Economy

[Timber Loftis]

Originally Posted by Micah Foehammer As expected, the share of income paid to Federal income taxes ratchets up based on the progressive nature of the tax code.

I want to point out a hole in this conclusion.

Taxes and Billionaires
By NICHOLAS D. KRISTOF

The House speaker, John Boehner, suggests that the Republican threat of letting the United States default on its debts is driven by concern for jobs for ordinary Americans.

“We cannot miss this opportunity,” he told Fox News. “If we want jobs to come to America, we’ve got to give American businesspeople the confidence to invest in our economy.”

So take a look at one of the tax loopholes that Congressional Republicans are refusing to close — even if the cost is that America’s credit rating blows up. This loophole has nothing to do with creating jobs and everything to do with protecting some of America’s wealthiest financiers.

If there were an award for Most Unconscionable Tax Loophole, this one would win grand prize.

Wait, wake up! I know that “tax policy” makes one’s eyes glaze over, but that’s how financiers have gotten away with paying a lower tax rate than their chauffeurs or personal trainers. Tycoons have bet for years that the public is too stupid or distracted to note that in many cases they’re paying just a 15 percent tax rate.

What’s at stake is the “carried interest” loophole, and President Obama is pushing to close it. The White House estimates that this would raise $20 billion over a decade. But Congressional Republicans walked out of budget talks rather than discuss raising revenues from measures such as this one.

The biggest threat to the United States this summer probably doesn’t come from Iran or Libya but from the home-grown risk that the nation will default on its debts. We don’t know the economic consequences for America or the world, and some of the hand-wringing may be overblown — or maybe not — but it’s reckless of Republicans even to toy with such a threat.

This carried interest loophole benefits managers of financial partnerships such as hedge funds, private equity funds, venture capital funds and real estate funds — who are among the highest-paid people in the world. John Paulson, a hedge fund manager in New York City, made $4.9 billion last year, top of the chart for hedge fund managers, according to AR Magazine, which follows hedge funds. That’s equivalent to the average per capita income of 184,000 Americans, according to my back-of-envelope calculations based on Census Bureau figures.

Mr. Paulson declined to comment on this tax break, but here’s how it works. These fund managers are compensated mostly with a performance bonus of 20 percent or more of the profits they make. Under this carried interest loophole, that 20 percent is eligible to be taxed at the long-term capital gains rate (if the fund’s underlying assets are held long enough) of just 15 percent rather than the regular personal income rate of 35 percent.

This tax loophole is also intellectually vacuous. The performance fee is a return on the manager’s labor, not his or her capital, so there’s no reason to give it preferential capital gains treatment.

“The carried interest loophole represents everyone’s worst fear about the tax system — that the rich and powerful get away with murder,” says Victor Fleischer, a law professor at the University of Colorado, Boulder, who has written about the issue. “Closing the loophole won’t fix the budget by itself, but it gets us one step closer to justice.”

At a time when the richest 1 percent of Americans have a greater collective net worth than the entire bottom 90 percent, there are other ways we could raise money while also making tax policy more equitable. The White House is backing some of them in its negotiations with Congress, but others aren’t even in play.

One important proposal has to do with founder’s stock, the shares people own in companies they found. Professor Fleischer has written an interesting paper persuasively arguing that founder’s stock is hugely undertaxed. It, too, is essentially a return on labor, not capital, and shouldn’t benefit from the low capital gains rate.

Likewise, Europe is moving toward a financial transactions tax on trades made in financial markets. That is something long championed by some economists — especially James Tobin, who won a Nobel Prize for his work — and it would also raise tens of billions of dollars at a time when it is desperately needed. It makes sense.

The larger question is this: Do we try to balance budget deficits just by cutting antipoverty initiatives, college scholarships and other investments in young people and our future? Or do we also seek tax increases from those best able to afford them?

And when Congressional Republicans claim that the reason for their recalcitrance in budget negotiations is concern for the welfare of ordinary Americans, look more closely. Do we really want to close down the American government and risk another global financial crisis to protect the tax bills of billionaires?

