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As a state of panic grips both parties, due to their financial ignorance and fear of losing power the upcoming election, they seem intent not only on spending every dollar they have(well, I guess they always do that) not only every dollar they can barrow, but actually printing more money, and selling countless future generations into financial slavery. What do they care, they'll be dead well before this is paid off. The US is embracing the worst parts of socialism and the worst parts of capitalism. This is the type of stuff third world dictators pull that eventually destroys their country.
The government is working on a proposal to bail out all the idiots who were smart enough to spin all manner of insanely complicated derivatives of mortgages, but not smart enough to understand high school economics. Well, actually, the smart ones made their money and got out. The idiots are the CEO's and other management that let it happen. In addition, it has handcuffed the market by banning short selling, a critical tool for the market. The proposal is being rushed through as quickly as possible. That's where the problem is.
The gold standard for this crisis is the AIG model. Personally, I oppose all bail outs, but realistically, if they are going to occur, you want what happened with AIG to be the model to follow. You loan them money at a very high rate, and take 80% of their stock as collateral.
God only knows what congress is going to slap together and call a recovery package. It will be packed with pork and breaks for big contributors. Rest assured, this will be one of the worst pieces of legislation ever. It will cost the taxpayers billions if not trillions of dollars, let the guilty off the hook, give out billions in pork, and throw a huge tangle of regulations on the market. The bills that are rushed through are the worst, because there is no time to review them. No one even knows what they are voting on or signing. The classic example is the PATRIOT act, which basically flushed away a good chunk of the rights of the American citizen.
The market should have been allowed to work. The bad debt would be written down, bad companies punished and good rewarded. It would have been painful, but it would have been done. Now it will drag on indefinitely, at the taxpayers expense.
This has allowed us to see what we face in the election. Mr. McCain was forced from his logical pro-market stand, and now is forced to back this nonsense, because the voters don't understand economics, and he would forfeit the election if he spoke the truth. Ron Paul actually has guts, and tells it like it is, and that's why he isn't the nominee.
Mr. Obama waited until he could see what was popular, then backed that. His running mate, Mr. Biden, told the wealthy that paying more taxes was patriotic. That's why they shouldn't worry that under the Democratic Plan, they pay all the taxes.
What Mr. Obama and Mr. Biden don't understand is that in this day and age, those of means choose where they will live. With the dollar being intentionally devalued, the Democratic tax plan could be the last straw that convinces the wealthy that there are better places to live. Depending on preference, it could be anywhere from the EU to Dubai to South America. With the wealthy gone who will pay the taxes?
Of course, the real answer is devious. Regardless of weather the wealthy leave, the high taxes that Mr. Obama promises "only the top 5%" will have to pay will eventually hit everyone. See, tax brackets aren't indexed for inflation. People tell me, Mr. Obama's just restoring the Clinton tax code, and we did fine then. Well, there's a longer answer to that, mostly that Mr. Clinton was much closer to the moderate Republican Mr. McCain is than the socialist that Mr. Obama is. But also, $250,000 in 1993 was a lot more money than in 2008. With the government taking on all this debt and intentionally devaluing the dollar, inflation is going to soar. When $250,000 is middle class income(ignoring that fact that in many areas it already is for a family), or a working class income, do you think Mr. Obama will cut those taxes? Nope. He'll levy new taxes against those making over a million, claiming it's needed to pay for all his social programs, and that only the rich will pay it. Then, as inflation continues, the process repeats, until we are fully socialistic.
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4 comments:
Calm down there, tiger.
Income tax brackets have been adjusted for inflation since the 1980s. Why don't you check the first section of the Internal Revenue Code (26 U.S.C. § 1) before flying off the deep end with your socialist nightmares?
(Yes, the exemption levels for the Alternative Minimum Tax are not indexed for inflation, but that hasn't stopped Congress from increasing those exemption levels on a regular basis. See the Tax Policy Center to see historical AMT legislation.)
You lose all your credibility when you start mouthing off without checking your facts.
Taxes are adjusted for the CPI, which, though opinions vary, does not exactly reflect inflation. Perhaps I should have noted that in my original post.
However, not only are there problems with the CPI, there has been a troubling tendency to start using the core CPI, which is even less accurate.
So the CPI is not equal to inflation. It is better than nothing I will grant you. However, the way the CPI is calculated has already been changed once to minimize official inflation, and most voters would have no idea if it were changed again, or if core CPI was substituted.
The last time the CPI was changed, the Senate Finance Committee formed an Advisory Commission that conducted an exhaustive report detailing the fact that the CPI suffered from substitution bias and
systematically overstated cost of living increases. These adjustment don't just occur on a whim and they have largely been insulated from callous political calculation.
It would hardly go without notice if the CPI was changed again. Perhaps the average voter wouldn't realize it, but the CPI is linked to so many aspects of the tax code and benefit programs that interest groups would be instantly mobilized. Can you imagine the AARP's response to a manipulation of the CPI that reduced senior's Social Security benefits? Your assumption that this tool can be easily manipulated is politically naive.
The core CPI is used by the Federal Reserve when it tries to decide whether to adjust interest rates. This is because the broader index of CPI is more volatile, not because the core CPI is viewed as more representative of overall changes in the cost of living. I challenge you to point to any other aspect of federal policy that is calibrated to the core CPI.
The central point remains that CPI simply is not that accurate of a measure of inflation. It was completely at odds with M3, which is why they simply stopped publishing M3, with no (real) reason given.
Whether CPI is changed again or whether core CPI is substituted or not is really secondary to the larger issue of CPI's accuracy, pre-Boskin or post.
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