News What are the potential impacts of public confidence on the economy's recovery?

[Phrak]

The Economy Is Still at the Brink

http://query.nytimes.com/gst/fullpa...34A35755C0A96F9C8B63&sec=&spon=&pagewanted=1"

Mr. Obama thinks that the way to revive the economy is to restore confidence in it. If the mood is right, the capital will flow. But this belief is dangerously misguided. We are sympathetic to the extraordinary challenge the president faces, but if we've learned anything at all two years into the worst financial crisis of our lifetimes, it is that a capital-markets system this dependent on public confidence is a shockingly inadequate foundation upon which to rest our economy.

 

[bleedblue1234]

A lot of this mess could be largely avoided if the government hadn't stepped in years ago to continue this crazy scherade of propping up the US economy against the rest of the world and continuing to rely on the cheap easy credit that has moved the US economy along for the past 10-15 years.

China, the Middle East, and the rest of Eurasia have been largely willing to finance are debt (in ever increasing percentages relative to domestic markets) while the government continues to think that the solution to this idiotic policy that was started by the government and the FED, is... guess what? MORE OF IT... we continue to flood the currency markets and everything else with cheap money... just this week we had a record $106 billion treasury auction... guess when the last record was? Two weeks ago. We will need to roll over about $1 trillion this year and add $2 trillion more debt to continue financing these crazy bailout schemes that set us up for more dire pain down the road.

All the things that the government does in the name of "helping" the economy have large unintended consequences down the road... cheap money led to the stock market bubble, and after it burst Greenspan lowered rates like a madman and inflated the housing bubble, followed by a quick rate increase that hammered the economy, followed by this supposed "crisis" and a quick jump to 0% interest rates... which will surely incite either A) large inflation if the FED doesn't raise rates as the economy strengthens or B) jarring the economy back down as rates skyrocket as a result of this buildup of artificially low interest rates.

The US economy is 70-75% driven by internal consumption mostly financed from the rest of the world (most the BRIC nations) and we cannot hope for a true recovery without a VAST restructuring of our economy that can only be accomplished if government realizes that they are the problem, they caused this mess, and the sooner they get out of the way the sooner the market can allocate productive work where it needs to go and turn the economy around for the better (not just a short term bubble-rally).

 

[Astronuc]

Recovery's Missing Ingredient: New Jobs
Experts Warn of A Long Dry Spell
http://www.washingtonpost.com/wp-dyn/content/article/2009/06/21/AR2009062101859.html

Despite signs that the recession gripping the nation's economy may be easing, the unemployment rate is projected to continue rising for another year before topping out in double digits, a prospect that threatens to slow growth, increase poverty and further complicate the Obama administration's message of optimism about the economic outlook.

The likelihood of severe unemployment extending into the 2010 midterm elections . . . .

So far, the White House has counseled patience even as the political debate surrounding its economic policies grows more urgent. Officials point out that job growth will not come until robust economic expansion takes hold, which they expect will happen as stimulus funding works its way through the economy. . . . .

With many forecasters projecting unemployment to remain above 10 percent next year and not return to pre-recession levels of roughly 5 percent for years after that, Obama is likely to be confronted with defending the effectiveness of his economic policies as the nation endures its worst employment situation in a generation.

. . . .

A friend was telling me about discussion on one the news programs in which an economist described various scenarios.

Some optimists predict a 'V-shaped' recession, which is apparently fairly typical of recessions over the past several decades. Others are predicting a 'W-shaped' recession, and the middl peak may be lower than the outer ends.

Still some pessimists predict and 'L-shaped' recession, i.e., little recovery for a long time.

And another pessimist thinks the recession shape with be that of an upside-down square root sign (√).

 

[Phrak]

Per se, jobs do not directly contribute to economic recovery. It could be said that nonproductive jobs, jobs that neither sustained nor enhanced the economic infrastructure, but depleted it, contributed to the economic collapse; working for a blue sky company only produces blue sky--and at a price.

Jobs produce economic recovery through productivity.

 

[Phrak]

bleedblue1234,

Low interest rates didn't contribute to the 1994-2000 market bubble. 401K savings plans, internet investing, and start-up companies did.

The Federal Reserve Corp was once said to manipulate interest rates to what they have decided is an optimal amount to hold the rate of inflation to 4.0 to 4.5 percent a year, under the assumption of constant economic conditions. But things happen.

The prime lending rate, defined as 3.5% above bank-to-bank overnight loans by the WSJ, was managed to ~5.0% between '94 and 2000. The market down-turn put the old-money interdependent business institutions at economic risk and in need of the liquidity of low interest rate loans. This, as one of the interdependent businesses, the Fed was eager to supply from 2001 unti 2005 when they thought they had avoided a '28 style depression. Doh!

http://en.wikipedia.org/wiki/File:Federal_Funds_Rate_(effective).svg"

So the wasted labor, lost to poor investments in the evolving technologies of the personal computer, the internet and communications, was defered to other hands. And yes, through the availability of cheap loans, the low lending rates contributed to the housing market bubble, obliged by an eager public who had no idea they were betting into a false economy.

Another bubble, less spoken of, was of consumerism, where paper profits were spent before realized.

Pretty mushy reasoning in my ramblings above, right? I wish someone here could pin things down better.