[Micah Foehammer]

Originally Posted by Timber Loftis This tax loophole is also intellectually vacuous. The performance fee is a return on the manager’s labor, not his or her capital, so there’s no reason to give it preferential capital gains treatment.

I have absolutely no problem with eliminating the preferential capital gains treatment on that performance fee TL. None whatsoever.

[Azred]

I can see that it is time for the mathematician to step in and clear up a few things.

If your expenses are greater than your income, then you are losing money and you must either increase your income or cut your expenses; this is true whether you are an individual or a government. As individuals, we can get better jobs or take on extra part-time or full-time jobs to increase our income and we can cut out things that aren't needed to reduce expenses. Government, unfortunately, may only raise taxes to increase income even though they can cut spending at any time.

Do you recall the somewhat humorous definition of "insanity" being "doing the same thing over and over the same way and expecting different results"? Our current system of taxation and spending fits this definition exactly--it is insanity.

As far as the government cutting spending, we can start with the easy stuff--why have we had troops stationed in places for decades where there is no current conflict? Shut those places down and bring those people home--quit spending that money. The UN is a failed venture from a bygone era--cut off all money going to the UN immediately.
Now...for the not-so-easy stuff. If anyone can give me any valid reason why I should pay for someone else's medical care then I will consider that reason. Also, why should I pay for someone else's retirement? In fact, why should I pay anything for anyone who is not in my immediate family, unless I choose to give money to someone for something? Similarly, why should you pay for my care, hm?
Why has the bureaucracy in Washington, D.C. grown without any real benefit? The War on Poverty, which is older than I am, is a failure--why continue spending money on programs that don't work? The War on Drugs? Another failure and another example of trying to legislate morality.

In short, there are many programs in the budget that can be cut, either dramatically or completely and the nation will quit wasting that money.

Now...for governmental income...I have the numbers on a spreadsheet that I got from the IRS website that go up to 2008. The table won't copy/paste well so I will try to format it to make it readable. The Excel file is 4MB; I can e-mail it to anyone who requests it if you want to see it for yourself.

income group___________number______group avg
full population_____152,462,000________$54,315
bottom 90%________137,215,800________$31,244
top 10% - 5%________7,623,100_______$127,184
top 5% - 1%_________6,098,480_______$211,476
top 1% - 0.5%_________762,310_______$443,102
top 0.5% - 0.1%_______609,848_______$878,139
top 0.1% - .01%_______137,216_____$3,238,386
top .01%_______________15,246____$27,342,212

The sum of the (number)*(group average-96,000) for the non-bottom 90% groups is $2,530,118,696,583.90. 6.2% of this number is $156,867,359,188.20--this is the amount of money that the Federal Government is *not* collecting annually for Social Security because they cap the deduction at $96,000. $156 billion is a lot of money, even for a government.
The total (number)*(group average) = $8,280,985,934,693.33 = $8.281 trillion. The Federal Budget (available here in .pdf format), on page 171 shows that total outlays for 2012 are projected at $3.729 trillion with revenue of $2.627 trillion for a defecit of $1.102 trillion (they have $1.101 but they were rounding and cutting off numbers).

Here is where it gets easy again. If spending were decreased by 10% across the board and taxes, averaged out for all citizens, were raised by 5% these numbers become 2.758 - 3.356 = -0.598 trillion, cutting the defecit in half. If spending is cut by 13.5% and taxes raised by 6.5% the numbers become 2.7978 - 3.2256 = -0.4278. As you can see, we can thus get to a point where this number becomes 0 IF government will cut spending somewhat and the tax codes are modified to remove loopholes and things like capital gains rates are increased.

But will an increase in the capital gains tax really make a difference? The numbers show that income information differs on the spreadsheet by only $1,522 annually for people in the Top 10% category (defined as income >= $109,062 including capital gains). Earners in the Top .01% category have an average of $2,727,179 in annual income due to capital gains. All totalled, the numbers show $180,533,638,856 for capital gains income; raising the tax rate on it from 15% to 20% would generate an extra $9 billion. Not a heck of a lot--probably less than people might think--and certainly not enough to really impact the Federal Budget, measured in the trillions of dollars.

