RTF Income Distribution Poll GDG....

[Jim Pickering]

OK, now I understand. I can afford a chassis mount dog truck and Jeff has a nice camera which I believe he uses in his photography business. What is your point? Never mind, your comment is about as shallow as any I have seen posted on this forum.

Thankfully, "about as shallow" left room for the possibility that there could be even more shallow comments, because you promptly raised the bar with:

Well all I can say is that it is a good thing that neither Jeff or I were likely potential clients of The Dragger Group. I take it that public relations is not your area of expertise with your firm. The Drager Group does explain your position.

You are correct; I was weak and could not resist retaliating. Obviously something you would never do, right!!

[Aussie]

Can I ask a question please, regarding your thoughts on the next G20 summit? BTW, what a day not only for America but for the world.

Should and could Obama be invited to attend?

[Jay Dufour]

I lost 455.00 last year.Wealth distribution please! He won....so Im lookin for it.Yea....right

[Mike Noel]

Mike, maybe I missed it but I did not hear you complaining when George Bush gave you and me a tax cut and put the IOU on the backs of our kids and grandkids.



The remainder of your post I agree with completely. However, what I could more easily swallow and what this country needs may be mutually exclusive.

As Buzz, Jeff and I have pointed out, it amazes me that, with the facts about government spending over the past 45 years going back to Johnson, who BTW had to finance the conflict in Vietnam, the democrat party has been able to retain the label of the Tax and Spend party while the republican party has retained the label of fiscal conservatives.

Labels aside some more food for thought concerning our economy and stimulation provided by tax cuts verses tax and spend. I am not saying one is right and one is wrong, just offering what I see as some logic behind each.

JP ECON 101: You cannot push a string.

I will start with tax cuts. For most of my adult life while I have never been a card carrying member of any party, I was pretty hard core republican. The primary reason was that the Republican Party stood for fiscal responsibility which meant balanced federal budgets. The party began to loose me when it abandoned fiscal responsibility.

Back when the Republican Party and, in fact, both parties adhered fairly closely to balanced budgets we had the option of a reductions in taxes as a means of stimulating the economy. However, starting with Ronald Reagan there have been fundamental changes in government policy that have mitigated the effects of tax cuts as economic stimulus.

The idea behind a tax cut is obviously that if you and I have more money in our pockets from paying fewer taxes we will run out and spend our new found money. We will purchase products and someone will have to make the additional products so new jobs are created. Sounds great and it used to work that way, but no so much today.

Starting with Bill Clinton we got NAFTA which was the start of “Free Trade” agreements pushed hard by both parties. I have lost count of how many “free trade” deals have been approved under George Bush but there have been several. Free trade has a nice ring to it, but what exactly is free trade. Free trade is a deal under which the US drops all import tariffs on good coming in from foreign countries which allows large US companies to move manufacturing facilities to countries with much lower labor cost. It is really that simple. If you own stock in these companies maybe this is good given their profits increase due to much lower labor cost. However, if you worked for one of these companies and lost your job it is not so good.

So getting back to the tax cuts, instead of stimulating our economy when we spend the new found money, to a significant extent we are stimulating the economies of China, India, Mexico and other low wage countries where the products we buy are made. The US economy has not gotten the full impact of the tax cuts.

Next let’s look at who got the tax cuts. The Bush tax cuts and the proposed continuation by McCain skewed the tax cuts to the top 5%. I for one certainly appreciate the extra money, but I have to tell you that we were getting by reasonably well before the Bush tax cuts. In fact we are spending no more after the tax cut than before as I suspect is the case with most in the higher tax brackets. The money for us goes to make the annual addition to the IRA, to make a couple extra house payments or into another CD but very little is actually spent on goodies that would stimulate the economy.

So the distribution of the tax cuts is the second problem. For tax cuts to have a meaningful stimulating effect on our economy even 25+ years back those cuts needed to go to all levels and especially to middle and lower income levels; the folks who are in desperate need for a new pare of shoes for the kid or new tires for the old car. Skewing the cuts to the top mitigates the effect proportionally. One can argue that giving the tax cuts to the top 5% of taxpayers creates investment and therefore new jobs. True to the extent that top percent are the owners of small business that can grow in a weak economy, but as pointed out above much of that money goes into the stocks of large companies and much of that gets invested overseas.

