The 4 Biggest Risks to the Economy

After four miserable years, the economy really is improving. Jobs are coming back. Production is on the rise. Debt is coming down. Confidence is going up. The improvement seems real. And I think it will continue.

But the best you can do when forecasting this stuff is to think in probabilities. The odds are good that things will keep getting better, but not perfect. If there's a 70% chance that the economy will improve this year, there's a 30% chance that something less enjoyable will happen. What might go wrong? Four threats should be kept in mind.

Gas prices
Two months ago, a gallon of gasoline cost an average of $3.18. Today, it's $3.52 and rising virtually every day. If you think it's bad now, just wait until the summer driving season.

What's behind the jump? Probably nothing happening here at home. U.S. refinery output is at an all-time high, and U.S. consumption of gasoline is the lowest in 11 years. The U.S. is now a net fuel exporter for the first time since 1949.

Rather, geopolitical strife is likely to blame -- which, of course, U.S. policy is part of. As my colleague Dan Dzombak explained, "The U.S. has been pushing a plan among Iran's major oil customers to embargo Iranian oil over the country's nuclear program ... In retaliation, the Iranians have threatened to close the Strait of Hormuz, the gateway for 20% of the world's oil." A physical constraint of oil doesn't even have to occur here. Just the fear of such an outcome is enough to push global oil prices higher.                                                                    

And that adds up fast. Americans consume about 358 million gallons of gas a day. When prices rise by $0.50 a gallon, an extra $65 billion a year comes out of consumers' pockets. 

These spikes tend to self-correct quickly, as higher prices push people to drive less. But that's what's dangerous. Less driving usually means fewer trips to the mall, a canceled vacation, and less eating out. That can help weaken the economy, as happened in 2008.

Europe
It's cliche to cite Europe as a threat these days, but that doesn't make it any less valid. Fallout from a Greece default or some other cataclysm within Europe's banking system could haunt the U.S. in two ways.

One, the U.S. exports more than a quarter trillion dollars of goods to Europe annually. A deep recession on the Continent could cut into that substantially, dampening what has otherwise been a strong point of the U.S. recovery -- manufacturing and exports.

Two, we could wake up one morning to learn that U.S. banks are more exposed to European assets than they assured us (how most financial crises begin). Scrambling to stem losses, they may then cut back on loan growth, reversing progress made on that front in the last year.                                                                                                                                        

In December, I asked Reuters editor Chrystia Freeland what average U.S. citizens should think about what's happening in Europe. She replied: "The single most important economic actor in their lives is [German Chancellor] Angela Merkel. She is also, more than anyone else in the world, going to be the person who determines who is the next president of the United States."

Politics
When S&P downgraded U.S. debt last year, its reasoning was clear: "The downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenge," the ratings agency wrote.

The best example is last summer's debt-ceiling debacle, when Congress came within hours of willfully and voluntarily defaulting on the nation's debt. Throughout the ruckus, most analysts reassured that this was mere posturing, and that Congress would never actually allow a default. In hindsight, they were right. But what if it's different next time? What if, in the intrepid game of chicken we call legislating, each side calls the other's bluff and refuses to budge? It's hard to guess the circumstances, but some self-inflicted wound can easily be imagined. When we asked Motley Fool readers in January what worried them the most, almost half said dysfunctional politics. You can hardly blame them.

Facebook has a sign in its corporate headquarters that says "Move fast and break things." This seems fit for Congress lately. And while it may be a good motto for a young technology company, it's an awful way to run a country.

Something totally unforeseen
Author James Fallows once wrote, "What looks like tomorrow's problem is rarely the real problem when tomorrow rolls around."

There will be another crisis, another recession, and another panic. Many, in fact. And all will have something in common: They will be caused, at least in part, by factors and events that no one is talking about today. Japan could not have foreseen the economic hit caused by its tsunami last year. No one can predict the actions of a rogue trader. Wars, earthquakes, oil spills, assassinations... no one predicts these things because they can't be predicted. But they can have a huge impact on the economy.

Warning of "something unknown" might seem like a cop-out when making a list of risks, but it's probably the most important risk to think about. This is the basis of Nassim Taleb's best-selling book The Black Swan: It's the events we don't think about, or those considered highly improbable, that inflict the most damage. If everyone knows something is going to happen, it's probably nothing to worry about.