No, clearly cutting spending is more important. "Tax the rich" won't really amount to much. Cut spending by 20% and raise average taxes by 7.5% and the defecit becomes 0.1592 trillion--not a surplus, but not bad, either. If you think this gouges the "middle class" (there really isn't such a thing, but we'll cover that later) note that the average income for the Bottom 90% is $31,244. Subrtact the standard deduction of $11,400 and (on average) 3 deductions for a total of $10950, bringing the taxable income down to $8894 on the tax table this is $893 for married filing jointly (as most filers are). 26 bi-weekly paychecks per year means that if this example had more than $34.35 withheld on every paycheck that they owe no Federal Tax at the time of filing--they have already paid their share. An increase of 7.5% on this example would be a whopping (893)(0.075) = $67--hardly a "burden". Individual cases may vary, of course.

So...what can we see so far? Hard-core Tea Party folks (people who use the derogatory "teabagger" term need to quit--not everything in life is a sexual reference) do make a mountain out of a molehill on this particular topic AND that government should cut spending. We could go through the budget I link ealier and find things to cut or cut everything 20% like I suggest.

Now...as far as mortgages and credit are concnerned.
monthly payment = price*[(rate/1200)/(1-(1+(rate/1200)^(-360))) + (prop tax rate/1200)] (at least within $5; 30-year note). This will tell you whether or not you can afford a particular house, depending upon the main interest rate and the property tax rate in your area, which is easily obtained online. The number one reason most people don't own a house--and the reason we don't at this time--is the down payment. Many lenders, of course, want a bunch of money up front and it takes time to save that money, unless you look into 100% financing. Naturally, if you have bruised or poor credit you won't get that (unless they are willing to give you a higher interest rate).

Personal finance advice: buy a low-cost car that goes from point A to point B and save the money you aren't spending in a car payment. Do not buy anything you do not absolutely need until you can pay for it in cash. If you are young and have a job paying good wages then, yes, use some credit but for pity's sake be careful with it. There is no reason for college students to have $20,000 in credit card debt (honestly, there is no reason for anyone to have that much).

I apologize for the TLDR here, but there was a lot to cover. Feel free to nitpick if you must; however, all I did was put up numbers and pure mathematics does not bend the truth.

Oh, I forgot to include the example of a 7.5% increase for someone making $109,762--the cutoff value for the Top 10% group. Again, we presume 3 deductions but we will also presume benefits that reduced their taxable income by 10% each paycheck so taxable income = (109762)(0.9) - 11400 - 3(3650) = 76435.80, which gives us $11,769 from the tax table. This is $452.65 per check, or about 12% of their taxable pay if they have it taken out per check. If you perform the calculations you will see that their paychecks are about $3,050 every two weeks even with this tax amount. If a family of 3 or 4 can't live on $6,000 of actual income they are doing something incorrectly. Getting back on track...a 7.5% increase in their taxes would amount to an extra $33.95 on a bi-weekly basis. Again, this isn't a burden becuase this same family should be able to easily make ends meet with a monthly income of $6,032.

Am I arguing for tax increases? Absolutely not--I still favor cutting spending. I am, however, pointing out that the reality of a tax increase isn't as bad as you might initially think.

That being said, I wouldn't want to give the government more money than I already am...but, mathematics teaches one to face reality and something has to be done. If a small hike in my personal rate needs to accompany larger cuts in spending then I can't rule that out. The other outcome--default on the debt or raising the debt ceiling and borrowing more money--is worse than a tax increase. Significantly worse.

[Micah Foehammer]

Azred, you might want to tweak your Social Security calculation. The max income on which SS taxes are collected is $106,800 not $96,000. And effective in 2011, employee contributions to SS are taxed at 4.2% while employer contributions are still taxed at 6.2%.

