Does that mean that wealth is "dormant"? What does the bank do with it? Banks are required to retain a portion of the deposits in the bank under the reserve ratio. The remainder is used to lend money for home mortgages, business loans, car loans, boat loans, etc. Currently the reserve requirement is 10%. This means that 90% of the wealth stationed in banks is out working in the hands of the general public. Were it not for a bank loan, virtually NONE of us would have a house.
All of these processes are, by their nature, building our economy and creating jobs.
What is the alternative?
If we killed all the wealthy and redistributed their wealth evenly among all the rest of the population what would happen? There would be some (most) who would spend everything they received on perishable items and would end up with nothing. These are the folks who win the lottery and are penniless.
(As a side note 93% of all professional football and basketball players are completely penniless withing 5 years of retiring from the league.)
There would be a smaller group who would invest these funds wisely, compound their growth, and expand their wealth. In a hundred years or so, their children would again be "wealthy". There would still be those who had none. There would still be those in the middle working to increase their wealth and work to become wealthy.
I have never met an independently wealthy person who inherited it. I have met TONS of folks who started with nothing and built a business that yields them great wealth.
All that a higher tax on the wealthy will do is drive tax avoidance behavior. It will not benefit the low and middle class in the least. Any tax credit or benefit received will be offset by higher product costs, higher unemployment, and fewer opportunities to build wealth of their own.
Kennedy knew this. Too bad Obama isn't a student of history.
Demand DOES create consumption, but there must be goods and services to consume. Wealth creates the vehicle to deliver those goods and services. Simply giving someone cash to spend is like giving them a fish. Tomorrow, they will be hungry again and will have nothing to show for their expenditure.
Fats, the problem is the rich aren't consuming multiples of their income with credit card debt and mortgage lines of credit until they're leveraged to the hilt.
It seems our capitalistic system requires the middle class to leverage themselves to keep those wheels turning.
The problem is: it looks like they have, and now they're getting laid off.
Also seems like the government has leveraged itself to the hilt so Bush could have his war with Sadaam.
Now the middle class can't service their debt.
Maybe the wealthy should help fight the wars,or at least their kids, and maybe they'll have to bail out the middle class.
After all, it was their business that encouraged the consumption and profited from it.
OK. THIS is my last post. Cut and paste. Yes. It's quoted from Marrinewe S Eccley. Learn how to read douche bag. Still haven't answered the Mccain theory yet. Doesn't surprise me though.
Fats, the problem is the rich aren't consuming multiples of their income with credit card debt and mortgage lines of credit until they're leveraged to the hilt.
THAT is a problem, but it isn't a problem that the wealthy created. It's a problem that the poor have elected to create.
How long did it take our parents to buy a house? How long did it take their parents? How long did it take them to buy a car? How long did they keep it? How many TV's did they have? How many cell phones? Cable? How long did our parents keep the furniture they bought? How long THEIR parents? Did they repair or replace items more often? How much did they spend on designer clothes? $100 tennis shoes? Youth soccer? Traveling baseball teams? Expensive vacations?
The American dream is a 3000sqft house in a high end neighborhood with two cars under 2 years of age, 4 tv's with at least two of them being big screen or flat panel, two computers, etc.
We, as a society, live beyond our means because the Jones' next door do. We have outstripped our parents without having the income to back it up. We save less than our parents or grandparents did. College grads expect to start at $75,000 per year with a house, new car, and all the goodies. Their parents didn't start that way, but that is what is expected.
The wealthy aren't withholding anything from the low and middle class. The middle class are buying more than they can afford.
What would happen to prices if everyone said, "I'm not going to buy this until I can pay cash." Granted, there would be slower growth, but that growth would have zero leverage applied to it. Once you bought it, you owned it. Job market fluxuations would only affect that which you needed to pay for to survive. You wouldn't have to service the house note, the car note, the TV note, the college debt, all 6 credit cards, the second mortgage, the financed furniture bill, and the Rentco bill.
I'm working to live smaller. I'd love to get to the point where I have not debt including the house. It means that we would have to downsize, keep the cars a little longer, buy older cars to begin with, buy only what we can pay cash for, and save more than we are currently for incidentals.
I'm tired of the rat race. I don't even like the Joneses.
I don't put as much stock in the Fed Chairman of a devout Socialist President as you do.
You have an answer for everything except my question, don't you?
You're right. I'm stupid. What was I thinking. My Penn State education means nothing. It's a shame. I used to like this place, until Blake let some right wing nut jobs "Moderate" here. No wonder the number of knowledgeable people that frequent this site keeps shrinking.
Again, please delete me from this site. Later....Much later.
I would be here having this same conversation with you whether I was a "moderator" or not. What difference does me being a "moderator" have to do with it? I'm assuming you'd still be whining?
When taxes are reduced, Federal revenues go UP! Kennedy knew it, Reagan knew it, George W knew it. Hell, even Clinton knew it.
Lower capital gains equal higher revenues. George Bush's tax cuts resulted in tax revenues above the trend before the tax cuts.
