Republican economic philosophy does not work. Here is why.
The money that drives the economy is shifted away from that very economy it drives.
Imagine taking gas out of your car and trading it on the market because prices are high? Your car stops running.
Imagine if you had unlimited cash. Would you invest it in a measly domestic operation struggling to make 1% on its return….or would you send it overseas where 33% can be achieved.
Personally if it were my money, I would do the latter too. It is a basic fundamental, reaching deep into the human psyche.
The opposite was tried during the Clinton years and worked marvelously. We had record real growth, not the virtual kind imposed by Republican philosophy.
What we did was tax the excessive income. Fairly mind you to the tune of 29%. And we allowed deductions.
Now if I had tremendous amounts of money, instead of having it taxed and going hell know where, I would hide my profits by reinvesting in my business….my business. Doing so would put people to work……My balance book would show little if any profit, but……if one counted my assets which were not taxable, I was doing quite well, thank you very much.
Suddenly, with everyone else also following their natural inclination, saving their own money by reinvesting it in themselves, we are expanding and jobs are needed.
What is interesting is that more people working, have more money to spend, and even further expansion is then needed.
That is the beauty of taxing the wealthy. It works to everyone’s benefit.
And all that hidden money being reinvested into real assets, generates jobs, which does not happen when assets are diverted to paper ones, that rise and fall on the whims of investors.
So why are things not so bad, yet….looking at the chart there is a growing disparity between the two lines. The reason is because we the bottom line have mortgaged that gap with borrowing. We are living beyond our means, and now, time has caught up with us. It is time to pay back our dues and we have no money.
So, as would any human being, we look around to see who has money. It is not us, it certainly is not our government. Most of our money is owned by 1% of our population. They are the ones who are responsible for bailing us out. Failure to do so, means the end of the United States of America.
So how do we go about rebuilding from the rubble.
We tax them. Fairly.
And Republicans ( not local individual ones) are solely to blame. Had the Clinton plan continued to stay in force, we would be on top of the economic pyramid as we speak…….
Republican philosophy, not individuals, is to blame.
For their party to survive, Republicans who understand these economics, need to take over their party. Republicans like Mike Castle, who supported going down the wrong path, need to relinquish control.
By holding their ground, the old dogs doom the party to the ranks of the Federalists, Whigs, Greenbacks, and others who also based their politics on a vaporous financial scheme.
(chart courtesy of Daily Kos)
kavips 
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March 16, 2008 at 6:15 pm
Ken
What a great blog and some great advice to live by.
Cheers
March 18, 2008 at 6:39 pm
Duffy
“The money that drives the economy is shifted away from that very economy it drives.”
Meaning what? Outsourcing? That has nothing to do with being Republican or Democrat. It’s reality.
“Imagine taking gas out of your car and trading it on the market because prices are high? Your car stops running.”
But then you make money from selling that gas a profit which allows you to either buy more gas or hire a rickshaw.
“Imagine if you had unlimited cash. Would you invest it in a measly domestic operation struggling to make 1% on its return….or would you send it overseas where 33% can be achieved.”
If I had unlimited cash investing wouldn’t matter.
“The opposite was tried during the Clinton years and worked marvelously. We had record real growth, not the virtual kind imposed by Republican philosophy.”
Strange. Who controls spending? The President or Congress? Which party was in control of Congress under Clinton?
“What we did was tax the excessive income. Fairly mind you to the tune of 29%. And we allowed deductions.”
I hear this a lot. Please define ‘excessive’. No prevaricating either. Give me a number. How is taking nearly 1/3 of someone’s income fair?
“Now if I had tremendous amounts of money, instead of having it taxed and going hell know where, I would hide my profits by reinvesting in my business….my business. Doing so would put people to work……My balance book would show little if any profit, but……if one counted my assets which were not taxable, I was doing quite well, thank you very much.”
Sure but you growing your business would put someone else out of business as you take over their customers. I’m curious how you plan to reinvest any profits to hide them from taxation.
“Suddenly, with everyone else also following their natural inclination, saving their own money by reinvesting it in themselves, we are expanding and jobs are needed.”
This is an argument for increased savings rates. One I strongly support. However, the Tax Man takes so much of my money I can’t save enough. We are also hyper consumers in this country. The average person between 18-25 spends 111% of what they earn.
“What is interesting is that more people working, have more money to spend, and even further expansion is then needed.”
c.f. Hong Kong, Iceland, Hungary
“That is the beauty of taxing the wealthy. It works to everyone’s benefit.”
