Wealthy bailout Feds
WOW, suppose this was a real headline? What would this mean for Americans? Would it be like a parent getting their child out of trouble or receiving an unexpected gift from a grandparent? Either way, the unexpected would be appreciated… right? Or, is this an expectation of a free-market society?
Let me layout a little scenario here. Let’s suppose that we have a professional basketball team that is very popular and is always winning resulting in all the players demanding higher salaries because of their skills, abilities, teamwork, and success. The owners agree because the sports arena is always sold out for home games. However, the owners realize that when their profits decrease it can only be attributed to the increase in salaries, so to compensate they increase the price of admission. While the fans are loyal, they refuse to pay this increase in prices and the once sold out arena is now seeing 25% of their seat revenue has gone missing.
The owners have several choices to make:
- Do nothing
- Reduce salaries
- Reduce ticket prices
- Encourage employers to pay higher wages
- Encourage Government to reduce taxes
- Educate the public on ways to save money
- Donate money to Government so that taxes can be reduced
What we must realize here is that in each one of these strategies, the owner loses revenue; and, what any owner is likely to do when faced with these types of outcomes, is decide by calculation or by other means, which outcome minimizes the loss, both in the short term and in the long run.
What is going on in America today the debt crisis and our economic situation can only be solved by America’s wealthy. Both Republicans and Democrats are trying to find another path out of the forest when all paths have been blocked by fallen trees and destruction. Some of America’s wealthy have come forward and suggested that they should be taxed at higher rates by letting current tax codes expire and while that is honorable, I would submit to you that this is the only logical path that we have open to us if we want to cut up the trees.
Will these actions cause a new set of expectations to develop upon American – that is to say, expect the wealthy to do this all the time? Hard to say, but I suppose some of us will come to expect this while others will not as has always been the case… but, is there anything wrong with that? I mean, not everyone like basketball.
by Alex Hutchins - I put this at the bottom instead of at the beginning to see how many of you would read the entire post...
9 comments:
deju vu all over again. I was thinking of a mock story to see what shock I could get from people commenting. You gave this one away early but seriously "what if"?
Let's see if I understand this. Using your basketball analogy, the players want more money and the owners want more money. So what do they do? The players go on strike, the owners lock out the players, giving them an ultimatum, the players disband their union and sue the owners.
Is that the answer you are looking for?
Seriously, you should not have used the baskeball example to explain our government. However I don't think there is anything out there you can use to explain something that can't be explained.
Serious response to come next.
The wealthy paying taxes is NOT going to get us out of this mess. It would only be a band aid because we will always continue to spend more than we take in.
California is an excellent example of why not to depend on taxing the wealthy. When economy went into decline, the state was overly dependent on the higher taxes of the wealthy. When those people and businesses were no longer bringing in as much income, they were screwed.
Governments should depend on fair taxation without loop holes and without preferences. Not a flat tax as that would unfairly burden those with less income. But a fair and balanced (not like Fox News is however)taxing plan that takes advantage of prosperity enjoyed by those blessed with it.
We also need a fair and balanced approach to our finances, meaning cutting/raising taxes while increasing/lowering spending that matches the prosperity.
The problem with our representatives in government is that they are all too short sighted, focusing on the problems today. If they were more focused on the future wealth of this nation and increase spending that increases wealth and decreasing taxes that would help increase wealth, then we would have something solid to all hang our hats on.
NOTE: This suggestion of mine above does not say decrease spending and increase taxes, which is the mantra today (and does need to be done but done in a reasonable manner and not slash and burn). My plan says to increase spending and decrease taxes; but on the RIGHT things, those things that would create wealth.
It is only our increase in wealth and prosperity that will get us out of this mess, and once understood the spending cuts or tax increases won't mean a thing.
Fair and balanced works in a culture where there are only a dozen points-of-view; however, in our current society, we have hundreds if not thousands of points-of-view that fair and balanced cannot even begin to address.
In some cases, increasing taxes and decreasing spending might work whereas in other cases decreasing taxes and decreasing spending might work.
Soon our country will have 1/4 of its population in the senior citizen category which is going to cause Social Security and Medicare spending to increase; plus, there are close to 2 million Americans that are living into their 90's.
So, if we want to decrease Govt spending, knowing that these areas are going to increase, then what part of the budget do we decrease?
Do we decrease defense knowing that China is increasing their defense budget?
If we increase taxes, will that cause the rich or wealthy not to invest in businesses? Or, will they do that regardless of the tax?
Will inflation increase or decrease in the future? Will the European markets that purchase American goods increase or decrease over the next few years? Will the Chinese middle class continue to grow, putting demands on worldwide goods and services that will cause global shortfalls?