For more like this, check out my new e-book, 50 Years in the Making: The Great Recession and Its Aftermath, on Amazon for your Kindle or iPad. It's short, packed with data, and only costs a few bucks.

Check back every Tuesday and Friday for Morgan Housel's columns on finance and economics.

Editor's note: A previous version of this story understated the current price of gasoline. The Motley Fool regrets the error.

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Follow him on Twitter @TMFHousel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On February 24, 2012, at 1:06 PM, ETFsRule wrote:

    Good article.

    "Two, we could wake up one morning to learn that U.S. banks are more exposed to European assets than they assured us (how most financial crises begin)."

    Agreed.

    Greece makes up roughly 2% of the EU's economy, which doesn't sound like much.

    But, when you factor in the tendency of banks to over-leverage themselves, it becomes clear that 2% is really a lot more than 2%.

    Because credit default swaps are unregulated, there is no way of knowing how many of them are out there.

    More on this here:

    http://dealbook.nytimes.com/2012/02/21/greek-crisis-raises-n...

  • Report this Comment On February 24, 2012, at 1:21 PM, CrankyTexan wrote:

    #1 As you read this, there are more than 6 million mortgages in the United States that are overdue.

    #2 In January, U.S. home prices were the lowest that they have been in more than a decade.

    #3 In Florida right now, some drivers are paying nearly 6 dollars for a gallon of gas.

    #4 On average, you could buy about 10 gallons of gas for an hour of work back in the mid-90s. Today, the average hour of work will get you less than 6 gallons of gas.

    #5 Sadly, 43 percent of all American families spend more than they earn each year.

    #6 According to Gallup, the unemployment rate was at 8.3% in mid-January but rose to 9.0% in mid-February.

    #7 The percentage of working age Americans that have jobs is not increasing. The employment to population ratio has stayed very steady (hovering between 58% and 59%) since the beginning of 2010.

    #8 If you gathered together all of the workers that are “officially” unemployed in the United States into one nation, they would constitute the 68th largest country in the entire world.

    #9 When Barack Obama first took office, the number of “long-term unemployed workers” in the United States was approximately 2.6 million. Today, that number is sitting at 5.6 million.

    #10 The average duration of unemployment in the United States is hovering close to an all-time record high.

    #11 According to Reuters, approximately 23.7 million American workers are either unemployed or underemployed right now.

    #12 There are about 88 million working age Americans that are not employed and that are not looking for employment. That is an all-time record high.

    #13 According to CareerBuilder, only 23 percent of American companies plan to hire more employees in 2012.

    #14 Back in the year 2000, about 20 percent of all jobs in America were manufacturing jobs. Today, about 5 percent of all jobs in America are manufacturing jobs.

    #15 The United States has lost an average of approximately 50,000 manufacturing jobs a month since China joined the World Trade Organization in 2001.

    #16 Amazingly, more than 56,000 manufacturing facilities in the United States have been shut down since 2001.

    #17 According to author Paul Osterman, about 20 percent of all U.S. adults are currently working jobs that pay poverty-level wages.

    #18 During the Obama administration, worker health insurance costs have risen by 23 percent.

    #19 An all-time record 49.9 million Americans do not have any health insurance at all at this point, and the percentage of Americans covered by employer-based health plans has fallen for 11 years in a row.

    #20 According to the New York Times, approximately 100 million Americans are either living in poverty or in “the fretful zone just above it”.

    #21 In the United States today, corporate profits are at an all-time high. The percentage of Americans that are living in “extreme poverty” is also at an all-time high according to the U.S. Census Bureau.

    #22 In the United States today, the wealthiest one percent of all Americans have a greater net worth than the bottom 90 percent combined.

    #23 The poorest 50 percent of all Americans now collectively own just 2.5% of all the wealth in the United States.

    #24 The number of children living in poverty in the state of California has increased by 30 percent since 2007.

    #25 According to the National Center for Children in Poverty, 36.4% of all children that live in Philadelphia are living in poverty, 40.1% of all children that live in Atlanta are living in poverty, 52.6% of all children that live in Cleveland are living in poverty and 53.6% of all children that live in Detroit are living in poverty.

    #26 Since Barack Obama entered the White House, the number of Americans on food stamps has increased from 32 million to 46 million.

    #27 As the economy has slowed down, so has the number of marriages. According to a Pew Research Center analysis, only 51 percent of all Americans that are at least 18 years old are currently married. Back in 1960, 72 percent of all U.S. adults were married.