No, it doesn’t. Remember Carter? He taxed the hell out of the luxury yachts as a tax on rich people. What happened? Yacht building went overseas and never came back. That and the secondary market for yachts went up. Taxing rich people is stupid because they have much more ability to respond to those taxes than you and I.
“And all that hidden money being reinvested into real assets, generates jobs, which does not happen when assets are diverted to paper ones, that rise and fall on the whims of investors.”
Those “paper” assets employ most of America.
“So why are things not so bad, yet….looking at the chart there is a growing disparity between the two lines. The reason is because we the bottom line have mortgaged that gap with borrowing. We are living beyond our means, and now, time has caught up with us. It is time to pay back our dues and we have no money.”
Correct but it’s not for the reasons you’ve stated.
“So, as would any human being, we look around to see who has money. It is not us, it certainly is not our government. Most of our money is owned by 1% of our population. They are the ones who are responsible for bailing us out. Failure to do so, means the end of the United States of America.”
This is a call to class warfare. You may as well be storming Warren Buffet’s house with pitchforks and torches demanding his huge pile of cash, gold and jewels. Guess what? He doesn’t have it. It’s all tied up in those “paper assets” you were complaining about. Most rich people are rather illiquid.
“So how do we go about rebuilding from the rubble.
We tax them. Fairly.”
Again, define fair. Moreover, if you want the economy to do well, for people to do well, leave them alone. People know what’s best for themselves and thrive when you let them to it.
“And Republicans ( not local individual ones) are solely to blame. Had the Clinton plan continued to stay in force, we would be on top of the economic pyramid as we speak…….”
No. The 90’s boom was largely a technological one fueled by the dot com bubble which burst as investors regained their senses. Republicans absolutely deserve to be excoriated for overspending. This is however, new ground as “tax and spend” was always the mantra of the Democrats.
“Republican philosophy, not individuals, is to blame.”
Again, tax and spend is anathema to Republican philosophy.
“For their party to survive, Republicans who understand these economics, need to take over their party. Republicans like Mike Castle, who supported going down the wrong path, need to relinquish control.”
Finally we agree on something.
“By holding their ground, the old dogs doom the party to the ranks of the Federalists, Whigs, Greenbacks, and others who also based their politics on a vaporous financial scheme.”
“Yay for Federalists, Boo for Whigs and Greenbacks”
March 18, 2008 at 10:42 pm
kavips
I said: “The money that drives the economy is shifted away from that very economy it drives.”
You said: “Meaning what? Outsourcing? That has nothing to do with being Republican or Democrat. It’s reality.”
I say: “No, I was referring to buying paper assets, not factories. Buying 300 million in Chrysler, and selling it at 350 million does not help raise capital or create jobs. Losing money does not help as well. Holders of Bear Stearns lost 68 dollars a share over the weekend. What did they buy? Can they sell it for scrap? No. It was wasted money….It was real, they bought paper, and now they have nothing….Were that put into a factory, and it went belly up, someone could buy the assets and start anew.
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I said: “Imagine taking gas out of your car and trading it on the market because prices are high? Your car stops running.”
You said: “But then you make money from selling that gas a profit which allows you to either buy more gas or hire a rickshaw.”
I say: “you missed the point. You have a perfectly good car on the side of the road. While you run off in a richshaw……that car represents our economy.
March 19, 2008 at 8:49 am
kavips
I said: “The opposite was tried during the Clinton years and worked marvelously. We had record real growth, not the virtual kind imposed by Republican philosophy.”
You said: ” Strange. Who controls spending? The President or Congress? Which party was in control of Congress under Clinton?”
I say: “The President sets the budget: Congress passes their own. Gingrich’s Congress followed Clinton’s budget. However, the real reason for the great period of economic vibrancy, was the tax act which passed by 1 vote. Republicans all voted against it. The balanced budget would not have happened had a Republican been in office….Don’t believe me? Look at what happened when both chambers of Congress, the Execuitive Branch, and a Republican Supreme Court dominated Washington for the four years between ’02 and ’06. It was a tax increase that caused the deficit to dwindle down to nothing.
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I said: “What we did was tax the excessive income. Fairly mind you to the tune of 29%. And we allowed deductions.”
You said: “I hear this a lot. Please define ‘excessive’. No prevaricating either. Give me a number. How is taking nearly 1/3 of someone’s income fair?
