Archive for August, 2011

Who gives a fig what S&P thinks?

Sunday, August 7th, 2011

 

Trickle down economics isn’t causing that drip you hear, its drool.  Who cares what S&P thinks?  Except, “after the Dow Jones Industrial Average,  the S&P 500 is the most widely followed index of large-cap American stocks.”

 

We should all be listening to Fred.  The news is full of Standard and Poor (S&P) credit downgrade of the US’s borrowing worth.  I say, OK, so lets not borrow from them.  Lets revoke their use of ratings as a political weapon. I’ve read and read and read and can’t really find an answer.  Numbers, economics, and resources all seem to play a part.

 


 

 

 

 

 

 

 

 

 

 

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It may be disturbing to some to find out that not all good comes out of the wealthy corporate interests represented by the S&P’s 500.  Japan is pulling themselves out of their natural and man-made financial woes.  How?  Innovation.  It also helps that they don’t have a tea-party or christian fundamentalists standing on their drowning heads.  OK, with that sentence, I’m guessing I’ve lost about 25% of you.

Economics is nothing more than realizing that all the Earth’s resources are scarce and the study of Economics is how those resources get allocated amongst people.  A comparison of 1961 to today was made that sparked more research.  I asked my smart friend Fred  If our tax rate were the same as it was is 1961, would our deficit get payed off quicker?

and like a true economics guru he gave this reply…

Your question about the tax rate being what it was in 1961 would eliminate the deficit is a good one. The math is correct but ignores what has happened to the dollar since 1961. The top tax rate today is 35% on $357,500 of taxable income. In 1961 it was 34% on $8,000 and went as high as 91% on $200,000, $400,000 joint filers.  See http://www.taxfoundation.org/files/federalindividualratehistory-20080107.pdf for historical rates.

Back then a dollar was still worth 50 cents. Now it is worth something between a dime and a nickel. (this is the stuff, I just can’t seem to grasp.  How can a dollar only be worth a dime?  Compared to what? )In 1961 a large milk shake (real dairy) was  25 cents, gas was 25 cents a gallon, a new cadillac cost $2,999, and the minimum wage was 75 cents. A living wage was $5,000 and it took only one person working to support a family. Full time workers made much more than the minimum wage which applied mostly to part time and seasonal itinerant workers. If one made $20,000 a year they were rich.

Since then we have had greatly reduced tax rates but a very high tax in the way of inflation. Inflation went up most in the 1970’s until Reagan stopped it by raising interest rates in 1979. Since then inflation has been slower, but still running 4-6%. until 2008 when prices of some things went down, like housing making average inflation minor. Still we have food, medicine, fuel, education, all going up more than the Consumer Price Index. (The consumer price index takes a semester to understand. Why are we suffering if the price of things has gone down?  We’re not making it we’re just buying it, so we should be on top of this game.)

Now the government has used a new tack to fleece the citizen, it is called borrowing. We get tax cuts to make us feel like voting for the creeps, they take our social security money to fund wars, (is that why they want to tap into social security?  Are those 500 in the S&P wanting our pittances for wars?  Are those 500 in the S&P making money off of loaning to our pentagon for these wars? ) they give us cheap goods from China sending our jobs overseas so they can borrow from the wealthy and the Chinese, to finance more wars, that make some rich people richer so they can finance their reelections. “creeps” and other epithets are extremely appropriate in view of their game. These are smart people; they know what they are doing to us. (they don’t see us though, it’s like bomber pilots dropping bombs, all they see is a little poof)

Comparing the value of a dollar in 1961 ($.50) versus today ( 5 – 10 cents) we can compare the tax rates and equivalent dollars over the time from 1961 to now as follows; (50/10 + 50/5)/2 = 7.5 times. (I’m lost)

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Back to the main question, a tax of 34% on any family making more than $120,000, (16,000 X 7.5), and 91% on over $3,000,000, (400.000 X 7.5), would be equivalent to the tax rates we had in 1961. (91%?! Nobody wants that!  Wealthy folks should not pay more just because they are wealthy. , They should pay the same as we here in the trenches pay and take away their loopholes.  Perhaps those companies that profit from war should pay higher taxes.)These rates would go a long way to wiping out the deficit. I don’t have the figures, but it may even give us a surplus.

In fact, the tax rates in 1961 were too high because the rates still included the WW II repayments. (Our taxes included repaying the war debt? Now they want social security to pay the war debt?) When Kennedy reduced the rates it brought big expansion to the US economy, but it was accompanied by inflation which became intolerable by 1973 when Nixon brought out price controls, which did not work, by the way.

Reagan fixed inflation and brought us trickle down economics, which did not work, by the way. (It just brought a lot of drooling)

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Bush jr brought us cheap efficient wars, which do not end, by the way. (Cheap and efficient?  Fred, I believe your stabbing at humor here.)

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Reagan, Bush sr, Clinton. Bush jr, and Obama all brought us the global economy and cheap foreign goods at Wal Mart, Which do not last, by the way. (that is the plan?, buy crap that doesn’t last so you buy more crap.  This is not sustainable)

They also gave away our jobs, so we no longer work, by the way. (so we’ll be a bedroom society.  Let the rest of the world work while we figure out how to get disability.)

This is my final answer.  . . . I think.

We could fix the deficit if we balanced the long term budget by combining tax increases (much lower than 1961 rates), with reduced wasteful spending on senseless wars, control of medical costs and education costs, and getting organized money out of politics.

Fred
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(we need to put a cap on political donations.  $1000 per person and since corporations have been deemed “a person”  that’s all they can give too)

“Despair is the conclusion of fools” — Benjamin Disraeli
 

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