    #28 In 1984, the median net worth of households led by someone 65 or older was 10 times larger than the median net worth of households led by someone 35 or younger. Today, the median net worth of households led by someone 65 or older is 47 times larger than the median net worth of households led by someone 35 or younger.

    #29 If you can believe it, 37 percent of all U.S. households that are led by someone under the age of 35 have a net worth of zero or less than zero.

    #30 After adjusting for inflation, U.S. college students are borrowing about twice as much money as they did a decade ago.

    #31 According to the Student Loan Debt Clock, total student loan debt in the United States will surpass the 1 trillion dollar mark at some point in 2012. If you went out right now and starting spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars.

    #32 Today, 46% of all Americans carry a credit card balance from month to month.

    #33 Incredibly, one out of every seven Americans has at least 10 credit cards.

    #34 The average interest rate on a credit card that is carrying a balance is now up to 13.10 percent.

    #35 Of the U.S. households that do have credit card debt, the average amount of credit card debt is an astounding $15,799.

    #36 Overall, Americans are carrying a grand total of $798 billion in credit card debt. If you were alive when Jesus was born and you spent a million dollars every single day since then, you still would not have spent $798 billion by now.

    #37 It may be hard to believe, but the truth is that consumer debt in America has increased by a whopping 1700% since 1971.

    #38 At this point, about 70 percent of all auto purchases in the United States involve an auto loan.

    #39 In the United States today, 45 percent of all auto loans are made to subprime borrowers.

    #40 Mortgage debt as a percentage of GDP has more than tripled since 1955.

    #41 According to a recent study conducted by the BlackRock Investment Institute, the ratio of household debt to personal income in the United States is now 154 percent.

    #42 To get the same purchasing power that you got out of $20.00 back in 1970 you would have to have more than $116 today.

    #43 When Barack Obama first took office, an ounce of gold was going for about $850. Today an ounce of gold costs more than $1700 an ounce.

    #44 The number of Americans that are not paying federal incomes taxes is at an all-time high.

    #45 A staggering 48.5% of all Americans live in a household that receives some form of government benefits. Back in 1983, that number was below 30 percent.

    #46 The amount of money that the federal government gives directly to Americans has increased by 32 percent since Barack Obama entered the White House.

    #47 During 2012, the U.S. government must roll over nearly 3 trillion dollars of old debt.

    #48 The U.S. debt to GDP ratio has now reached 101 percent.

    #49 At the moment, the U.S. national debt is sitting at a grand total of $15,419,800,222,325.15.

    #50 The U.S. national debt is now more than 22 times larger than it was when Jimmy Carter became president.

    #51 During the Obama administration, the U.S. government has accumulated more debt than it did from the time that George Washington took office to the time that Bill Clinton took office.

    #52 If the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt.

    #53 If Bill Gates gave every single penny of his fortune to the U.S. government, it would only cover the U.S. budget deficit for about 15 days.

    #54 Right now, the U.S. national debt is increasing by about 150 million dollars every single hour.

    #55 Spending by the federal government accounted for about 2 percent of GDP back in 1800. It accounted for 23.8 percent in 2011, and according to former U.S. Comptroller General David M. Walker, it will account for 36.8 percent of GDP by 2040.

  • Report this Comment On February 24, 2012, at 2:30 PM, ibuildthings wrote:

    The biggest risk comes from within. Our grandparents' generation had huge work ethics. Most schoolchildren (all races, all backgrounds) studied in school, knowing that their adult years would be better or worse based on their own choices now.

    Now it matters more that you have the right clothes and play the right video games. Kids spend more time planning weekends than planning careers. And if things don't work out 10 years later, it's some rich guy's fault, not yours. A mindset like that will not create a large population of productive citizens. It has created a large number of unemployed low-wage workers and huge opportunities for educated immigrants.

    We can no longer allow ourselves to discern between real victims and self-imposed victims. So the productive are required to carry the non-productive (victims and deadbeats) on their backs. If we could allow ourselves to differentiate between the victims and deadbeats, we could support the victims and hardly notice the cost.

  • Report this Comment On February 24, 2012, at 2:46 PM, kyleleeh wrote:

    @crankytexas

    I'm curious, with all of your pessimism do have a huge short position on US stocks, or are you long?