 

[OmCheeto]

The Economy Is Still at the Brink

Mr. Obama thinks that the way to revive the economy is to restore confidence in it.

I agree with Mr. Obama.

Economics: A social science.

It's very simple, it you stop and think about it for a few years.

 

[Phrak]

I agree with Mr. Obama.

Economics: A social science.

It's very simple, it you stop and think about it for a few years.

Can you eat confidence? Can you live sheltered in economic confidence with central heating? Can you drive economic confidence or does someone have to take some physical matter and rearrange it so you can push your foot down to make it go? We are physical creatures.

Talk can motivate people to add value to a rock and turn it into steel. Has Mr. Obama talked about any of these things? Will Mr Obama get around to these things; will Mr Obama motivate the legislation to promote these, or is he a very handsome, charming and confident critter in a suit offering no more than another Tennessee Valley Authority?

I'm not so easily taken by the charismatic. If he looses the self-grandure, starts to stutter, comes back ranting about RICO laws for corporate and governmant thieves, and it actually has demosterable effect, then maybe I could believe he's more than hot air.

 

[rootX]

Can you eat confidence? Can you live sheltered in economic confidence with central heating? Can you drive economic confidence or does someone have to take some physical matter and rearrange it so you can push your foot down to make it go? We are physical creatures.

Confidence in future ==> more Investments (Less savings also I believe) ==> Real production.

 

[Ivan Seeking]

The Conference Board LEI for the U.S. increased sharply for the second consecutive month in May. In addition, the strengths among its components continued to exceed the weaknesses this month. Vendor performance, the interest rate spread, real money supply, stock prices, consumer expectations, and building permits contributed positively to the index, more than offsetting the negative contributions from weekly hours and initial unemployment claims. The index rose 1.2 percent (a 2.4 percent annual rate) between November 2008 and May 2009, the first time the index has increased over a six-month period since July 2007, and the strengths among the leading indicators have become balanced with the weaknesses during this period.

The Conference Board CEI for the U.S. continued to decrease in May, amid further declines in industrial production and employment. The six-month change in the index stands at -3.3 percent (a -6.4 percent annual rate) in the period through May, down from -2.3 percent (a -4.5 percent annual rate) during the previous six months. In May, the lagging economic index for the U.S. fell by the same amount as the coincident economic index, and the coincident-to-lagging ratio remained unchanged, as a result. Meanwhile, real GDP fell at a 5.7 percent annual rate in the first quarter of the year, following a contraction of 6.3 percent in the fourth quarter of 2008.

The Conference Board LEI for the U.S. , which had been on a general downtrend since reaching a peak in July 2007, has risen sharply in the past two months amid widespread strengths among its components. With these large and extensive increases, the six-month change in the index has become positive for the first time in two years. The Conference Board CEI for the U.S., a measure of current economic activity, remains on a decreasing trend but its pace of decline has stabilized in recent months. All in all, the behavior of the composite indexes continues to suggest that the recession that began in December 2007 will likely ease in the near term.

http://www.conference-board.org/economics/bci/pressRelease_output.cfm?cid=1

 

[Office_Shredder]

Can you eat confidence? Can you live sheltered in economic confidence with central heating? Can you drive economic confidence or does someone have to take some physical matter and rearrange it so you can push your foot down to make it go? We are physical creatures

You don't grow food if you don't think anyone will buy it. You don't build houses if you think nobody will buy it. You don't advertise your central heating installation business if you think nobody will call you. At its most base level, the economy is people doing things for each other, with an efficient means of exchange (money), and this only happens because everyone's confident that the system works

 

[Phrak]

You don't grow food if you don't think anyone will buy it. You don't build houses if you think nobody will buy it. You don't advertise your central heating installation business if you think nobody will call you. At its most base level, the economy is people doing things for each other, with an efficient means of exchange (money), and this only happens because everyone's confident that the system works

People will eat. Farmers will grow food. Perhaps more soy and fewer artichokes.

I think you put your finger on it, whether you know it or not.

Poorly gauged confidence in the stock market lead its collaspe. Poorly gauged confidence in housing has left many upside down, owing more principle than they have equity. Confidence in the state of the economy 2000-2007 led to irrational consumer choices, which seems to be what you recommend.

 

[bleedblue1234]

Confidence in future ==> more Investments (Less savings also I believe) ==> Real production.

yes as long as investment goes into things like production (factories, infrastructure, the works) but almost all of the capital in the US has been diverted from these such things and into frivolous items that produce no long term economic growth...

and savings are necessary to finance large capital projects...

 

[mheslep]

Recovery's Missing Ingredient: New Jobs
...

What recovery? There has to be one in progress for them to be missing. The credit crisis seems to have eased, but a 'recovery' addresses GDP, and it still moving the wrong way.

 

[Ivan Seeking]

What recovery? There has to be one in progress for them to be missing. The credit crisis seems to have eased, but a 'recovery' addresses GDP, and it still moving the wrong way.

So your position is that once Obama waved his magic wand, all of the numbers should instantly reverse? The question is whether the contraction is slowing or not.

Real GDP -- the measure of the value of goods and services produced in the economy -- fell at a 5.5% annual rate in the quarter after plunging at a 6.3% pace in the fourth quarter of 2008, the government said.

A month ago, the government had estimated GDP fell at a 5.7% pace in the January-through-March quarter. The government revises the estimates as it obtains more complete data not available earlier. Read the full government report.