Why is this so?
Do they even teach economics at Penn State.
What I do for a living is work to help individuals who make larger incomes ($500,000-$2,000,000) reduce their tax burden via qualified tax strategies and creation of tax arbitrages. As tax rates rise, high income folks work harder and spend more money working to shield income from taxes. It becomes a cost benefit analysis. They are willing to spend $50,000 to save $200,000 in taxes. Many of these strategies, while not dormant in the market, generate less growth potential than other strategies they might pursue given an incentive to utilize those funds elsewhere. In essence, the tax rate incentivizes folks NOT to receive the income in a taxable manner and strategically defer the taxes until a later date.
As tax rates decrease, the "penalty" for taking the income and spending it or investing it decreases. They are no longer willing to spend $50,000 to save $75,000 in taxes. They are more willing to either spend the money or invest in a manner less hampered by the tax rate.
This sucks for me, but is better for the economy.
Now given a lower tax rate, what happens with the money of the wealthy that ISN'T confiscated by the Federal Government? The same thing that happens with your money and my money that isn't confiscated by the Federal Government, we invest it or we buy stuff with it. Investing drives growth in the economy. Buying stuff drives growth in the economy. Both activities have a tax multiplier effect. When I buy something, the person or business selling the item earns money and pays taxes on THAT income. That product was made using labor that pays taxes on their income. That product was built with raw materials the sale of which creates income for the individual who created it. Those raw materials were created by chemicals, metals, wood, etc. The person who created that product made money on the sale of those products.
Investing also has a multiplier effect. Per share growth creates capital gains. Higher dividends drive ordinary taxes. Income from investing activities drives additional investing or are spent buying stuff. Some of that money goes into banks. Banks use up to 90% of deposits to lend money. These investing activities also provide resources for corporations to grow, to expand, to hire more people. These new employees are paid wages. These wages are then used to invest or buy stuff. Companies pay workers to build new plants, to build new equipment, to instal new IT systems.
For a person to pigeon hole their earnings into a tax reduction strategy creates only one deduction for them and denies that tax revenue to the Federal Government. The Federal Government is also denied the additional taxes of the multiplier effect.
With taxes lower, we get the benefit of reduced interest in tax reduction strategies and greater access to the multiplier effect.
Obama was informed by Peter Jennings during the debate with Hillary that lower taxes are better for revenues.
Obama KNOWS this to be true and admitted as much. For him, the tax code isn't a manner of tax revenues. For Obama, it's a matter of "fairness".
So, in summary, McCain expects to pay for his programs with a two pronged approach. Tax cuts across the board, including corporations, AND cuts in spending.
Obama plans to increase new spending AND reduce the tax revenues out of "fairness".
If Obama wins tomorrow, you will see a pretty large sell off between now and the end of the year. Individuals will take the 15% capital gains rate and reposition those assets elsewhere. They may even buy the same shares and are simply resetting their basis. Once they "buy in" to their new position, they will be much less likely to turn over those shares going forward. The economy will be less agile, tax revenues will fall.
"In 2006, the federal government spent $1 out of every $12 on interest payments, or $227 billion. That’s more than we spend on education, housing, veterans’ care, and environmental protection, combined." (Brookings Institute)"
Please compare that to the interest many families pay on their new home in the first year; then combine that with interest paid on their other credit lines and card. One out of twelve would mean a family earning $120K would be paying $10K in interest. That's about par for that class of new home owners these days.
Posted on Wednesday, November 05, 2008 - 12:17 am:
"Please compare that to the interest many families pay on their new home in the first year; then combine that with interest paid on their other credit lines and card. One out of twelve would mean a family earning $120K would be paying $10K in interest. That's about par for that class of new home owners these days.
Your point was?"
My point was the obvious one. In fact, the point isn’t mine. The point was made by the Brookings Institute. I merely quoted.
Exponentially extrapolating an individual household as justification for not worrying about the national debt? Making that argument based on the very group feeling the effects of overextending their credit?
I would have thought you could have done better than that. It's a ludicrous argument. If I didn’t know better, I would think you were being deliberately obtuse.
Really though, there is no point in debating the issue. I find your logic so flawed that neither of us would find any traction with the other. It would only frustrate both of us. I see your response as evidence that you have no understanding of the issues at hand, and you obviously see mine in the same light.
“$227 billion (in interest). That’s more than we spend on education, housing, veterans’ care, and environmental protection, combined”
If you think there is nothing wrong with that, and it has no real negative impact on the functioning of our country, then I am at a complete loss as to how to continue.
Posted on Wednesday, November 05, 2008 - 12:43 am:
Here we go . . . .
Standing in line . . .no kidding . . . and one of the Dem poll watchers is asking a large black gal who she was going to vote for . . . the immediate response . . "Bro-bama. . he's gonna help pay my rent"
It was a good speech he gave and I wish him the best . . . but there are going to be some really disappointed folks when they figure out they don't get their rent paid.