    As buffet said "be greedy when others are fearful, and fearful when others are greedy" Nothing you posted is new news, markets have known about it for some time and long since priced them in.

    It just seams like you spend all your time trying to chase current trends rather then getting in front of future ones. I'm curious as to your investing strategies. (investing only, please don't turn this into another political debate)

  • Report this Comment On February 24, 2012, at 2:56 PM, TrojanFan wrote:

    I agree with ETFsRule's comment.

    For the typical large European financial institution, a 3% loss on assets would be more then adequate to render the entire institution insolvent because of the level of leverage they are still employing via both on balance sheet and off balance sheet financing mechanisms.

    This is especially true of French banking institutions, but Spanish, Italian and even German banking institutions are frought with problems related to excess leverage.

    European banks are going to need to be recapitalized at some point with gifts rather then loans (LTROs are loans at the end of the day and they are bridge loans to nowhere at that). Depending on the form that recapitalization effort takes, it could be highly disruptive to economic activity and world markets to say the least. Europeans have an incredibly intense aversion to sharing wealth with one another which is the primary source of the dysfunction and this will not change. In the US, if New York or California runs into trouble then the federal government pools resources and makes transfer payments and puts up tangible and credible backstops in the form of federal guarantees. Europe lacks any similar federalist construct and they aren't likely to be able to broker such a structure after the fact with the EU's current composition of member states. If some of the weaker states drop out and the fiscal position of the union is fortified with new treaties that MAY be possible, but not before. Those are things that needed to be implemented on the front end as a precondition to rolling out the common currency. It's impossible to coerce countries into making those promises after the fact when they have angry voters to face who have a complete disinclination to extend any generosity to other nations states with whom they have had bitter cultural rivalries as little as a lifetime ago or less. A grand, unified Europe was a noble concept, but it was fatally flawed from the beginning and now the entire world is aware of the deficiencies in its construction.

    As much as these issues concern me, in the near-term I am far more concerned by the intense geo-political risks in the Middle East. That situation is unlikely to end well and it's going to come to a head very, very soon. You have an immoveable object on the one hand (Iranian nuclear ambitions) and an unstopable force on the other (Israel's vast military superiority and their understandably unwavering commitment to the PREEMPTIVE defense of their people against any and all existential threats) and something's got to give.

    Diplomacy and comprimise is obviously the preferred solution to the alternative of the possible death of millions of innocent civilians (largely oppressed and disempowered in the case of the Iranian population) who find themselves tragically caught in the ideological crossfire. However, as we have seen, comprimise and negotiation is political anathema for the majority of US politicians because they don't want to be seen as negotiating with terrorists and openning up the pandora's box of moral hazard the such bargaining creates as a precendent for future extortionist demands. The political blowback Obama would undoubtedly face in an election year if he were to engage and negotiate with Iran in any serious way is so great that it almost binds his hands into going to war on this one. It is a horrible and unenviable position to find oneself in.

    It's also important to note that Iraq should in no way be thought of as an analog for the likely outcome in Iran. One surgical strike in the middle of the night like the one undertaken by George Bush, Sr.'s administration is not going to neutralize Iran. Their missile arsenal is vast and their capacity for retalitory counterattack is significant and credible. They also have a lot of strong regional allies that Iraq really didn't who may or may not show up to the fight to back them up. That entire situation is just a powder keg waiting to go off and most accounts place Iran about a year or so away from a fully functional nuke along. Their leaders have also repeatedly articulated to the entire world that they have an inclination to use it as soon as they have it so the clock is definitely ticking down and options are running out.

  • Report this Comment On February 24, 2012, at 3:03 PM, portefeuille wrote:

    Europe

    ----------

    German manufacturing has re-entered the boom sector -> http://www.cesifo-group.de/portal/page/portal/ifoContent/N/d....

    from here -> http://www.cesifo-group.de/portal/page/portal/ifoHome/a-winf....

    My fund has quite a bit of "European exposure" and "has about doubled" since its December 2011 performance low, see comment #152 here -> http://caps.fool.com/Blogs/fund-trades/705717.

    The fund -> http://caps.fool.com/Blogs/fund-trades/711929.

  • Report this Comment On February 24, 2012, at 3:05 PM, portefeuille wrote:
  • Report this Comment On February 24, 2012, at 3:07 PM, kyleleeh wrote:

    @crankytexas

    I'm curious, with all of your pessimism do have a huge short position on US stocks, or are you long?