Economists surveyed by MarketWatch were forecasting that the final estimate for first quarter GDP would be unchanged at a negative 5.7%. They expect the economy to contract 1.5% annualized in the second quarter (which ends next week) and to grow 1.3% in the quarter that begins July 1. See Economic Calendar...

http://www.marketwatch.com/story/gdp-revised-to-55-decline-in-first-quarter

 

[Astronuc]

What recovery? There has to be one in progress for them to be missing. The credit crisis seems to have eased, but a 'recovery' addresses GDP, and it still moving the wrong way.

Well - I keep hearing that the rate of decline is lessening. But unemployment will apparently continue to increase to something like 10%.

On the other hand, I've heard mentioned "The credit crisis - part 2", which is apparently developing.

 

[Ivan Seeking]

Well - I keep hearing that the rate of decline is lessening. But unemployment will apparently continue to increase to something like 10%.

As you know, that is why it is called a lagging indicator.

On the other hand, I've heard mentioned "The credit crisis - part 2", which is apparently developing.

We will see. I haven't heard anything suggesting that we will see a crisis like that already seen. Keep in mind that a normal recession turned disasterous because of the hidden CDS losses, and reckless lending practices.

Of course I have seen half of the alphabet [and now an inverted mathematical symbol] used to predict the nature of the recovery. And, of course, the worst case scenarios are precisely what the Obama admin was concerned about and trying to prevent with bold and decisive actions, and based on lessons from history. The inverted square root, or an L-shaped recovery were precisely the situations the Obama team was trying to prevent based on lessons from Japan.

 

[Astronuc]

I don't care for the hype on the recovery. I want to hear the facts and dispassionate analysis.

Meahwhile - good news for Michigan:

http://marketplace.publicradio.org/display/web/2009/06/26/pm_michigan/

General Electric plans to build a new research and development center in Michigan, and GM will make its Chevy Spark in the Great Lakes State. Mitchell Hartman reports why the companies are choosing to invest in and around the Motor City.
. . . .

There was some economic acceleration in and around Motor City today. General Electric is going to build a brand spanking new research center in the suburbs of Detroit. It's going to work on software for renewable energy, and jet engines, and gas turbines and that kind of thing.

But more to the point, it means 1,100 new jobs in a state that's lost well over a 100,000 of them in the past year alone. Also General Motors has decided to build its new subcompact, the Chevy Spark, in Orion, Mich. But from the Marketplace desk of no free lunch, there is a lot of money being laid on to grease the wheels of these big corporate decisions.
. . . .

26 June 2009 - http://www.genewscenter.com/Content/Detail.asp?ReleaseID=7157

GE To Open Advanced Manufacturing Technology & Software Center in Michigan
1,100 scientists, engineers and technologists will focus on information technology, energy and aviation R&D; drive progress in manufacturing capability

FAIRFIELD, Conn.--26 June 2009-- The General Electric Company (NYSE:GE) today announced that it will open an advanced manufacturing technology and software center in Michigan. The center is expected to grow to more than 1,100 GE employees over the next few years.

The Advanced Manufacturing and Software Technology Center will include a GE research and development facility that will be part of GE’s Global Research network. It will house scientists and engineers who will develop next generation manufacturing technologies for GE’s leading renewable energy, aircraft engine, gas turbine and other high-technology products. Such work will include development of composites, machining, inspection, casting and coating technologies for GE’s Aviation and Energy businesses.

. . . .

Now if they can find long term employment for the other 99,000 people who lost their jobs in the last year, and the others who lost their job the year before that.

 

[WheelsRCool]

I disagree with President Obama on most things, but I think it is too soon to be expecting a recovery. Remember, when Ronald Reagan came into office, and the Federal Reserve employed a contractionary monetary policy to contol inflation, which drove the economy into a steep recession, and taxes were cut to help the economy recover, the recession lasted from July 1981 to Novermber 1982. That is more than a year.

We cannot expect the economy to turn around within six months, especially with a financial crises of this magnitude. I am surprised the Obama administration itself seems to be a bit surprised on this, that the economy isn't "recovering" so fast. Give it at least another six months or a bit more to make a recovery IMO.

 

[mheslep]

So your position is that once Obama waved his magic wand, all of the numbers should instantly reverse?

How do you go there from a question about the claims of recovery?

The question is whether the contraction is slowing or not...

Your question. It appears that it is slowing in some sectors, to the good, but that does not make a recovery.

 

[mheslep]

Well - I keep hearing that the rate of decline is lessening. But unemployment will apparently continue to increase to something like 10%.

Same here.

 

[mheslep]

... Keep in mind that a normal recession turned disasterous because of the hidden CDS losses, and reckless lending practices.

Evidence?

 

[Phrak]

evidence?

Good question. Googling names of institutions along with Credit Default Swaps might do it.

I got hits on GM and AIG... and GSE.

If you can make your way through this gruelingly long article (I'm going to print it and read it later) it might help give you an overview of the financial insurance web.

http://www.financialsense.com/fsu/editorials/amerman/2008/0910.html"

 

[mheslep]

aig?

Does not a recession make. Small potatoes compared to Fannie and Freddie losses.

 

[Phrak]

Does not a recession make. Small potatoes compared to Fannie and Freddie losses.