Here's the link:

http://ssa.gov/pubs/10003.html

BTW, I do agree that it's STILL a pretty big chunk of change that the government is leaving on the table.

Which page did you find those capital gains income figures?

[Azred]

Thank you for the "heads up", Micah. I didn't know about the increase in the SSI limit--I thought it was still $96k. I was using 6.2% because that is what the rate was for so long and this 4.2% is only temporary.

I took the capital gains numbers from the IRS Excel file I can e-mail to you, if you like. The simple subtraction "income including realized capital gains" - "income excluding realized capital gains" = "capital gains". So I took sum[(number of families)*(average income in the "including" section)] - sum[(number of families)*(average income in the "excluding" section}] = total income from capital gains. The grand total of capital gains income is $466.579 billion; an extra 5% tax on this money is still only slightly more than $23 billion--not significant to reduce the budget shortfall. I think this number is lower than the capital gains from 2007 you note because the economy took a significant downturn in 2008--the higher income brackets lost more non-wage money than the lower brackets did.

The sum of all income (including capital gains) over $106,800 is $2.365 trillion; 4.2% of this amount is $99 billion. The total outlay for Social Security is $727 billion (found on page 174 of the budget .pdf) so $99 billion is significant.

My purpose here was to ignore politics and look only at the numbers to see what we can uncover then begin to figure out what to do. Although the budget document is long, I urge all of you to peruse it--you can't make a decision or have an informed discussion without the numbers at your disposal. I haven't checked back at the IRS site to see if they have updated income numbers compared to what I have; I suspect they do.

[Timber Loftis]

Originally Posted by Azred [color=lightgreen]I can see that it is time for the mathematician to step in and clear up a few things.

TLDR, I stopped right here. Okay, kidding.

If your expenses are greater than your income, then you are losing money and you must either increase your income or cut your expenses;

I don't think the USA can solve its problem using only one of these. Both are needed.

As far as the government cutting spending, we can start with the easy stuff--why have we had troops stationed in places for decades where there is no current conflict? Shut those places down and bring those people home--quit spending that money. The UN is a failed venture from a bygone era--cut off all money going to the UN immediately.

Unless you're suggesting far far more money taken from the military other than just closing a few overseas bases, you have really not saved a mathematically significant amount yet.

If anyone can give me any valid reason why I should pay for someone else's medical care then I will consider that reason.

I'll give you two, and they go hand in hand. First, you will pay for the care one way or another. If these people don't have insurance, then they'll just go to an emergency room that won't turn them away. ER services are just about the most expensive form of health care. You're impacting a triage facility. So, it is far cheaper to put an indigent person on some sort of publicly-funded health care plan.

It is true generally that paying for the poor to have some modest standard of living is cheaper than dealing with the social impacts of giving them nothing. Social safety nets didn't get invented because some aristocratic MF's said "WWJD?" It got invented because they came to learn that if you didn't do something to help out the unwashed masses they would eventually come to your house with pitchforks and put your head on a stick for others to see.

Also, why should I pay for someone else's retirement?

You don't. They paid in to social security, it's theirs, they earned it. Quit acting like you own everything.

In fact, why should I pay anything for anyone who is not in my immediate family, unless I choose to give money to someone for something? Similarly, why should you pay for my care, hm?

Because we did choose. We chose, collectively, by voting. You see, we have what is called a "representative system of government..." I think you see where I'm headed.

Why has the bureaucracy in Washington, D.C. grown without any real benefit?

Because... it hasn't. The size of the federal government hasn't grown significantly since the 80's. The only recent growth of any magnitude has with Bush and DHS.

In short, there are many programs in the budget that can be cut, either dramatically or completely and the nation will quit wasting that money.

Name them. This is where it starts getting hard. This is where we start fighting about insignificant amounts given to planned parenthood and ignore the elephants in the room such as defense spending and the money left on the table by way of tax cuts and loopholes for the rich.

As you can see, we can thus get to a point where this number becomes 0 IF government will cut spending somewhat and the tax codes are modified to remove loopholes and things like capital gains rates are increased.

