Wednesday, November 05, 2008

Re: The Big Y

As always, thank you for your response. I would like to do some digging before responding but have a meeting to attend. Under the circumstances, I will make a couple of assertions that I believe to be true.

If we add the payroll tax to the income tax and then compare the totals to the net amounts paid by the bottom 10% of our population, especially after we also throw in welfare payments at their peak, and I think you will find that we are less socialistic today than in the days of the LBJ Great Society programs. Certainly during the Great Depression, we reached higher levels of socialism. While I understand that Obama's term is just beginning, if the great danger is in a boost of the top bracket from 35% to 39%, I can live with that.

One of the big differences today is that we are so much wealthier. Back in those rough days, men often worked two jobs, grew a garden and plumbed the pipes when needed. Today the average man works 34 hours per week.

As far as going bankrupt, even after the downturn in asset values, the US balance sheet is pretty darn strong. We tend to rail against the size of our debt in nominal terms without comparing it to our income and assets.

Capitalism did not fail during the great depression. Governments slammed capitalism time and time again and capitalism ultimately came out limping but strong.

Right now, democrats are quickly lining up to propose another silly Keynesian style stimulus plan. If another stimulus package passes or if it does not, will not make a hill of beans. The last $600 checks went in a circle. We shifted money from one pocket to the other. We borrowed $600 per taxpayer and we increased our debt. Yes, the bottom third of those who received it will not have to pay it back but these kind of hand outs are understood by the most liberal to be limited to times of recession. The recession will be over soon.

These silly payments give the people comfort that something is being done. They may even result in the retired, living off of SSN, to take part time jobs just to qualify for the checks.

My final point is that the power hungry desire to remain in power. If they try to run over the 43 to 46 votes in the senate, they know they will lose some of that power in 2 years. Again, the congress, the Fed, the president and our international trading partners all made dumb moves that created or prolonged the great depression. No one is proposing great tariffs today, the fed is not restricting money but pumping it in and we have just watched the most liberal voting member of the senate run a very successful centrist campaign for president. He won votes from former supporters of Jesse Helms! Conservatives see him as a wolf in sheep clothing but perhaps it will be Barney Frank who sees him as a wolf in sheep clothing within a few months.

On Wed, Nov 5, 2008 at 11:00 AM, Lamar wrote:

I agree with your theoretical economic argument but differ with the realities of the body politic of the depression era. From what I have read, the world was viewing with greater skepticism the great experiment of capitalism and democracy. Many countries had already converted to communistic rule or were eying the shift. The US was no different with communism gaining support. No better argument for the failures of capitalism than the economic times of the 30's. The depression was caused by ill guided policies and actions but the average American neither understands nor believes those facts.

Fast forward to financial collapse of 2008. In my opinion the most egregious action taken recently was the imposition on the financial system that Americans had a right to own their own home. By most definitions a person that offers no or very little equity to purchase this home, that person does not actually own the home. And yet our politicians have forced us to swallow that outrageous pill.

This is another great example of the incompatibility of economic theory and political action. In hindsight it made no economic sense to allow lower credit quality buyers purchase homes with no money down. The politicians forced this great idea on the country and now we are enjoying the result. On a purely economic argument the solution was probably not the correct one. Our politicians had to answer with the 850 billion bailout. Surely not the best economic answer but the ones they decided upon.

My outlook on the economy is less sanguine than yours and many others. If the stat of 40% of Americans pay no taxes is correct, that is an alarming number. I cannot imagine that number decreasing over time. Combine that with the rush to court the hispanic vote, the union vote and others and I can only imagine what level of socialism the country will have in 40 years. I won't even go into the moral decay of the population.

Just apply the Hemingway quote about bankruptcy here. Q-"How did you go bankrupt? A-Slowly at first"