Right. Sorry about that. I completely rewrote my snippish remark. See above ^

 

[Astronuc]

I think the economic recovery is being postponed.

Much-needed tax refunds delayed from Ga. to Calif.
http://news.yahoo.com/s/ap/20090703/ap_on_bi_ge/us_state_budgets_tax_returns

Tax day — April 15 — has long since come and gone, but sharp budget cuts and falling revenues have forced many states to delay income tax returns for months — and left taxpayers longing for their money.
. . . .
Some states say plummeting tax collections drove them to hold on to the money so they can make ends meet. Others complain of not being able to keep up because the economic downturn has forced staffing cuts in revenue departments.

But critics worry governments are withholding funds that rightly belong to taxpayers when they need the extra cash the most. And some of the tardy states are fast approaching a stiff deadline of their own: The longer they wait, the more likely they'll have to pony up interest from thinning state coffers.

That prospect could soon become a reality in Georgia and Alabama, where tax officials are racing to beat a mid-July deadline to send hundreds of thousands of tax refunds or risk racking up millions of dollars in interest.
. . . .

In Alabama, more than 120,000 taxpayers are waiting for at least $63 million in income tax refunds!

In Georgia, tax officials say that more than 320,000 returns still need to be processed!

 

[Astronuc]

Perhaps the recovery will look like a super slide.

MOUNTAIN OF DEBT: Rising debt may be next crisis
http://news.yahoo.com/s/ap/20090703/ap_on_go_ot/us_mountain_of_debt

The country first got into debt to help pay for the Revolutionary War. Growing ever since, the debt stands today at a staggering $11.5 trillion — equivalent to over $37,000 for each and every American. And it's expanding by over $1 trillion a year.

The mountain of debt easily could become the next full-fledged economic crisis without firm action from Washington, economists of all stripes warn.
. . . .
Interest payments on the debt alone cost $452 billion last year — the largest federal spending category after Medicare-Medicaid, Social Security and defense. It's quickly crowding out all other government spending. And the Treasury is finding it harder to find new lenders.
. . . .
According to the Treasury Department, which updates the number "to the penny" every few days, the national debt was $11,518,472,742,288 on Wednesday.

The overall debt is now slightly over 80 percent of the annual output of the entire U.S. economy, as measured by the gross domestic product.

By historical standards, it's not proportionately as high as during World War II, when it briefly rose to 120 percent of GDP. But it's still a huge liability.

Also, the United States is not the only nation struggling under a huge national debt. Among major countries, Japan, Italy, India, France, Germany and Canada have comparable debts as percentages of their GDPs.
. . . .
Treasury securities are suitable for individual investors and popular with other countries, especially China, Japan and the Persian Gulf oil exporters, the three top foreign holders of U.S. debt.
. . . .
And if major holders of U.S. debt were to flee, it would send shock waves through the global economy — and sharply force up U.S. interest rates.

As time goes by, demographics suggest things will get worse before they get better, even after the recession ends, . . . . .

While the president remains personally popular, polls show there is rising public concern over his handling of the economy and the government's mushrooming debt — and what it might mean for future generations.
. . . .

The Peter G. Peterson Foundation, established by a former commerce secretary and investment banker, argues that the $11.4 trillion debt figures does not take into account roughly $45 trillion in unlisted liabilities and unfunded retirement and health care commitments!

That would put the nation's full obligations at $56 trillion, or roughly $184,000 per American, according to this calculation!

Well - I wasn't planning to retire anyway.

 

[Ivan Seeking]

Good question. Googling names of institutions along with Credit Default Swaps might do it

It couldn't have been a serious question. We have had tons of information about this.

One thing that is rather amusing: We keep hearing from Republicans how the stimulus plan hasn't worked. The fact is that only about one-third of the available money has been spent.
http://www.recovery.gov/?q=content/report-progress

By all accounts that I've heard, the money is only now really beginning to move.

If the Obama admin had recklessly rushed the money out, the Republicans would be complaining about that. Honestly, this is a great example of why I am no longer a Republican. If they want to save their party, then they need to quit assuming that Americans are all idiots. Spin only works for so long and people eventually get wise to it.

 

[Ivan Seeking]

Perhaps the recovery will look like a super slide.

MOUNTAIN OF DEBT: Rising debt may be next crisis
http://news.yahoo.com/s/ap/20090703/ap_on_go_ot/us_mountain_of_debt
Well - I wasn't planning to retire anyway.

Everything depends on the US regrowing industry and creating wealth. That and immigration will be what saves us. Obama is targeting the soft money first - the $500 Billion+ that we literally burn every year; money sent to foreign energy suppliers.

Note that at 122%, our debt as a percentage of GDP reached its peak just after WWII. What followed was a period of properity like the world had never seen. I have not seen any projections that would put our debt on par with that after WWII.

Also, to say or imply that we have 45 trillion in debt right now is a bit like crying the sky is falling. Future debt is not debt today. One has to take into account the GDP, growth, and the fact that it represents payments made over many years.

 

[WheelsRCool]

It couldn't have been a serious question. We have had tons of information about this.

One thing that is rather amusing: We keep hearing from Republicans how the stimulus plan hasn't worked. The fact is that only about one-third of the available money has been spent.
http://www.recovery.gov/?q=content/report-progress

By all accounts that I've heard, the money is only now really beginning to move.

