The State of the Economy: Whose fault is it and why?

[_Bond James Bond]

Dear Bond,

The State of California is one of the most fiscally liberal State in the Nation. During the last election in November of 2010, all of the Democrats running for State offices won. Liberal Democratic U.S. Senator Barbara Boxer, won her re-election to the U.S. California Senate seat. The State of California got a whole lot of money from the stimulus Package. Yet, California has an Unemployment rate now as high as 12%. If fiscal liberalism is the way to go, then why does California now have such an high Unemployment rate???

California got 31.8 billion in stimulus funding. (roll over California for information).

http://www.recovery.gov/Transparency/Re ... taMap.aspx

We're heading toward a double dip in our current recession with the continued lack of jobs. The stimulus was 2 1/2 years ago, and that money is long gone so I'm not sure how you can blame the 2009 stimulus plan to today's current economic state in California, especially since I'm not familiar with the local issues in California. My original point was that the stimulus plan halted the loss of jobs as shown in the graphs I posted showing job loss in 2009-10. Yes jobs continued to be lost but job loss trended less, certainly a positive compared to continued increases in job losses.

My original point was most related to national unemployment, of course you can dig up outliers like California. Check out Massachusetts, (certainly liberal and with socialist medicine), they have unemployment less than 8% (7.6% for July) as an alternative, which is better than Texas's unemployment (8.4% for July).

http://www.deptofnumbers.com/unemployme ... achusetts/
http://www.deptofnumbers.com/unemployment/texas/

*Should anyone be interested, Gov. Rick Perry's touted "job miracle" in Texas is largely government jobs.

[_Yoda]

Define "the rich".

Let's say households making 1,000,000 a year for starters.

And you don't think that their high-powered tax attorneys won't find loop-holes?

What always happens, Bond? Guess who invariably gets stuck with the bill? The middle-class.

My husband and I both have college degrees. He works full-time; I work part-time. Between the two of us, we make around $140,000 a year. We own a home, two cars, have a mortgage, are putting 2 kids through college, and have an elementary school-aged child with autism.

Are our kids eligible for Pell Grants? No. We're too "rich". Are we eligible for special Medicaid programs for our disabled child? No. We make too much money, according to the government.

Well, guess what? I'm a little tired of everyone coming to us with their hands out when we're robbing Peter to pay Paul to keep our lights on, just like everybody else!

/rant off.

[_Jason Bourne]

Now the question that emerges is what is the alternative: tax increases or cutting Medicare(caid)/Defense? I say tax the rich. The rich have been accumulating trillions in wealth the past thirty years as low tax levels have fueled the income disparity we currently face. What do you people think?

I am all for compromise. Spending has to be cut. Defense has to be cut. Medicare has to be modified and perhaps age to receive increased and or means tested as well. Same for Social Security. Also close loopholes and end subsidies to large oil companies. Change the tax law to encourage multinational companies to repatriate earnings. Perhaps modify some of the itemized deductions like mortgage interest and limit such deductions to a home at say $500k.


If there were real attempts to make reasonable cuts then I would spring for other tax increases on higher income earners.

However, taxing 100% of what those over $1 million make still would leave us in horrible deficits. A reasonable plan of cut and revenue increases will go a long way to solving the problems.

[_Jason Bourne]

Let's say households making 1,000,000 a year for starters.

And you don't think that their high-powered tax attorneys won't find loop-holes?

Not true. The wealthy pay substantial taxes in real dollar amounts.

What always happens, Bond? Guess who invariably gets stuck with the bill? The middle-class.

Not true. The middle class if you define that as $50k to say $150k per year does not pay the majority of real $ collected.

My husband and I both have college degrees. He works full-time; I work part-time. Between the two of us, we make around $140,000 a year. We own a home, two cars, have a mortgage, are putting 2 kids through college, and have an elementary school-aged child with autism.

Since you shared your income can you tell me how much your total income tax bill is per year? And what % of your $140k is that amount? My guess is less than 20%

Are our kids eligible for Pell Grants? No. We're too "rich". Are we eligible for special Medicaid programs for our disabled child? No. We make too much money, according to the government.

Actually at $140K per year you are starting to climb out of middle class into upper middle. But I feel your pain. I am in a similar situation. Plus I am above where the college credits, child credits and other nice credits phase out.

Well, guess what? I'm a little tired of everyone coming to us with their hands out when we're robbing Peter to pay Paul to keep our lights on, just like everybody else!

Me too!

[_moksha]

In lieu of taxation, what if the government was to build a large permanent tax shelter for the rich at Guantanamo Bay. An extra touch would be to have the sheltering barbed wire fence tops facing inward.

[_Bond James Bond]

And you don't think that their high-powered tax attorneys won't find loop-holes?

So...since tax lawyers will find loopholes then we shouldn't even try to replicate the tax policy that fueled America's growth during the 1950s-mid 1970s, tax the rich?

What always happens, Bond? Guess who invariably gets stuck with the bill? The middle-class.

The rich already pay much more taxes, since they have a disproportional amount of the wealth.

My husband and I both have college degrees. He works full-time; I work part-time. Between the two of us, we make around $140,000 a year. We own a home, two cars, have a mortgage, are putting 2 kids through college, and have an elementary school-aged child with autism.

Are our kids eligible for Pell Grants? No. We're too "rich". Are we eligible for special Medicaid programs for our disabled child? No. We make too much money, according to the government.

Hey you're my parents. (except no disabled child but make that "three kids in college").

Well, guess what? I'm a little tired of everyone coming to us with their hands out when we're robbing Peter to pay Paul to keep our lights on, just like everybody else!