The premise is sound, but as I said the devil is in the details. And we can't even *get* to the details because one side of the aisle in Congress has emphatically declared that "tax increases are off the table."

No, clearly cutting spending is more important.

Not in a recession. Quite plainly when you cut spending, you cut jobs. In a recession that's more jobless folks looking for jobs that aren't there. How do you factor that in?

You're talking spending cuts of like 10 or 20%. How do you like unemployment numbers going up from 9 to 13%?

So...what can we see so far? Hard-core Tea Party folks (people who use the derogatory "teabagger" term need to quit--not everything in life is a sexual reference)

Look, when I see teabaggers, the first thing that pops in my mind that should be done with them is shoving a scrot in their face. So, that's why I, personally, stick with the term. And the idiots brought in on themselves by wearing teabags.

The number one reason most people don't own a house--and the reason we don't at this time--is the down payment. Many lenders, of course, want a bunch of money up front and it takes time to save that money, unless you look into 100% financing. Naturally, if you have bruised or poor credit you won't get that (unless they are willing to give you a higher interest rate).

No one. No one. Can swing a 100% finance these days. You're incredibly lucky if you know someone who can get you in under 20% down payment.

[Timber Loftis]

You know, back in the late 90's we had nearly total employment -- the figures were low enough that they were almost down to the transigent level of 2-3%. When everyone had jobs, the deficit -- poof -- went away. Bill Clinton didn't plan to run the country in the black for a few years -- in fact he only learned it was about to happen just right before it did.

So, might I suggest that the focus of the argument as it currently sits is just wrong. Rather than arguing whether we cut government spending or raise taxes, essentially arguing who amongst us bears a burden, mayhap we ought to insist our government actually get around to trying to do something to create jobs.

But they did! you say. Nope, not true at all. Our roads and bridges are still crumbling out from under us, and no armies of workers are out there fixing them. Read more if you're interested.

No, We Can’t? Or Won’t?
By PAUL KRUGMAN

If you were shocked by Friday’s job report, if you thought we were doing well and were taken aback by the bad news, you haven’t been paying attention. The fact is, the United States economy has been stuck in a rut for a year and a half.

Yet a destructive passivity has overtaken our discourse. Turn on your TV and you’ll see some self-satisfied pundit declaring that nothing much can be done about the economy’s short-run problems (reminder: this “short run” is now in its fourth year), that we should focus on the long run instead.

This gets things exactly wrong. The truth is that creating jobs in a depressed economy is something government could and should be doing. Yes, there are huge political obstacles to action — notably, the fact that the House is controlled by a party that benefits from the economy’s weakness. But political gridlock should not be conflated with economic reality.

Our failure to create jobs is a choice, not a necessity — a choice rationalized by an ever-shifting set of excuses.

Excuse No. 1: Just around the corner, there’s a rainbow in the sky.

Remember “green shoots”? Remember the “summer of recovery”? Policy makers keep declaring that the economy is on the mend — and Lucy keeps snatching the football away. Yet these delusions of recovery have been an excuse for doing nothing as the jobs crisis festers.

Excuse No. 2: Fear the bond market.

Two years ago The Wall Street Journal declared that interest rates on United States debt would soon soar unless Washington stopped trying to fight the economic slump. Ever since, warnings about the imminent attack of the “bond vigilantes” have been used to attack any spending on job creation.

But basic economics said that rates would stay low as long as the economy was depressed — and basic economics was right. The interest rate on 10-year bonds was 3.7 percent when The Wall Street Journal issued that warning; at the end of last week it was 3.03 percent.

How have the usual suspects responded? By inventing their own reality. Last week, Representative Paul Ryan, the man behind the G.O.P. plan to dismantle Medicare, declared that we must slash government spending to “take pressure off the interest rates” — the same pressure, I suppose, that has pushed those rates to near-record lows.

Excuse No. 3: It’s the workers’ fault.

