Americas Financial Future

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#21

Re: Americas Financial Future

[QUOTE=desslock;99161]Then why are companies sitting on all their cash? (President Obama says companies have nearly $2 trillion on their balance sheets)
[/QUOTE]

$70 billion of that is at Apple. Christ. Apple has more cash on hand than the American government thanks in part to the 3+ tril spent on the Bush tax cuts that did nothing to stimulate our economy. (Maybe you can prove it otherwise? See above post.)

But there is a huge difference between a VC spending money and a publicly traded company. Publicly traded companies as a rule don’t act as a VC does on start ups. The VC market is on fire now. There is a lot of risk being taken. Spend a day or two reading through tech crunch or one of the other blogs that deal with the VC market.

Oh. And no comment on Texas? It is a state that is very much unlike New York and California on its “tax philosophy”.

#22

Re: Americas Financial Future

I echo everything Lloyd said…

I’d add that New York is doing pretty well - ever since we got a strong (gay friendly) Democratic governor who’s been able to stop the Republicans from being obstructionists. After decades of not getting budgets done on time they got one passed 5 days early this year.

So please stop citing New York as an example of things going wrong - the reality is just the opposite. We’re doing fine.

#23

Re: Americas Financial Future

[QUOTE=rawTOP;99167]

So please stop citing New York as an example of things going wrong - the reality is just the opposite. We’re doing fine.[/QUOTE]

And if I am not mistaken his budget closed a 10bil gap by not killing unions?

#24

Re: Americas Financial Future

Spending your incomes, along with money you borrow against the appreciating value of you assets, certainly pumps up growth for a while. But, as we’ve just seen, it also leads to a gross miss-allocation of capital, unsustainable growth, and a depletion of savings.

So, could it be that the high income tax plus investment based tax shelters of prior eras were actually a more healthy & sustainable system than the low income tax rates of today?

Lot’s of historical indicators point to that direction. Not only that, you just have to look to your good neighbours to the North…Canada.

#25

Re: Americas Financial Future

Debt is not a bad thing if it’s invested wisely. Borrowing to give tax breaks is a bad investment.

We wouldn’t even be having this debate if it weren’t for some whack jobs in the tea party. I mean… I don’t get how it is even legal to pass a budget through Congress and then not be able to pay for what we already allocated. (It probably isn’t.)

A friend of mine is a die hard Republican and I always ask him to show me a period in recent history where after a tax cut, revenue went up as a percentage of GDP. He can’t. My next question to him would be after revenue went up as a percentage of GDP, show me where the deficit went down after the tax cut. Suffice to say, there is only a puzzled look on his face and silence.

I can easily show him the converse. Look at the Clinton years. Taxes went up. 23 million jobs were created. We had a budget surplus and were on track to wipe out debt out in 7 years.

But, do we really have a deficit problem? Look at the time after World War II. In 1945 the deficit was 120% of GDP. Right now it is 97%. How did they deal with the deficit crisis in 1945. They raised taxes and invested in infrastructure, the exact opposite of what the Republicans want now. They actually spent money. What happened? Unemployment dropped to an almost low under Eisenhower in the early 50’s.

Here is the million dollar question - what was the highest tax rate under Eisenhower? The answer may shock those that don’t know…

#26

Re: Americas Financial Future

I don’t know… but it would be interesting to find out :wink:

#27

Re: Americas Financial Future

Here you go Adam -

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#28

Re: Americas Financial Future

What happened starting with Reagan is that the US saw a huge shift in how revenue was sliced up. (My facts are by memory, so if anyone wants to correct me, please do.) Before Reagan it was something like the richest 10% in the country had something like 60% of the total wealth. Now it’s some wacky number like the richest 10% control 90% of the wealth. When you hear the expression that the rich are getting richer and the poor are getting poorer in America, it is dead on right. We have been borrowing money for the longest time to give those making the most a task break. That to me is a bad investment.

When Bush took office he had a budget surplus. He was coming in on the heals of one of the biggest expansion of jobs in the history of the US under any president, 23mil. The CBO projected that in 7 years we would be debt free at the rate we were going. Look where we are now…

If this whole tax thing about cutting taxes on the most wealthy really works why is our economy gone to hell?