    As buffet said "be greedy when others are fearful, and fearful when others are greedy" Nothing you posted is new news, markets have known about it for some time and long since priced them in.

    It just seams like you spend all your time trying to chase current trends rather then getting in front of future ones. I'm curious as to your investing strategies. (investing only, please don't turn this into another political debate)

  • Report this Comment On February 24, 2012, at 3:08 PM, kyleleeh wrote:

    ^^^^

    duplicate ignore

  • Report this Comment On February 24, 2012, at 3:19 PM, stevedahnke wrote:

    I would respectfully like to know where someone has to live to pay $2.46 for a gallon of gas... here in the Detroit area it's at $3.60+... 8)

  • Report this Comment On February 24, 2012, at 3:21 PM, deckdawg wrote:

    @crankytexan

    Re #28 - within 25 years 99% of that wealth will be passed on to the government and to households currently led by someone under 35. Hopefully, you will have been lucky enough to have been born into the right houshold.

  • Report this Comment On February 24, 2012, at 3:23 PM, fikemj wrote:

    @CrankyTexan You do know that some (most) people will start reading your post then see you posted 50+ bullet points and move on assuming some mad ramblings, right?

  • Report this Comment On February 24, 2012, at 3:33 PM, DJDynamicNC wrote:
  • Report this Comment On February 24, 2012, at 3:38 PM, mwm102 wrote:

    The market couldn't possibly have figured in all 50 points of the Cranky Texan. The market isn't smart enough. It is very simple to find out who is responsible for the hike at the gas pump. Just ask the one simple question. Who benifits? Look back at history and if these pump prices continue we will slip back into recession.

  • Report this Comment On February 24, 2012, at 3:40 PM, hbofbyu wrote:

    Israel inadvertanly will become a victim of "what you most fear, you attract."

    I think it's futile in this age of constant information to keep a country from aquiring a nuclear weapon - if they really desire it. When they were huge threats, we didn't stop Russia, we didn't stop China, we didn't stop North Korea or Pakistan for that matter. Starting a war with Iran will just make the Iranians more resolute to bring about what the US and Israel fear.

    No politician wants to be labeled as the one who allowed the enemy to aquire "the bomb". They will send men to die first; allow civilian casualties first. And in the end Iran will have the bomb anyway. Such a waste.

  • Report this Comment On February 24, 2012, at 3:41 PM, ibuildthings wrote:

    DJDynamic: That is a heartening story, but rather exceptional, don't you think? She represents the best more than the normal. And look who is giving her the accolades, adults, not the MTV crowd.

  • Report this Comment On February 24, 2012, at 3:45 PM, ibuildthings wrote:

    hbofbyu: The difference is that Russia and China had leaders who valued their own lives, and populations who feel the same way. Iran praises suicidal behavior as the best way to get to Heaven. And they plainly say they want to wipe Israel off the map. The last folks that plainly spoken on that topic were the Nazis. Israel believes them, even Americans under little threat of their own lives don't.

  • Report this Comment On February 24, 2012, at 3:47 PM, CrankyTexan wrote:

    >>> I'm curious, with all of your pessimism do have a huge short position on US stocks, or are you long? <<<

    I'm am long on 15 stocks, but the national debt scares the hell out of me.

    >>> Nothing you posted is new news, markets have known about it for some time and long since priced them in. <<<

    There are more important things in life than stocks.

  • Report this Comment On February 24, 2012, at 3:50 PM, CrankyTexan wrote:

    >>> Hopefully, you will have been lucky enough to have been born into the right houshold. <<<

    Life is like a poker game. You need luck but you also need to make the right decisions. Every person born in the USA is EXTREMELY lucky. Liberals are too spoiled to realize this.

  • Report this Comment On February 24, 2012, at 4:00 PM, hbofbyu wrote:

    @ibuildings

    I hope your wrong. I know enough Iranians to know that they are a great people and culture and are not Jihadists and they value their own lives very much. I hate to believe that so many could be put at risk by a few madmen in control at the top.

    Unless backed into a corner with no out, I don't believe Iranian leaders would offer themselves up for a suicide mission. Dropping the bomb on Israel would be a suicide mission for all of them.

  • Report this Comment On February 24, 2012, at 4:04 PM, CrankyTexan wrote:

    >>> Dropping the bomb on Israel would be a suicide mission for all of them. <<<

    Any nuclear detonation would be catastrophic for the entire world.