Unemployment soared during the financial crisis and its aftermath. So it seems bizarre to argue that the real problem lies with the workers — that the millions of Americans who were working four years ago but aren’t working now somehow lack the skills the economy needs.

Yet that’s what you hear from many pundits these days: high unemployment is “structural,” they say, and requires long-term solutions (which means, in practice, doing nothing).

Well, if there really was a mismatch between the workers we have and the workers we need, workers who do have the right skills, and are therefore able to find jobs, should be getting big wage increases. They aren’t. In fact, average wages actually fell last month.

Excuse No. 4: We tried to stimulate the economy, and it didn’t work.

Everybody knows that President Obama tried to stimulate the economy with a huge increase in government spending, and that it didn’t work. But what everyone knows is wrong.

Think about it: Where are the big public works projects? Where are the armies of government workers? There are actually half a million fewer government employees now than there were when Mr. Obama took office.

So what happened to the stimulus? Much of it consisted of tax cuts, not spending. Most of the rest consisted either of aid to distressed families or aid to hard-pressed state and local governments. This aid may have mitigated the slump, but it wasn’t the kind of job-creation program we could and should have had. This isn’t 20-20 hindsight: some of us warned from the beginning that tax cuts would be ineffective and that the proposed spending was woefully inadequate. And so it proved.

It’s also worth noting that in another area where government could make a big difference — help for troubled homeowners — almost nothing has been done. The Obama administration’s program of mortgage relief has gone nowhere: of $46 billion allotted to help families stay in their homes, less than $2 billion has actually been spent.

So let’s summarize: The economy isn’t fixing itself. Nor are there real obstacles to government action: both the bond vigilantes and structural unemployment exist only in the imaginations of pundits. And if stimulus seems to have failed, it’s because it was never actually tried.

Listening to what supposedly serious people say about the economy, you’d think the problem was “no, we can’t.” But the reality is “no, we won’t.” And every pundit who reinforces that destructive passivity is part of the problem.

[Azred]

Originally Posted by Timber Loftis TLDR, I stopped right here. Okay, kidding.

Basement Cat tempted you to read the rest.

Originally Posted by Timber Loftis I'll give you two, and they go hand in hand. First, you will pay for the care one way or another. If these people don't have insurance, then they'll just go to an emergency room that won't turn them away. ER services are just about the most expensive form of health care. You're impacting a triage facility. So, it is far cheaper to put an indigent person on some sort of publicly-funded health care plan. It is true generally that paying for the poor to have some modest standard of living is cheaper than dealing with the social impacts of giving them nothing. Social safety nets didn't get invented because some aristocratic MF's said "WWJD?" It got invented because they came to learn that if you didn't do something to help out the unwashed masses they would eventually come to your house with pitchforks and put your head on a stick for others to see.

So...the poor unwashed masses need the magical, all-powerful Nanny State to take care of them like toddlers?

Oh, it's because their employers don't pay them a living wage? Right now, if both Noty and I worked only full-time for minimum wage we could pay all our bills. It wouldn't be a great life but nothing would get shut off; one part-time job on my part would be extra money saved for the future. If we would be able to do it, why can't other people? With even a modicum of job training, one may find a job that pays more than minimum wage--even call centers here pay at least $10.

I agree, though--the medical industry is broken as is and needs some repair. An ER is the worst and most expensive form of care you can get.

Originally Posted by Timber Loftis You don't. They paid in to social security, it's theirs, they earned it. Quit acting like you own everything.

I don't own everything and I don't act like it. I would rather fund my own retirement--which I am already doing--and not rely on a system that we all know will not be there when I hit retirement age. Again, if I can do it then why can't other people?

Originally Posted by Timber Loftis Because we did choose. We chose, collectively, by voting. You see, we have what is called a "representative system of government..." I think you see where I'm headed.

Well, I certainly didn't choose it. I just have to put up with other uninformed people outvoting me then listen to those same people complain about the things for which they voted.

Originally Posted by Timber Loftis Because... it hasn't. The size of the federal government hasn't grown significantly since the 80's. The only recent growth of any magnitude has with Bush and DHS.