Politics. The Obama administration said this stimulus was necessary to prevent unemployment from going over 8%. It hasn't.

If the Obama admin had recklessly rushed the money out, the Republicans would be complaining about that.

Why would Republicans complain about the money going out immediately to recover the economy?

Honestly, this is a great example of why I am no longer a Republican. If they want to save their party, then they need to quit assuming that Americans are all idiots. Spin only works for so long and people eventually get wise to it.

The Obama administration rammed this stimulus down everyone's throat claiming if we did not enact it right away, then we would go into a full-on depression. So then they proceed to create something that takes months or even over a year to go into full effect? The only spin here is on the Democrats side.

Everything depends on the US regrowing industry and creating wealth.

So let's just enact the largest tax increase in history and hamstring industry completely.

That and immigration will be what saves us.

Then why not just cut taxes? America's tax on capital is too high, and so is our corporate income tax rate, along with our taxes on small businesses, which employ about 80% of the workforce. Entrepreneurs and businesses create jobs, not government. Why should people and businesses have to pay more money overall for the government's messes? Why cannot the government just cut back their spending?

Our corporate tax rate is the second-highest in the world. Our tax on capital is about 15%, which is high from a global point-of-view (some countries don't tax capital at all).

Obama is targeting the soft money first - the $500 Billion+ that we literally burn every year; money sent to foreign energy suppliers.

It's going to increase as we are forced to move onto so-called "green" technology that isn't viable at all.

Note that at 122%, our debt as a percentage of GDP reached its peak just after WWII. What followed was a period of properity like the world had never seen. I have not seen any projections that would put our debt on par with that after WWII.

That was a war, where we built up actual industry and so forth, while the rest of the world got bombed to smithereens. We aren't building up industry right now, nor are foreign competitors being bombed out.

The only real prosperity was during the 1950s, when the U.S. economy had all that industry built up, with no real overseas competition.

After the 1950s, the U.S. economy was stalled more. And then in the 1970s, we got Nixon, who in the name of politics did many things to completely wreck the economy.

Meanwhile, American companies began getting creamed by foreign competition. Automobiles, electronics, appliances, American companies were on the decline.

When Reagan came in and enacted his policies, our economy was able to turn around and we were able to restructure our corporations to once again be competitive. The financial sector was revolutionized as well. The Reagan reforms gave us a period of prosperity unmatched in history. More wealth has been created over the last thirty years then over the prior two hundred. Even if one considers that a lot of phony paper wealth was created over the last ten years, starting in 2000, that still doesn't change that much wealth was still created over the period from 1980 to 2000 and much from 2000 to 2008 as well, albeit not as much when one takes into account the crash.

 

[OmCheeto]

America's tax on capital is too high, and so is our corporate income tax rate, along with our taxes on small businesses, which employ about 80% of the workforce. Entrepreneurs and businesses create jobs, not government. Why should people and businesses have to pay more money overall for the government's messes? Why cannot the government just cut back their spending?

Our corporate tax rate is the second-highest in the world. Our tax on capital is about 15%, which is high from a global point-of-view (some countries don't tax capital at all).

Umm... According to Forbes, we have one of the lowest tax burdens on the planet.
http://www.forbes.com/global/2008/0407/060_3.html

It's going to increase as we are forced to move onto so-called "green" technology that isn't viable at all.

I think it's viable.

The Reagan reforms gave us a period of prosperity unmatched in history.

I hope you're not talking about the bubble that just popped.

 

[mheslep]

Umm... According to Forbes, we have one of the lowest tax burdens on the planet.
http://www.forbes.com/global/2008/0407/060_3.html

Which lists total income taxes as 10%? That is detached from reality somewhere.

 

[OmCheeto]

Which lists total income taxes as 10%? That is detached from reality somewhere.

I don't know how they get that number either.

But this supposedly right wing website seems to think we've got it pretty good also:

http://www.heritage.org/index/Default.aspx"

Covers 183 countries across 10 specific freedoms such as trade freedom, business freedom, investment freedom, and property rights.

They list us 6th overall out of 183 countries.

They do mention that our taxes are "burdensome", but the number they quote overall is the same as Forbes: 28.2%

I think the reason we show up below the average on the "Heritage" tax scale(Fiscal Freedom) and number 5 from the top on the "Forbes" scale is that the Heritage people have included most every country in the world, whereas Forbes only lists 30 countries.

I wonder how effective the other 153 countries are at collecting income tax.

 

[WheelsRCool]

Umm... According to Forbes, we have one of the lowest tax burdens on the planet.
http://www.forbes.com/global/2008/0407/060_3.html

Overall, perhaps, that doesn't mean our tax burden still is not too high in many ways. Remember, it isn't just Federal income tax. There's state tax, county tax, local tax, property tax, etc...and we have among the highest corporate and capital taxes, oftentimes which businesses pass on to others. Businesses can pass on their taxes to their workers through lower wages or worse working conditions or less benefits, etc...or their shareholders through lower dividends, or to their customers through higher prices, and so on.

I think it's viable.

None of them, wind, solar, geothermal, etc...are viable right now. Both must be subsidized financially and power-wise (have a reliable 24/7 plant to back them up in case the wind stops or the sun dies or whatever).

Wind farms kill birds. They're also ugly. Could you imagine the rolling fields of America, the great plains, all filled with huge wind turbines?