I say: I believe the amount was during the nineties: 500,000. For the record, I would start at a yearly income of 15 million. Taking 1/3 of ones income is never fair…but it did wonders for our entire economy during the 90’s. And it didn’t seem to hurt those making that amount either, for with the growth of the economy, they made an additional amount far more than they lost paying incremental taxes. Proof: Wall Street gave Bill Clinton a plaque in the NYSE and said: ” Thanks for making us all wealthy.” (to which Clinton, at that time behest with attorney’s fees, joked: at least someone got wealthy in my administration.) I don’t hear them saying that about Bush/Cheney now after 4 straight years of their tax cuts…….Clinton’s plan worked….Bush’s did not……
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I said: “That is the beauty of taxing the wealthy. It works to everyone’s benefit.”
You said: “No, it doesn’t. Remember Carter? He taxed the hell out of the luxury yachts as a tax on rich people. What happened? Yacht building went overseas and never came back. That and the secondary market for yachts went up. Taxing rich people is stupid because they have much more ability to respond to those taxes than you and I. ”
I say: “True, but there is a diffence between Carter’s approach and Clinton’s. Carter taxed a manufactured good. Clinton taxed people’s incomes. Clinton was successful whereas Carter was not. Carter was on the right track; just used the wrong tack (pun intended). But if one gets wealthy by paying out 29% of your income to the Federal Government, then whoopee. But the point I made in the original article, is that when tax rates are high, and you allow deductions…..no one pays the full 29%. The additional goes back into the economy through the legalized form of deductions.
_________________________________________________
I said: “We tax them. Fairly.”
You said: “Again, define fair. Moreover, if you want the economy to do well, for people to do well, leave them alone. People know what’s best for themselves and thrive when you let them to it. ”
I say: “We agree that people know what’s best for themselves. They will figure it out with higher taxes just as they do with lower taxes. The difference is that our deficit in the meantime, is reduced, allowing more of our money to be spent on objects we need, or want. Currently a large share of our taxes are paying for Bush/Cheney’s excesses. Kind of a waste if you ask me. If we are going to cut spending, which I totally agree, we need to cut our interest payments. Either don’t pay them….and take the hit, or raise taxes on those who already have too much money and pay it down little by little….The upcoming tax increase should be properly named the “Bush Tax Increase” even though he will be out of office by the time it takes effect. But History, will always recognize that the only reason we have to undergo such a tax incresase is due to the pubescent notion that “deficits do not matter”.
______________________________________________________________
I said: “So, as would any human being, we look around to see who has money. It is not us, it certainly is not our government. Most of our money is owned by 1% of our population. They are the ones who are responsible for bailing us out. Failure to do so, means the end of the United States of America.”
You said: “This is a call to class warfare. You may as well be storming Warren Buffet’s house with pitchforks and torches demanding his huge pile of cash, gold and jewels. Guess what? He doesn’t have it. It’s all tied up in those “paper assets” you were complaining about. Most rich people are rather illiquid.”
I say: ” Again you make a point, but class warfare is not what we are discussing. We are talking about erasing the tax cuts on the wealthy making over 15 million a years to the levels they were paying during the 90’s, when they were doing quite well. In fact, it is our progressive tax structure that has prevented and storming of the Bastile or Winter Palace in this country to date. Taxes provide stability, that is unraveling because of a maniacal propensity to stop money from coming into the treasury. faster than we are spending it. Cut spending, eradicate the tax cuts, and lets get back on our feet……..
March 22, 2008 at 1:15 am
Arkfred
Tax and spend is fiscally sound. Borrow and spend, however, is not. U.S. budget deficits ballooned during Reagan’s administration, were added to by Bush I and exploded during Bush II. In comparison, Democrat Presidents are fiscal misers. Trickle down supply side economics with tax breaks have never succeeded in giving the U.S. both economic prosperity and fiscal restraint. In 6 of 8 years of his presidency, Reagan had a Republican majority in the Senate and never balanced a budget. While Reagan talked balanced budgets, Clinton maneuvered the Republican Congress into giving him several. Huge Republican budget deficits and de-regulation were the old bait and switch – giving short term false economic security and wholesale license to steal America’s bounty. There was a reason for every fiscal regulation – unfortunately, our short memories have not served us well and we are losing our nation to the rich and powerful – again.
July 2, 2010 at 10:32 am
Response to Duffy « kavips
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