  • Report this Comment On February 24, 2012, at 4:18 PM, kyleleeh wrote:

    <<There are more important things in life than stocks.>>

    In life, yes. On this website, I disagree.

    It seems like most of your arguments would be more suited to a political blog then an investment site.

  • Report this Comment On February 24, 2012, at 4:28 PM, CrankyTexan wrote:

    >>> It seems like most of your arguments would be more suited to a political blog then an investment site. <<<

    This article is not about stocks. This article is about the economy. The economy has everything to do with politics.

  • Report this Comment On February 24, 2012, at 4:34 PM, kyleleeh wrote:

    <<This article is not about stocks. This article is about the economy. The economy has everything to do with politics.>>

    I think it's the other way around actually, especially in an election year.

  • Report this Comment On February 24, 2012, at 4:42 PM, CrankyTexan wrote:

    >>> I think it's the other way around actually, especially in an election year. <<<

    Who decides how the economy runs? POLITICIANS.

  • Report this Comment On February 24, 2012, at 4:44 PM, SMFT wrote:

    @ crazytexan

    Are you a paid propagandist?

    "You conservatives" are apparently unwilling to own up to the simple fact that the national debt and recessionary mess was caused, in large part, by the last "conservative" president. Tax cuts at the same time as unfunded spending on two wars, plus the "bribes to win the 2004 election", e.g. Medicaire Prescription Plan and "cash back" tax refunds to all Americans.

    Of the 50 points you posted that I actually read (I confess, I only ready about 1/3 of them), many were of the "Bush handed a ticking bomb to Obama, then the bomb blew up, so it was Obama's fault" type of argument. i.e. fallacious in nature. The others were irrelevant to the 3 years that our current president has been in office, since they reflect decades-long trends that no president can fix without the cooperation of both houses of congress.

    Try acknowledging that no one person/party/philosophy has all the answers. It is our differences that make us a great nation, and it is through compromise and shared acceptance of pain and responsibility that we have always worked our way through these predicaments.

    How about a post from you along the lines of "We agree with liberals on points a,b,c....., so the two parties should come together and fix these ones, first"........?

    Just curious what an "optimistic" crazytexan post might sound like....

  • Report this Comment On February 24, 2012, at 4:52 PM, gibbstom13 wrote:

    when don't drivers including politics, gas prices, interaction between nations, and the catchall "unforeseen occurrences" category have a substantial impact on the economy? surely these aren't new ideas?

  • Report this Comment On February 24, 2012, at 5:15 PM, DJDynamicNC wrote:

    "That is a heartening story, but rather exceptional, don't you think? She represents the best more than the normal. And look who is giving her the accolades, adults, not the MTV crowd."

    Absolutely an exceptional story, I don't expect every 17 year old to go around curing cancer. :lol:

    But I think the younger generation gets an undeserved bad rap that comes largely from our collective guilt (it is, after all, our job to teach these people) and from the standard "kids these days" feeling that all adults experience.

    I am cautiously optimistic. :)

  • Report this Comment On February 24, 2012, at 5:51 PM, TrojanFan wrote:

    @Cranky Texan

    Actually, an honest look at the facts (and these are pretty indisputable and unadulterated raw data) reveals that the overwhelming majority of our current national debt was racked up by Republican administrations. The real line of demarcation occurred during the Regan administration when he discovered the enormous ability of deficit spending to gin the economy and spent lavishly on a nuclear arms race in an attempt to outspend the then Soviet USSR into the ground and bring an end to the Cold War. You can debate whether that was good policy and worth it or not until the cows come home, but those are the facts. Bush senior then dutifully carried on those deficit spending policies as did his son 8 years later. Bill Clinton was actually the only president to achieve a budget surplus since Regan was in office. It wasn't a huge surplus, but he did briefly achieve a surplus. That is also an indisputable fact.

    I'm a registered Republican and even I can admit that.

    Those policies can work for a while when you start from the fiscal position that we had in 1980, but they are far less effective when the government's balance sheet becomes completely stretched the way ours is now and Japan's has been for nearly a generation.