Solar power isn't reliable enough if the sun is blocked by clouds and weather, and it also requires huge amounts of water, which is a problem as how to supply fresh water out West is a problem unto itself coming up.

Even nuclear power is limited. There's only so much uranium we have available. And most of it we have to import, so nuclear power doesn't make us energy independent per se I don't think.

And none of these solve the problems of oil. Many seem to think we can just magically create this paradise of no more coal powerplants and instead an economy powered by wind and solar, and it's just evil oil and coal companies stopping this, but that is not the case. The technology isn't there.

I hope you're not talking about the bubble that just popped.

1980 to 2008 was a period of great prosperity that had three bubbles: one under Reagan that popped in 1987, the Dot Com bubble that popped under Clinton in 2000, then the housing bubble under Bush that just popped.

But a real-estate bubble is a HARD blow to an economy is a thing, unto itself. Japan's government played a very large role in their economy (still does I think) and for most of the 1980s, it was the economy many said America should copy. Then their real-estate bubble popped on them. Since then their incursions in trying to "fix" their economy have created in a sense a lost decade for them.

 

[mheslep]

http://michaelscomments.wordpress.c...day-unemployment-rate-increases-by-only-0-1/"

 

[mheslep]

It couldn't have been a serious question. We have had tons of information about this.

It was serious, though I'll specify further I was referring in particular to the CDS clause. If you believe there's so much information it should be easy to quickly support the the unqualified assertion that

...a normal recession turned disasterous because of the hidden CDS losses ...

- about a complex subject.

One thing that is rather amusing: We keep hearing from Republicans how the stimulus plan hasn't worked. The fact is that only about one-third of the available money has been spent.
http://www.recovery.gov/?q=content/report-progress

By all accounts that I've heard, the money is only now really beginning to move.

Well please explain then what the endless refrain of 'shovel ready' meant.

The recovery spending is not anywhere close to one-third of the $787B budgeted in the Act, spending is currently less than 10% of the total. Less than http://www.cnsnews.com/PUBLIC/content/article.aspx?RsrcID=43708" .

One of the fundamental problems with stimulus spending as Keynes warned, and for which much criticism was levelled at the Recovery Act during debate: government does not get the spending out fast enough, accurately enough:

Organized public works, at home and abroad, may be the right cure for a chronic tendency to a deficiency of effective demand. But they are not capable of sufficiently rapid organisation (and above all cannot be reversed or undone at a later date), to be the most serviceable instrument for the prevention of the trade cycle.

http://thinkmarkets.wordpress.com/2009/01/25/keynes-as-public-works-skeptic/

If the Obama admin had recklessly rushed the money out, the Republicans would be complaining about that.

Not would be, did, and with good reason. That's an inherent flaw of recession stimulus spending as was pointed out at the time. They certainly did rush out the Act with no more than a couple weeks of debate. Some part of that is unavoidable - at least the 2009 spending has to have been legislated quickly. The whole point (flawed in my view but many economists support it) is to get the money out fast, which requires ill-considered action in haste, and then government machinery is still to slow.

Anyway, no need to query the Republicans, the $787B stimulus package so far has not worked as the Obama administration said it would: http://otrans.3cdn.net/45593e8ecbd339d074_l3m6bt1te.pdf".

 

[Phrak]

Is it hard to understand that prosperity is created not by employing people to be engaged in activities dreamt up by nonconsumers, but by producing what people want as dictated by their voting capital.

 

[mheslep]

GAO report card just out on the Recovery Act:
"[URL
Highlights[/URL]
Most of the spending (~90%) has gone to state governments who used it to pay off their Medicaid and Education obligations.

 

[Astronuc]

This is a growing concern. Chinese companies are accumulating substantial resources, and in some cases, near monopolies.

http://www.usnews.com/articles/news...new-energy-dependency-chinas-metals_print.htm

Dominance. The strategic implications of this growing imbalance are vast, particularly for defense and energy. Wind turbines and electric cars have become clean energy symbols, but they are merely final products, the visible results of a supply chain that spans international borders and, for the most part, is largely overlooked by policymakers. At the bottom of this chain, at its most basic level, are rare-earth metals mined from the Earth's crust and made into magnets or other parts, then put into motors or batteries.

China's dominance in this arena, and its displacement of American leadership, are not accidental. In 1992, Deng Xiaoping, then the country's most powerful politician, outlined a plan. "The Middle East has oil; we have rare Earth's," he said. "We must develop these rare Earth's." Today this phrase is emblazoned, like a campaign slogan, across the roof of at least one Chinese factory.

Deng's call to arms has been carried out nearly flawlessly. China dominates the world market and in recent months has taken control of mines in Brazil and Australia, thereby eliminating potential competitors. It is poised to do with rare Earth's what the Organization of Petroleum Exporting Countries has done with oil: make the world dependent. In 2002, China exported about 60,000 tons of rare-earth metals. In 2008, it exported about 45,000 tons. In 2009, based upon preliminary estimates, that will drop into the 30,000s.
. . .
As Jack Lifton, a longtime metal analyst, says, "The Chinese are depending, as they always do, on the myopia of the American investment community that only sees to the end of its nose."
. . .