To these two complications add the fact that Reagan, Bush and Bush have already put the citizens of this country under $10.8 Trillion in debt and that was before the $1.6 Trillion in bailout obligations. As I posted earlier I do not know what the number is, but there is no doubt that at some point this country will collapse under the IOUs hung on the necks of the citizens to be paid in the future.

Now let’s look at the tax and spend method of stimulation. First of all there is still that monumental national debt to be concerned about, but if any additional spending is covered by additional taxes the debt does not increase so that burden remains static so long as interest rates do not increase.

On the positive side to the extent that the government spends money within the USA on such things as improvements or repair to infrastructure including roads, water systems, etc 100% of the money goes to toward stimulating our economy and to create jobs at home. Even a national health care program will have a stimulating effect. Given that 40% of the estimated 300 million citizens can not now afford health care do to lack of insurance we will need doctors, nurses, medical office space and hospital space for approximately 122 million new patients.

Bottom line, the government can give people tax cuts, but cannot make them spend the money especially when they are hunkered down wishing they did not have so much debt and wondering how bad it is going to get. The government cannot push the string. The government can however pull the string by collecting the money in taxes and spending within the borders of this country.

Again, I am not saying what is right or wrong, but offering some food for though from a prospective I have not seen on this forum. While we may not like it our economy is in trouble and IMHO tax and spend will have a far greater impact on stimulating our economy that continuing tax cuts of the same magnitude.

Jim,

I dont have time for a long answer, you know how busy I have been.

First, I did not complain about the tax cut and suffice it to say I have spent a large multiple of those dollars by investing in my new company and spending it on my family (easy to to with 4 boys!). If Bush would have kept Clintons tax rates and we kept running surpluses I would have been fine with that. If he would have kept those rates and decided to pass out money to low income folks and run a deficit I would have bitched to high heaven!

In the long run I still believe that the best thing we can do for our country is to get our deficits and debt under control. Sure the short term pain could be severe but its a "pay now or pay later" scenario and the pay later option is going to be a whole lot more expensive for future generations. If we dont start now when do we? Interest rates are going to go up. We are getting ready to sell an unprecedented amount of treasury notes in the near future. Add in the fact that we are down to 17 primary dealers (I think we had 30 or 31 when I started in the bond business in 1990) and we have a recipe for much higher rates in the near future. As I mentioned to you privately, as soon as the Fed can they are going to raise rates so we dont have the potential for a Greenspan type bubble....it may be a year or two, depending how deep this recession goes, but it is going to happen eventually.

If you have a friend with is over his head with credit card debt do you tell him to stop getting his Starbucks everyday or do you tell him to cut the card? You tell him to cut the card!

We are so spoiled here in the US that God-forbid anyone go through any short term pain for long term gain. Sure, this country needs to spend a little to help shorten the depth of this recession but giving out money to people wont have any long lasting effects.

I am willing to go through the pain of higher taxes if it were put to good use. Invest in infrastructure, pay down the debt, do things that have lasting value. Stimulus checks are worthless long term.

Dont get me going on healthcare. We cant get the folks coming out of med school now to go into general practice because it doesnt pay enough and there are too may headaches with Medicare etc. The medical staffing firm that is next door to my company says no one wants to be a doctor any more because the pay is not worth the hassle.....doctor compensation would probably go down under national healthcare which would make that problem worse.....but, if doctor comp does go up then its a bigger expenditure for our country.....another conundrum. Additionally, I would suspect that a good portion of those 40% that dont have healthcare already receive treatment at county hospitals and such. My wife is a trauma ICU nurse at a public facility like that and they have very FEW folks come through that have insurance. So I would not expect a big bump from those "new patients"....plus, I hope I dont get sick if THAT many folks are going to be jamming up all of the waiting rooms all of a sudden!

All of the above is my personal opinion which ain't worth much and is probably both right and wrong!

PS. Munis are getting more expensive everyday now