#29

Re: Americas Financial Future

[QUOTE=zbuckz_lloyd;99178]
But, do we really have a deficit problem? Look at the time after World War II. In 1945 the deficit was 120% of GDP. Right now it is 97%. How did they deal with the deficit crisis in 1945. They raised taxes and invested in infrastructure, the exact opposite of what the Republicans want now. They actually spent money. What happened? Unemployment dropped to an almost low under Eisenhower in the early 50’s.

Here is the million dollar question - what was the highest tax rate under Eisenhower? The answer may shock those that don’t know…[/QUOTE]

(Let’s leave out the point that the Eisenhower years ended in a recession, which was severe enough so that voters elected John F Kennedy because they wanted a change — and who subsequently lowered marginal income tax rates to spur the economy)

Keep in mind — in the Eisenhower years, no states had an income tax. Nor had Medicare been established, and Social Security taxes were much much lower. So it’s very misleading to point to today’s top tax rate of 35% and claim the upper class are paying few taxes.

Let’s take as an example, New York where the top state income tax rate is 8%.

Someone’s effective top marginal tax rate in the Empire State would therefore be 35% + 8% + 7.5% Medicare Payroll Tax + 7.5% Social Security Payroll Tax.

Leaving out New York City’s personal income tax, they’re effective tax rate is 58%.

Another difference between the Eisenhower years and today is that in those days it wasn’t a complete breeze to set up residences, off-shore accounts or move. I get DVD’s from United States porn companies whose 2257 information shows them registered in places like Cyprus, the Netherlands, etc.

I get info from producers located in Quebec, Canada, but sure enough, they sure as hell aren’t incorporated there.

Today’s world means that countries who institute taxes will immediately face competition from other jurisdictions. This, once again, reinforces my point that the Laffer Curve is correct. When tax rates increase, there is not necessarily an increase in revenues because those effected modify their behavior.

Everyone responds logically to incentives.

Steve

#30

Re: Americas Financial Future

Steve,

Can you show me where after a reduction in taxes that revenue went up as a percentage of GDP? And if that can be found can you find one where the defecit actually went down?

Also, considering that Texas is a state with a much different tax philosophy than say New York, why is it that they have a budget problem that some say is not as bad as California but worse than New York. Also, even with all our high taxes, the unemployment rate based on June 2011 data is .2 lower than Texas.

hmmmm…

Regarding your tax analogy. Yes, going back to the Eisenhower rate would be insane, but going back to the Clinton years tax rate when 23 million jobs were created, we had a budget surplus, and were on track to have a zero deficit in 7 years… There is way more than enough incentive in that fiscal policy to spur growth.

I am a poker player. For those that say that raising the tax rate on the upper 10% of Americans that control 90% of the wealth will kill the economy, I will call your bluff and go all in.

As of yet absolutely no one has shown me where reducing taxes has resulted in revenue increasing as a percentage of GDP in modern times while at the same time reducing the deficit. (And some had had the chance, like in this thread…)

#31

Re: Americas Financial Future

[QUOTE=zbuckz_lloyd;99227]Steve,

Can you show me where after a reduction in taxes that revenue went up as a percentage of GDP? And if that can be found can you find one where the defecit actually went down?[/QUOTE]

Lloyd, does this article from Time Magazine answer your question?

The graph in the article shows that when Clinton cut the capital gains tax from 28% to 20% in 1997, revenue increased the following three years.

The graph in the article shows that when Bush cut the capital gains tax from 20% to 15% in 2003, revenue increased the following five years.

Source: Congressional Budget Office

Does it make sense now? Low taxes provide the incentives for people to stay working and investing in this country, where they take risks with their money, creating companies like Netflix and Twitter and neighborhood restaurants.

Incentives matter. We all respond logically to them.

Steve

#32

Re: Americas Financial Future

Well. There is a difference between capital gains tax and normal revenue tax. (We can get into that later.) I was looking for Normal Revenue Tax. You know what I mean…

But… Your argument is only 1/2 valid.

So no, the reduction in the capital gains tax rate from 20% to 15% in 2003 did not result in an increase in revenue over the course of the business cycle. In 2000 receipts totaled $119 billion, which equals $143 million in 2007 dollars. In 2007, they totaled $122 billion. That’s a 15% decline

Read more: http://curiouscapitalist.blogs.time.com/2008/01/28/do_capital_gains_tax_cuts_incr/#ixzz1TzQpFVWu

#33

Re: Americas Financial Future

Interesting points of view, but you know, as interesting as it all sounds, for me, the bottom line is that back in the Golden Years ( the fifites and sixties ) it took one member of a family to earn a decent living, for people to save money, and afford to live and dream about a future. People could put money aside, could enjoy a bit of time off, and not worry about choosing between food and shelter.