Meanwhile, IBM is apparently doing research on Li-air (or Li₂O₂) batteries.
http://www.evworld.com/news.cfm?newsid=21277

Research is being done at University of St. Andrews
http://ch-www.st-and.ac.uk/staff/pgb/group/lio.html

 

[mheslep]

This is a growing concern. Chinese companies are accumulating substantial resources, and in some cases, near monopolies.

http://www.usnews.com/articles/news...new-energy-dependency-chinas-metals_print.htm
Meanwhile, IBM is apparently doing research on Li-air (or Li₂O₂) batteries.
http://www.evworld.com/news.cfm?newsid=21277

Research is being done at University of St. Andrews
http://ch-www.st-and.ac.uk/staff/pgb/group/lio.html

The St. Andrews work claims 1220 mAhg^-1 are possible. For a 3V cell that is 3600 Wh/kg, or ~13MJ/kg, compared to 46 MJ/kg gasoline, remarkable. A practical battery w/ that density would tip over gasoline and diesel based transportation - cars, trucks, trains - all of it.

 

[mheslep]

...They do mention that our taxes are "burdensome", but the number they quote overall is the same as Forbes: 28.2%

That is the tax revenue as a percentage of GNP. The federal income tax alone is 35%, so is the top corporate rate.

U.S. tax rates are burdensome. Both the top income tax rate and the top corporate tax rate are 35 percent. Other taxes include a property tax, an estate tax, and excise taxes, and additional income and sales taxes are assessed at the state and local levels. In the most recent year, overall tax revenue as a percentage of GDP was 28.2 percent.

Overall, perhaps, that doesn't mean our tax burden still is not too high in many ways. Remember, it isn't just Federal income tax. There's state tax, county tax, local tax, property tax, etc...and we have among the highest corporate and capital taxes, oftentimes which businesses pass on to others. B...

Here are the numbers from the Tax Foundation incorporating the 5.4% surcharge called for in the health plan just released by the US House of Representatives. In most of the 50 states (including mine) combined income tax will exceed 50% in the top bracket.
http://www.taxfoundation.org/publications/show/24863.html

Edit: http://gregmankiw.blogspot.com/2009/07/top-tax-rate-may-soon-exceed-50-percent.html" low as they don't include sales taxes, another 5% on average.

I don't know the tax rate at which the Laffer curve predicts revenue actually starts falling with increasing revenues due to behavioural changes, but this must begin to close in on it.

 

[Phrak]

It couldn't have been a serious question. We have had tons of information about this.

One thing that is rather amusing: We keep hearing from Republicans how the stimulus plan hasn't worked. The fact is that only about one-third of the available money has been spent.
http://www.recovery.gov/?q=content/report-progress

By all accounts that I've heard, the money is only now really beginning to move.

If the Obama admin had recklessly rushed the money out, the Republicans would be complaining about that. Honestly, this is a great example of why I am no longer a Republican. If they want to save their party, then they need to quit assuming that Americans are all idiots. Spin only works for so long and people eventually get wise to it.

I don't believe we have a single thing in common to discuss. don't bother responding. I wont.

 

[OmCheeto]

In most of the 50 states (including mine) combined income tax will exceed 50% in the top bracket.

Thank god I don't make enough to be in that tax bracket.

Otherwise I'd only be bringing home in one year as much as I've brought home in the last 30.

...

Jeez. What a burden that would be.

...

OMG! My state is number 1!

Rank #1
Oregon
57.54%

I knew we were good at something.

But that means I'll have to work a whole 'nother month before I can retire. As soon as someone realizes I'm worth a million dollars a year of course...

 

[tchitt]

I smell a little wealth envy.

I don't think I'll ever understand why some people seem to feel resentful of people more wealthy than they are... is it because you believe they don't deserve to keep all of the money they make? You feel as if you deserve some of the sweat of their brow? That's essentially what over taxing the rich is. Just because they have the ambition to get out there and hustle their way into a comfortable financial situation and you don't?

Taxing the rich is not the way to economic recovery. Taxing ANYONE is not the way to economic recovery. Government has never been good at turning a dime into a dollar and I don't see them figuring it out any time soon.

The rich employ the middle class... relieving them of their money and giving it to people who'd rather not work doesn't make sense.

 

[OmCheeto]

I smell a little wealth envy.

I would say, it is more like, I don't feel sorry for them.

I don't think I'll ever understand why some people seem to feel resentful of people more wealthy than they are... is it because you believe they don't deserve to keep all of the money they make? You feel as if you deserve some of the sweat of their brow? That's essentially what over taxing the rich is. Just because they have the ambition to get out there and hustle their way into a comfortable financial situation and you don't?

You shouldn't have used the word hustle. It makes them sound like hustlers.

Taxing the rich is not the way to economic recovery.

Nor is undertaxing the rich the way to economic recovery.

Taxing ANYONE is not the way to economic recovery.

So no one should pay taxes?

Government has never been good at turning a dime into a dollar and I don't see them figuring it out any time soon.

If I've said it once, I've said it twice...
I like sewers, roads, schools, water and electricity piped to my house, having gone to the moon, having had my liberties defended by our military, having not had our society disintegrate because people were starving, etc, etc, etc.

The rich employ the middle class... relieving them of their money and giving it to people who'd rather not work doesn't make sense.

Maybe the rich people should stop laying off the poor people. They're just going to breed with so much more time on their hands.

 

[tchitt]

Nor is undertaxing the rich the way to economic recovery.

