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#1
12-16-2011, 04:39 PM
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Germany is doing very well for themselves I agree to that.
You get me wrong, I am conservitive fiscally and socially I am liberal. I will not vote for anyone for any position who brings their religion or their ideal of what they think is moral to any office. I also will not support any candidate who suggests that we should all be equal and all should have the same things because when that is suggested what gives people a motive to do better and to be better? I am for free enterprise and for capitalism I am for social freedoms void of any religous point of view. Im am not for any public employee who's salary is funded with my tax dollars going on strike and causing hardships on other people to further the agenda of a Union. Im for giving people who came to this country illegally the option to join the armed forces for 4 years and become citizens or they will be sent back to the **** hole they come from. I do not think health insurance is a right neither is driving a car, they are privilages and it is not the federal governments role to provide it.
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Horses are like strawberries....they can go bad overnight. Charlie Whittingham 
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#2
12-16-2011, 04:46 PM
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 I agree with much of what you say.I think, that in a first world country, being healthy and having food on the table is a right, in the sense that society wants to ensure that every citizen has that. Rather than leaving everyone alone to fend for the basics themselves. Does that mean it should be "given away for free"? No. But yes, to the poor and destitute. And it should be made affordable for everyone else to purchase. Nobody, in a first world country as rich as ours, should starve, or not get health care, or not get the chance for education. Although, the 2010 Census indicates that our middle class is indeed virtually gone, with 1 of 2 of us living within or just above poverty levels. That's a shame, as the country is wealthier than ever. Does that mean I think money should be taken from the rich and given to the poor? Not at all. Keep what you earn. But the rules have to be the same for every citizen. Not just the plutocracy that rule us. And this is me :-)
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"Have the clean racing people run any ads explaining that giving a horse a Starbucks and a chocolate poppyseed muffin for breakfast would likely result in a ten year suspension for the trainer?" - Dr. Andrew Roberts
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#3
12-19-2011, 10:21 AM
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don't run out of ammo.
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#4
12-19-2011, 02:22 PM
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Secondly, a sink of billions per year has just been ended (Iraq). Third, when the Bush tax cuts expire, the debt is cut in half in 10 years, doing nothing else. No cuts to programs, no sacrifices, nothing. The truth is, that if this country does zero about "the debt", if congress takes zero actions, if the President takes zero actions, the debt is automatically cut in half in 10 years. They know that in Washington. Don't fall for the "we're broke!" scare tactic. Yeah, we have to deal with the debt. Bush killed this country financially, ran the charge card up and well over the limit. But it is only a disaster if we refuse to take responsibility, raise taxes back to where they were when cutting that income put us in debt, and retire it readily. The "we're broke" is the excuse for some politicos to eliminate social programs they don't like. It's a deliberately created argument, not based in completely true reality (you'll notice the very same now-panicked people didn't worry about it at all the previous 8 years). It's a SQUIRREL !
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"Have the clean racing people run any ads explaining that giving a horse a Starbucks and a chocolate poppyseed muffin for breakfast would likely result in a ten year suspension for the trainer?" - Dr. Andrew Roberts
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#5
12-19-2011, 02:30 PM
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#6
12-19-2011, 02:39 PM
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By John Mauldin
The payroll tax, as a way to pay for Social Security, has been 12.4% since 1990, with half paid by workers and half paid by business. Late last year a temporary payroll tax cut of 2% was enacted. This saved an average family of four about $1,000 per year and affected 160 million taxpayers. It is not peanuts. It also "cost" about $120 billion in revenue (best estimates). This is about 0.8% of GDP. Remember that number. Let's review the economic implications of tax policy. Depending on which academic study you want to use, tax increases or cuts have a "multiplier" effect of anywhere from 1 times (Harvard and Italy) to 3 times, the latter from Obama's former head of the council of Economic Advisors, Christina Romer, and her husband, both at the University of California Berkeley (not a hotbed of conservatism). Let's use 2 times as an average for our discussion, but you can adjust to suit your favorite academic study (you have read all those papers, haven't you?). Various studies show that spending cuts exert an effect for about 1 year before they are "absorbed" into the economy, and tax cuts take a little longer to have their full effect. I think it likely that we will see that the US economy grew less than 2% in 2011, and probably closer to 1.5%. If there is a 2 times multiple on tax cuts, then the stimulus was worth anywhere from 1% to 1.6% of growth in 2011 (depending on your favorite academic paper), which is much of (and maybe most of) the growth we had in the US this last year. As I write early Saturday morning, it looks like the payroll tax cut extension will only be for two months. This would mean that taxpayers may see a roughly $100 per month cut in take-home pay, starting in March. This means that the economy will take a growth hit starting in March. So why not extend it for a year? Or even two? Why not wait until the economy is stronger? The problem is that the US fiscal deficit is about 8% of GDP. We already have a debt-to-GDP ratio of between 80% to 98%, depending on how you count intergovernmental debt and nonfederal debt. But let's use the lower number. That means, if we do nothing about the deficit, in three years we are over 100%. We know (Rogoff and Reinhart and the BIS studies) that potential growth decreases above the level of 90% debt-to-GDP. We also know that as the debt grows, so does the cost of interest to pay the debt. Let's run a thought experiment (for the purposes of simplification) on a country with a large debt of, say, 80% of debt-to-GDP and a deficit of 8%, with interest costs of about 2%. Revenues are 16% from taxes, and expenses are 24%. First, that means that the debt carries an interest rate cost of about 1.6% of GDP, or around 10% of revenues. If the debt rises to 100% of GDP, then the interest costs will rise to about 2% of GDP, or about 12.5% of revenues. This will force spending cuts or tax increases if the deficit is not allowed to rise. But wait. If we cut spending (also known in Europe as austerity), then we will see a negative tax multiplier of about 1.5% of GDP over that time period. That means it will be harder to grow our way out of the problem, especially if the economy is growing at less than 2% annually. Debt at the levels we are talking about makes it much harder to grow yourself out of debt.