That isn’t how it is today, no matter who is responsible. Fact is, single income families rarely exist today. It takes both partners working to just exist, to keep food in the refrigerator, to keep the roof over the head, and to have heat in winter. Things cost much more, while the level of disposable income has dwindled for a larger segment of society, than before.

The gap between those who have it all, and those who don’t, is wider than every. It doesn’t take a financial wizard to know that the more you owe, the less you have to actually save, and spend. It costs to borrow, unless you have no intention of paying it back, or you plan on sluffing it off to those not yet born.

my 2 cents

#34

Re: Americas Financial Future

[QUOTE=Gaystoryman;99243]Interesting points of view, but you know, as interesting as it all sounds, for me, the bottom line is that back in the Golden Years ( the fifites and sixties ) it took one member of a family to earn a decent living, for people to save money, and afford to live and dream about a future. People could put money aside, could enjoy a bit of time off, and not worry about choosing between food and shelter.
[/QUOTE]

I agree entirely. The number of massively powerful corporations was far lower, people worked for smaller businesses, people invested and people didn’t have credit cards. The focus was more on the immediate community and economies were smaller. Now we’re in far deeper water (driven by the greed of the already massively wealthy) because all it takes is one of those global corporations to collapse to cause a global meltdown.

One of the biggest problems right now is the level of debt and this incredible idea that it’s somehow healthy to have debt. It’s not healthy at all. If you didn’t earn something you have no reason to be spending it, it’s remarkable how well that little mind fuck has worked on the population to make them think that it’s perfectly fine to have debt. It never was, and it isn’t now.
But in our wasteful consumerist society, where pointless objects are gobbled up and then thrown away for no reason other than status, the competition to be better than the guy next door and have that new iPhone (even though the last one was perfectly fine) drives the economy. It’s all about envy and greed.

#35

Re: Americas Financial Future

lol We’re not talking about going into debt for a new Gucci handbag. We’re talking about going into debt for investment and subsistence. We’re talking about social programs to keep people alive and healthy - like food stamps, basic health care, and then other social programs which can be viewed as investments - education (where the student pays you back with interest), and infrastructure (which allows business to grow and prosper), and efficiency programs like solar (which pay you back over time and create jobs in the meantime). And unlike you and me the government can borrow at close to 0% interest.

I totally reject the idea that all debt is bad. Case and point… When we bought our apartment in 1998 we had to put $30K down. My bf’s mom chipped in his $15K, but I put my $15K on credit cards. Totally irresponsible use of debt? NO… Then when we refinanced we took out something like $75K more to redo our kitchen and bathrooms. Then the renos cost substantially more than we were expecting and our credit card balance went up again. Was it completely irresponsible to get an expensive Poliform kitchen ($21K just for the cabinets) and a $4500 Sub Zero? One might think so, but the opposite was true. We sold in 2009 and netted a nice sum of money - and that was in a down market - a year before we could have made $100K more. That profit more than paid for all the maintenance charges we paid over the previous 11 years. So we basically lived for free and then walked away with money at the end of it. And it wouldn’t have happened if we hadn’t put stuff on credit cards. AND… the reason the buyer picked our place in a glutted market was the kitchen - those expensive cabinets and the Sub Zero really paid off - they attracted an all-cash buyer. Bottom line - It’s actually wise to go into debt sometimes. It can even be smart to be extravagant at times. Years before buying our place I also put computers and software on credit cards at a time when I was nearly broke and was having a hard time paying my bills. Sometimes those purchases were even stupid ideas (in hindsight), but if I hadn’t gone into debt I wouldn’t have had the equipment I needed to make money and get out of debt.

You don’t even want to know the size of the mortgage we just signed earlier this year. It’s frightening when I think about it. But I’ve run the numbers and we can afford it and taking on that debt will transform our lives (we’re getting 3,100 sq. ft. + outdoor space in Manhattan) and we’ll net a nice sized profit when we go to sell. The market can even go down a fair amount and we won’t lose money. But without the debt, we wouldn’t make the money. It’s a risk, but it’s worth it.

Debt can be a very good thing if you’re smart about it…

#36

Re: Americas Financial Future

RawTop - you made those choices about debt and took a risk. We’ve all done that… and most of us have worked damned hard to make sure that risk was rewarded. Others have worked equally as hard and haven’t been rewarded. Lady luck has a hand to play.