Like I said, the rich employ the middle class. The more money business owners have available the less likely it will be that they have to lay off their employees. Lowering taxes does have a stimulative effect on the economy... much more-so than spending which doesn't make a lot of sense at all. I suppose you could make the argument that the government is a consumer like anyone else but they're not exactly going out and buying fleets of american cars with that money. You think the government can spend your own money better than you can? Much of the stimulus package has nothing to do with jobs at all.

So no one should pay taxes?

I didn't say that... at all. Taxes are necessary to provide sewers, roads, schools, the space program, the military, social welfare etc, etc, etc. But in what universe does it make sense that taking more of people's money from them is good for business in this country? In case you haven't noticed a lot of people are financially strapped in this country these days... and considering a third of their income is gone before they even get a paycheck a lot of them are going to decide to put off buying that new car for a few years. Get it yet?

Maybe the rich people should stop laying off the poor people. They're just going to breed with so much more time on their hands.

No employer wants to have to lay off their employees. When an employer has to cut their workforce it means that business is slowing down... which means everyone is making less money. You talk as though business owners are all heartless greedy evil people who don't care about the welfare of their employees. I don't believe this to be the case based on my own personal experience. I don't even understand your breeding comment.

 

[russ_watters]

One thing that is rather amusing: We keep hearing from Republicans how the stimulus plan hasn't worked. The fact is that only about one-third of the available money has been spent.
http://www.recovery.gov/?q=content/report-progress

By all accounts that I've heard, the money is only now really beginning to move.

If the Obama admin had recklessly rushed the money out, the Republicans would be complaining about that.

There's no need to split them up, Ivan, they are two parts of the same fundamental flaw that Republicans pointed out when it was first proposed: It simply isn't possible to do what Obama said he'd do. You can't spend such a huge amount of money on capital projects in such a short time because it takes years to do a large capital project. That's as obvious of a reality as gravity.

Obama attended a groundbreaking of a construction project soon after the stimulus was announced as proof that the money was going where he intended it to go. But that kind of opportunity just doesn't exist on a large scale. People don't design buildings and then sit on the designs. Generally, they don't design buildings until the construction funding is already in place, especially with government funded infrastructure projecs.

Honestly, this is a great example of why I am no longer a Republican.

And with economic ideas like that, we thank you for leaving!

 

[russ_watters]

Thank god I don't make enough to be in that tax bracket.

Otherwise I'd only be bringing home in one year as much as I've brought home in the last 30.

...

Jeez. What a burden that would be.

Huh? The top income tax bracket in the US $375,000+ for married couples. Have you been making minimum wage for the past 30 years straight?

In any case, the first big jump in tax brackets happens for the middle class: For a married couple at $67,000 (or single at $34,000), it jumps from 15% to 25%.

If I've said it once, I've said it twice...
I like sewers, roads, schools, water and electricity piped to my house, having gone to the moon, having had my liberties defended by our military, having not had our society disintegrate because people were starving, etc, etc, etc.

Welfare doesn't build sewers and that's the flaw in it. When the government spends money on "entitlements", it gets nothing in return and that decreases the GDP. A trillion $$ given to entitlements is a trillion $$ off the top of the GDP.

Maybe the rich people should stop laying off the poor people.

How can you not get this? If you increase their taxes (including, especially, business taxes), they have to lay off "the poor people"!

 

[OmCheeto]

Huh? The top income tax bracket in the US $375,000+ for married couples. Have you been making minimum wage for the past 30 years straight?

We were discussing the new "sock it to the richies" tax

http://www.taxfoundation.org/publications/show/24863.html
5.4 percent surtax on AGI beyond $1,000,000 (singles beyond $800,000)

Which is what pushes the top tax bracket into the high 50's for some of us.
Which is where I got the $1M/yr.
I suppose my math was a bit off. Not to mention I'm single, so I'd only be making $800k/yr. I think I'd have to work a full 2 years at a 57% tax rate to bring home what I've made in 30.

Welfare doesn't build sewers and that's the flaw in it.

So you like the idea of public works projects?

How can you not get this? If you increase their taxes (including, especially, business taxes), they have to lay off "the poor people"!

I actually agree with you here. I was looking over the proposed new health coverage requirements for moderate sized businesses yesterday and almost puked. I was like, "and they think unemployment is bad now?"

But I'm not an expert on tax collection and distribution. And it's all opinion, in my mind, as to what is too high and what is too low. If you go back a page in this thread, you'll see where the https://www.physicsforums.com/showpost.php?p=2259557&postcount=30". Having one of the lowest overall tax burdens in the developed world might be one reason the government seems to be broke all the time. But now that them stinkin' commie democrats are in control, it's obvious that things are going to be different for awhile.

 

[russ_watters]

So you like the idea of public works projects?

Yes, I'm also in favor of gravity.

Having one of the lowest overall tax burdens in the developed world might be one reason the government seems to be broke all the time. But now that them stinkin' commie democrats are in control, it's obvious that things are going to be different for awhile.

Spending is popular, taxes are not. Hence: debt.

 

[OmCheeto]

Spending is popular, taxes are not. Hence: debt.

Speaking of debt, my new bank just informed me yesterday that I'm overdue on my first payment for my new truck. I have to run away now and make the payment.

Recovering this economy is expensive. But it sure is nice not having to take a shopload of tools with me everywhere I go. My old cars really sucked.