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#7
12-19-2011, 02:41 PM
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Part 2
Let's look at a paragraph from a very recent paper by the Boston Consulting Group entitled "What Next? Where Next?": "The inability to grow out of the problem is bad news for debtors. Look at Italy, for example: Italian government debt is 120 percent of GDP. The current interest rate for new issues of ten year bonds is 7%, up from 4.7% in April 2011. If Italy had to pay 6% on its outstanding debt , such a high rate would materially increase the primary surplus (That is, the current account surplus before interest expense) that Italy would need to run in order to stabilize its debt level. "If we assume that Italy's economy grows at a nominal rate of 2% per year, the government would need to run a primary surplus of 4.8% a year of GDP just to stabilize its debt levels; the latest forecast show only a 0.5% surplus for 2011. Any effort to increase the primary surplus through austerity and tax increases runs the risk of creating a downward spiral. When investors start doubting the ability of the debtor to serve its obligations, interest rates rise even further, leading to a vicious circle of austerity, lower growth and rising interest rates." What if interest costs in our hypothetical country rose to 4%? That would mean that 25% of tax revenues (over time) would be consumed by interest. (Yes, I know, there is a lag effect. I am trying to keep it simple.) That means either further spending cuts or tax increases. Which leads to the vicious circle of austerity that the BCG writes about This is why Nouriel Roubini says that Italy is better off simply defaulting on its debt and reducing the overall debt by about 20%. The arithmetic says that Italy would be better off, as the hope of using spending cuts and tax increases (austerity) as their way out of the current problem is rather bleak. And while we deal with the European problem in Endgame, we also note that the US risks becoming like Italy in a few short years. Sounds extreme? Here's my reasoning. If you invest in developed-market sovereign debt, it is because you are seeking as close to risk-free returns as you can get. Who buys US debt looking for risk? The bond market is going to watch the train wreck that is European sovereign debt, and the soon-to-be train wreck that is Japanese debt, and if the US does not show a clear path to a sustainable deficit by 2013, at which time our debt-to-GDP will be closing in on 100% (however you want to calculate it), and then I think the bond market will say, "We have seen how this movie ends in Europe and Japan. We are now watching the same movie in the US. If you don't mind, we'll leave at intermission." Once rates start to rise, the options faced by the US are not good. Real spending cuts and tax increases in the midst of a crisis? Allowing the Fed (or essentially forcing it) to monetize the debt? There will be no good choices if we do not act. Whenever the payroll tax cut extension goes away, it will mean an effective tax increase of the same magnitude of the tax cut. In our example, about a 1% to 1.6% hit to GDP. Think the economy is strong enough to handle that without going back perilously close to recession? As states and local governments are raising taxes by about 1% of GDP? As Europe implodes? These are the headwinds I keep writing about. These tax cuts and increases make a difference in the short, 1-2 year term. Big time difference! Do you in effect hit the economy going into an election? But if not now, when? If we fail to get the deficit under control, we soon become Italy. Can we go another year? Sure. But the longer we wait, the fewer options we have. We are going to have to face the music at some point. Better to control it now! The only way to do this is an economically rational way is wholesale restructuring of the tax code and restructuring of entitlements. We should consider replacing the payroll tax completely. No room today to go into these solutions tonight (but we will later!) There are tax cuts and increases that have better multipliers. If you combine or substitute taxes that have bad multiples with those that have benefits, you can partially offset the effect of the spending cuts and tax increases. There is a way. It will take a level of cooperation we have yet to see, or one party in total control of the process. And then it will take courage. The US has no easy choices. Our choices now are merely very difficult. If we delay much longer, past 2013, our choices go to bad or very bad. Different in kind from those of Europe but not in difficulty or the quality of outcomes. We are edging closer to the Endgame. We must combine the above with policies that create jobs. We must have growth as part of the solution. We can get through this in the US if we choose to. But the sense of urgency needs to get turned up.
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#8
12-19-2011, 02:42 PM
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Glad to see you post something that calls austerity for the economic BS it is
 And part two calls for tax increases! Well done! Now, his proffered solution : "The only way to do this is an economically rational way is wholesale restructuring of the tax code and restructuring of entitlements. We should consider replacing the payroll tax completely." doesn't even fit with the proofs of the arguments he himself made, but that's SQUIRREL! lovers for ya. They have never been known for logic.
__________________
"Have the clean racing people run any ads explaining that giving a horse a Starbucks and a chocolate poppyseed muffin for breakfast would likely result in a ten year suspension for the trainer?" - Dr. Andrew Roberts
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Hybrid Mode