/rant off.

So you're making 14% of what I called "rich"...that means under my plan you wouldn't have your taxes raised...hmm...that means if we tax the "rich" there will be no adverse effect on you and yet more money in the government coffers for things like pell grants/health care. What needs to happen is the creation of higher tax brackets. Currently the highest bracket is 250k. Is there no difference between Warren Buffett and a joint couple making $251,435/year? I think there is. At 140k per year you're edging out of the middle class by the way.

[_Bond James Bond]

Now the question that emerges is what is the alternative: tax increases or cutting Medicare(caid)/Defense? I say tax the rich. The rich have been accumulating trillions in wealth the past thirty years as low tax levels have fueled the income disparity we currently face. What do you people think?

I am all for compromise. Spending has to be cut. Defense has to be cut. Medicare has to be modified and perhaps age to receive increased and or means tested as well. Same for Social Security. Also close loopholes and end subsidies to large oil companies. Change the tax law to encourage multinational companies to repatriate earnings. Perhaps modify some of the itemized deductions like mortgage interest and limit such deductions to a home at say $500k.


If there were real attempts to make reasonable cuts then I would spring for other tax increases on higher income earners.

However, taxing 100% of what those over $1 million make still would leave us in horrible deficits. A reasonable plan of cut and revenue increases will go a long way to solving the problems.

I totally agree Jason with everything you say. In the current situation I'm willing to be totally pragmatic. Give some sort of incentive for companies to bring some of the trillions of dollars they have overseas home, along with some of their jobs., something fair to corps and govt. Maybe drop corporate tax rates to 29% from 35%. Repealing the Bush tax cuts will get quite along the way towards financial solvency, and that coupled with a return to unemployment around 4-5% would help alleviate our woes as people get off unemployment and get back to paying taxes themselves.

[_Jason Bourne]

Currently the highest bracket is 250k. Is there no difference between Warren Buffett and a joint couple making $251,435/year? I think there is. At 140k per year you're edging out of the middle class by the way.

Currently the tax rate for married joint filers between $212,301 – $379,150 is 33%. And keep in mind that the lower rates apply at income below that amount so the average rate is less than 33%. 35% is on taxable income over $379,150.

See http://www.mydollarplan.com/tax-brackets/

Another additional tax that is increasingly hitting upper middle class is Alternative Minimum Tax which effectively increases your overall average tax rate and can increase your tax bill.

[_hatersinmyward]

Stock Market.

Bulls, Bears, Golfers and Poppers.

We are in Poppers Market, which means poor people can play the market with little risk and make ALOT of money.

ex: Poppers Market, a guy buys a stock at $0.11 it goes up to $4.20 in a year, that guy just Made a lot of money.

ex: Golfers Market, a guy buys a stock at $21.10 a share the next year it goes up to $29.10, while it takes money to buy those stocks very little gain was earned.

[_Roger]

Bond:

So...since tax lawyers will find loopholes then we shouldn't even try to replicate the tax policy that fueled America's growth during the 1950s-mid 1970s, tax the rich?

What rich person is going to willingly keep his or her wealth in a country that continues to raise his or her taxes? And of the few who would, why don't they just voluntarily pay more?

Like Brack says, soaking the rich sure isn't working in California.

Even if your numbers are correct (which is questionable) this is not the same world as it was in the 50's. Perhaps some would stay, for a while, but in order to "solve" the problem you'd have to literally confiscate from the rich and hope they stick around long enough for you to drain them of the wealth they've created.

My wife is from Latin America. She uses an analogy of lobsters boiling in a pot. One lobster finds a way to climb out. In the Latin culture she is familiar with the other lobsters say, hey, he can't do that! So they grab his legs and pull him back in. In what used to be the North American culture the other lobsters observe, learn and escape.

The notion of soaking the rich is like saying I hate rich people--even though I'd like to be one. Poor people don't create jobs. You may not like the fact that people like Bill Gates have much more than their "fair share" but these are the people who create jobs which, in turn, creates real wealth.

In my wife's country, the "rich" Dole company set up a banana plantation in a particularly poor part of the country. It created a bunch of jobs. Conditions for those who worked there dramatically improved. But the Unions came in and started demanding even better working conditions. Noble? Sure. Who doesn't think better working conditions is a good thing? Dole complied for a while. But eventually the demands became so cost-intensive the company warned that it would not meet any additional demands. Thinking it was all a bluff the Unions again went on strike. As a result, Dole shut down its operation and moved to another country.

That's what we're doing today in the U.S. What is driving the outsourcing? Simple economics. There are places in the world where it's cheaper to produce goods. Loyalty to one's own country is a factor up to a certain point. But in a global economy, that only goes so far. In the real world, rich companies will naturally move to where it is most profitable for them. Failing to come to terms with that will continue to drain the U.S. of wealth.

The problem is we've gotten used to being wealthy and we've come to just expect that we should naturally be wealthy. So we ignore the real economics and borrow money to maintain previous levels. As liz's budget post clearly demonstrates that approach is only sustainable for as long as creditors are willing to loan us money. And we are reaching the end of the line on that. To borrow money in order to throw it into a bad economic system (assuming 100% actually got where it was intended to get) expecting the infusion to "kick start" a dying motor is insanity. It's like thinking the solution to a motor with bad spark plugs is to simply pour in more gasoline.

So we're killing ourselves from both ends. On the one hand we've created an economic environment where wealth producers can make much higher profits elsewhere and on the other, because we've gotten used to wealth, we borrow to maintain unsustainable levels. It's a recipe for disaster.