If you always do what you always did then you will always get what you always got...
What our govt does is going to continuously evolve and change as our world changes and evolves, so fair and balanced may not be a workable solution.
We have reached a point where we must do what we must do to save the whole, not the few...
As I said: The focus has to be on the future wealth of this nation. The specific increases in spending and cuts in taxes should be based on this consideration. Each step we inact must be one that will increase wealth. As for areas cut expenses or increase taxes would be those that are loaded with fat and can afford the changes with little or no negative impact to the economy. It really is not that complicated. What complicates it is that everyone has their pet projects, obligations to political contributors, or frozen ideologies.
It might appear that simplistic but it is not. Even if the govt did away with pet projects, political contributors, etc., our Federal Budget is not that easy to manage nor is it that easy to develop. A budget developed by one Party could very easily spill over into another Party that does not agree with budgeted allocations. Yes, greed (wealth) is what drives our economy, excessive spending causes inflation since Americans for the most part do not save, they spend. Do we want a large federal govt or a small one? Do we want to provide for our senior citizens and to what extent? How large do we want our military, homeland security, other security agencies. Is cyber crime an area that we need to start funding. Should government underwrite globalization or gasoline prices or should they invest in alternative technology? Should the Govt build more oil refineries since business refuses? What about space technology - and how much do we invest?
Sometimes, we may want a large government that employees many and sometimes we may need those people working in business so that the US can be competitive.
How much should the govt invest in new technology since the half life of technology is 6-15 months or should that exclusively be businesses?
What happens is China wants her money back? She owns 1/3 of our debt - so, do we not have a priority of paying off that debt first to get us out of the hole? Or should we limp along for the next 10-15 years paying debt interest but very little principle?
With so many people living longer and longer, who is going to cover Social Security now and into the future. Since Americans reduced births per family, there are fewer workers to take care of the retirees, so who supplements that?
I understand what you are trying to say, and on the surface it would seem simple, but it is not and since we really do not have a vision for the US how does a govt construct a budget?
The lobbyist have tremendous influence in WashDC... can you imagine if the people started speaking out like the Wall Street protesters, claiming lost votes, if you dont include this or that. How would you get this country to agree, especially since we cannot get our congressmen and senators to agree...
Developing and managing budgets for either a republic or a democracy is not simple, especially with the level of debt that the US currently has on the books, especailly with China. Can you imagine going to war with them because we defaulted on paying our interest...
Obviously the "super committe" can't even agree on a way to cut $500 billion out of ten years. They are split for one reason and one reason only: politics. Republicans can't be seen raising taxes (they even all took a pledge) and Democrats can't be seen making cuts to Medicare. Social Security, BTW, should be off limits because it is fully paid for and would be fine if they had not robbed the coffers. BOTH parties have to give in and won't. Even the general public agrees to that.
It may seem complicated if you make it complicated but it really isn't.
We commiteed to TWO wars while REDUCING taxes. BIG mistake. If we are going to do expensive things like go to war then we RAISE taxes. We would not be in half the mess we are now had that one "simple" thing been done.
NOW the "simple" thing to do is to INCREASE spending to enhance growth (that means education and infrastructure) and DECREASE taxes which will directly increase business and investment. Simple!
As unsettling the deficit is, this is a GREAT time to borrow, with lowest interest rates ever. A good time to use that money to grow as opposed to wasting it on wars that do not have nor will have any payback. Unless Blechmann gets elected then she's going to get them to pay us back.
There is not need to fear the Chinese or anyone else won't loan to us (for now)if we can continue to prove we are the strongest and most dependable nation on earth. I do not like our deficit spending but don't believe it should be our immediate priority. We should always be striving to cut the fat (waste spending) or tax the fat (opportunists).
As for waste spending I would begin with the bloated Homeland Security and pull out of our current wars. This would have immediate savings.
As for the taxes. Time to close the loopholes. That will lead to more fair and balanced immediately.
You've got good points Dan. In housing we were looking for the 1% rate with no credit check. Why no credit check? Because if you reduce the mortgage interest rate over a 30 year amortization you cut the PiTi by 60 to 75% putting the difference each month in the owners pocket to save or spread around as consumers. The Feds lend money to the big boys on Wall Street at 0%. Some have written that huges sums of this money has gone to buy oil tankers loaded with crude to sit off the coast of Africa. Then when price per barrels goes up, they sell to the U.S. companies and WALLA, the increase shows up at the pump to pay these Wall Street manipulators billions. We have such a HUGE amount of greed in the country that it doesn't make us a great country anymore, it makes us look like our future is Samalia.
BTW want to know why we have a stalemate in the Super Committed and why there is such resentment against any kind of tax increase.
Look up the Grover Norquist pledge.
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