The problem with debt accrued by governments is that the people who borrowed yesterday won’t be around in a few years time. They won’t be the people who will be held accountable - it will be the current government. They are then forced to borrow more to get out of a hole… and the spiral continues until eventually there’s not more borrowing available.

I doubt the whole Greece Debt Crisis has made news in America… they just received a second massive bail-out for the second time in 2 years. Next year most people expect them to default and take down the entire Euro currency. When that happens you can bet the US debt mountain will follow suit UNLESS the US can bring its deficit under control beforehand - and that means starting to pay off it’s enourmous debt which is close (per capita) to that of Greece today.

#37

Re: Americas Financial Future

Regarding debt -

http://finance.yahoo.com/banking-budgeting/article/113237/how-apple-would-solve-debt-crisis-marketwatch?mod=bb-budgeting&sec=topStories&pos=7&asset=&ccode=

#38

Re: Americas Financial Future

RawTop - I know exactly what you are talking about, but the fact that people can make a profit on a property does not justify the massive levels of debt people have around their necks. When I was growing up it was the DREAM of my parents to pay off their (modest) mortgage. It was the only debt they had and they hated it. They didn’t have credit cards and they didn’t have an overdraft.
They lived within their means and if we couldn’t afford something we either went without or we worked to attain it. I don’t have a mortgage, because I cannot afford it. But I am looking a buying in the next few years (I’m just waiting for the inevitable housing market crash that we should have had several years ago) but when I do it I’ll be looking for a property that I can actually afford, with enough space for me.

I view government debt in exactly the same way. Individuals pay taxes to support social welfare programs and the maintenance of infrastructure. If you don’t have enough money coming in, you cannot afford to pay it out. When there is an imbalance in this very basic fact you have a failed system that has already collapsed. It really is that simple.

The financial system in America has been broken beyond repair for a long time. You just need to look at the legalized slave labor system to see that the financial infrastructure of America is totally screwed and distorted, with corporations and government colluding to turn a profit. It is just one example, but it’s a good symptom of the wider problem; instead of those corporations having to employ citizens and pay them a decent wage, they pay peanuts to the bulging prison population, while lobbying government to INCREASE prison numbers for their slavery business. Research the companies who lobbied for the three-strikes rule.
How does that affect the profitability figures against nations like China? Without that massive slave workforce supplying the government with military equipment, would the nation have collapsed ten years ago? Would the poverty gap be far lower if corporations were not using slave labor to inflate their profits?

To be honest, it really doesn’t matter how many facts and statistics there are to throw around; because everyone produces different figures to suit their own end, and that goes for governments as well as commentators. I truly believe that the level of personal debt, the level of government debt, the corruption of corporation and state and the influence of failing fiat currencies will bring the USD into a collapse. In my opinion it is inevitable.

If we hadn’t bailed out the banks and some European nations, yes it would have been bad. But it wouldn’t have been as bad as it is now going to be because we bailed them all out. Either way we were all looking at massive changes ahead, but the panicked moves our politicians have taken to try to stop it from happening on their watch have only made the situation worse in the long run.

In the end we are talking about a Gucci Handbag, as well as larger issues. We live in a society where it is now reasonable to demand and want, instead of strive for and need.

If you can’t afford it, you don’t buy it - that applies to the individual as well as a government.

#39

Re: Americas Financial Future

This wouldn’t have to happen if the people elected smart leaders. Clinton proved that by having a budget surplus and having the CBO predict that we would be debt free in 7 years. Then we elected Al Gore president and the Supreme Court decided they wanted George Bush as president instead. The rest is history.

#40

Re: Americas Financial Future

[QUOTE=desslock;99240]Lloyd, does this article from Time Magazine answer your question?

The graph in the article shows that when Clinton cut the capital gains tax from 28% to 20% in 1997, revenue increased the following three years.

The graph in the article shows that when Bush cut the capital gains tax from 20% to 15% in 2003, revenue increased the following five years.

Source: Congressional Budget Office

Does it make sense now? Low taxes provide the incentives for people to stay working and investing in this country, where they take risks with their money, creating companies like Netflix and Twitter and neighborhood restaurants.

Incentives matter. We all respond logically to them.

Steve[/QUOTE]

Actually,

After reading this again it doesn’t show anything that you are trying to prove. Really. It doesn’t.