Yes, it has grown. Yes, I mean agencies like DHS, which not only drains the budget but sucks away our freedoms, as well, under the guise of "keeping us safe".

Originally Posted by Timber Loftis Name them. This is where it starts getting hard. This is where we start fighting about insignificant amounts given to planned parenthood and ignore the elephants in the room such as defense spending and the money left on the table by way of tax cuts and loopholes for the rich. The premise is sound, but as I said the devil is in the details. And we can't even *get* to the details because one side of the aisle in Congress has emphatically declared that "tax increases are off the table."

That's why I linked the budget. Now we can go through and start looking for things to cut. Since I am neither a Republican nor a Democrat, I am not limited by party rhetoric, which is why I was talking about cutting spending and raising taxes at the same time.

Originally Posted by Timber Loftis Not in a recession. Quite plainly when you cut spending, you cut jobs. In a recession that's more jobless folks looking for jobs that aren't there. How do you factor that in?

Government spending never creates jobs, except for government jobs.

Originally Posted by Timber Loftis You're talking spending cuts of like 10 or 20%. How do you like unemployment numbers going up from 9 to 13%?

I follow the U6 for unemployment numbers; this statistic is already well over 13%. Numbers may be found here.

Originally Posted by Timber Loftis Look, when I see teabaggers, the first thing that pops in my mind that should be done with them is shoving a scrot in their face. So, that's why I, personally, stick with the term. And the idiots brought in on themselves by wearing teabags.

You make a valid point here. I just get tired of not being able to enjoy a waffle for breakfast or a sandwich for lunch without that little voice in the back of my mind snickering at alternate definitions of things. It was funny at first but now they're running the jokes into the ground.

[Azred]

Originally Posted by Timber Loftis And if stimulus seems to have failed, it’s because it was never actually tried.

His assessment is a little off here--the stimulus was applied incorrectly.

If Presidents Bush and Obama, both of whom shoveled out tons of money in attempts to stimulate the economy, had really wanted to get the economy moving then they would have given all the money directly to consumers, not agencies and businesses. No, I am not a fan of throwing government money at anything, but if you are hell-bent on doing so then at least figure out how to do it correctly.

What, fundamentally, drives economies? Businesses hiring people and making things to sell? No! Government intervention? No! People buying things on store shelves or purchasing services provided by businesses? Yes!

Had they given the money directly to consumers--how much was it altogether? $1.5 trillion? more?--then we go back to our IRS numbers. There were 137,215,800 families in the "Bottom 90%" category; splitting $1.5 trillion amongst these people means $10,931.69 per family (I am giving everyone an equal cut here). What will the average family do with that kind of money? They will pay off their cars, pay down credit card debt, catch up on the mortgage, or--most likely--head to the stores and spend it feverishly. This money goes primarily into the hands of local small and medium businesses, who in turn buy stuff from larger corporations, etc. Paying off a car frees up, what, $300/month for most people? $450/month?

You can follow my thoughts here. Would some people have still been laid off? Probably. Would the economy have turned around? Probably not completely, but I suspect it wouldn't be in the shape it is in now.

[Gabrielles blades]

Originally Posted by Azred Basement Cat tempted you to read the rest. Oh, it's because their employers don't pay them a living wage? Right now, if both Noty and I worked only full-time for minimum wage we could pay all our bills. It wouldn't be a great life but nothing would get shut off; one part-time job on my part would be extra money saved for the future. If we would be able to do it, why can't other people? With even a modicum of job training, one may find a job that pays more than minimum wage--even call centers here pay at least $10. What, fundamentally, drives economies? Businesses hiring people and making things to sell? No! Government intervention? No! People buying things on store shelves or purchasing services provided by businesses? Yes!

Dont see any problems with these two ideas? I do, nothings getting shut off true, but if a lot of people are in this situation that means that there is very little spending on things that arent basic needs. Which of course means a continued slump; either workers need to be paid more so that they can spend more or the rich people need to spend more.