    Now Obama's deficits are gigantic, but he's also trying to combat the worst economic contraction that this country has seen, in fact the worst that the WORLD has seen, since the Great Depression that was largely brought about by the prior administration's blind faith in laissez faire capitalism, and its hands off approach to financial industry regulation that knowingly allowed the financial industry to harvest off of subprime borrowers with the expectation of an implicit backing by the taxpayer when the music stopped. I don't think anyone will ever be able to convince me that the banks that made those loans didn't do so with knowledge that they would go bad eventually and with a full expectation that the government would pick up the tab.

    Oh, and those very same financial institutions who benefitted from the bailout were also granted lavish loopholes by the convoluted tax code that their lobbyists helped to create for them so that they pay very little into the system in proportion to their gargantuan earnings during the good years and reap enormous benefits at the expense of average, ordinary middle class taxpayers who lack the financial resources to gain access to the very expensive tax advisers that are needed to game the tax code the way the banks do. So the formula basically was to pay very little in (other then the campaign contributions to rig the system to their advantage, of course, but these pale in comparison to the taxes that those campaign contributions enabled them to avoid) and take an enormous amount out. Pretty shrewd, but also pretty diabolical.

    The meager amount of taxes that Goldman Sachs actually pays, just as an example, when measured in comparison to the bailout monies they received is completely appalling by any stretch of the imagination and is bordering on treasonous.

    Very little has been done to fix this, and for that reason recent history is all but doomed to repeat itself with furious intensity as typically happens with serious financial crises throughout history. They have a nasty tendency to happen in clusters.

  • Report this Comment On February 24, 2012, at 5:56 PM, CrankyTexan wrote:

    Trojanfan, I don't believe you are Republican.

    And I already stated that both Republicans and Democrats are responsible for the debt.

    Only the current president can fix this. But he doesn't give a damn about the national debt. He is a tax and spend liberal.

  • Report this Comment On February 24, 2012, at 6:00 PM, DJDynamicNC wrote:

    TrojanFan, that was a very sensible comment.

    Texan, you yourself stated that the problem was many years and both parties in the making, yet you expect one person from just one party to fix the problem in one term.

    Do you think that's reasonable?

  • Report this Comment On February 24, 2012, at 6:09 PM, Merton123 wrote:

    Morgan - another excellent article.

    Why don't we do one of Einsteins/Warren Buffet thought experiments?

    We have Europeans who settled both North America and South America. Canada/USA are relatively prosperous and all of South America is poor. And even in South America you have pockets of Germans where a high degree of prosperity exists.

    I believe the critical difference is that the North was settled by Protestants and the South was settled by Catholics. The Protestant Congregations emphasized hard work, self responsibility, and giving each other a helping hand. That Catholics emphasized a central authority who would make all the decisions. These two models continue on today. The South American economies tend to be government driven while entrepeneurship is emphasized in Canada/USA.

  • Report this Comment On February 24, 2012, at 6:13 PM, hbofbyu wrote:

    @merton123

    Watch this video and it will give you a good idea of why South America is poor. As well as explain the problems of Greece and Italy:

    http://www.youtube.com/watch?v=A3oIiH7BLmg

  • Report this Comment On February 24, 2012, at 6:15 PM, CrankyTexan wrote:

    >>> Texan, you yourself stated that the problem was many years and both parties in the making, yet you expect one person from just one party to fix the problem in one term. <<<

    He's the leader of the free world! He promised hope and change! He enjoyed a Democrat House and Senate for a whole 2 years and still didn't bother passing a budget.

    Interesting that a self-admitted socialist is sticking up for Obama.

  • Report this Comment On February 24, 2012, at 6:16 PM, CrankyTexan wrote:

    He also promised to halve the debt. That means one person can do it.

  • Report this Comment On February 24, 2012, at 6:22 PM, DJDynamicNC wrote:

    "The South American economies tend to be government driven while entrepeneurship is emphasized in Canada/USA."

    You mean like Brazil?

  • Report this Comment On February 24, 2012, at 6:23 PM, CrankyTexan wrote:

    In 2009, Obama criticizes debt and promises to halve it....

    http://www.youtube.com/watch?v=6jJvkkNmR_8

  • Report this Comment On February 24, 2012, at 6:27 PM, DJDynamicNC wrote:

    "Interesting that a self-admitted socialist is sticking up for Obama."

    So very interesting. I simply cannot think of a more interesting coincidence.

    Have a good weekend, sir. I hope America's impending total collapse at least holds itself off until Monday.

    Fool on!

  • Report this Comment On February 24, 2012, at 6:32 PM, CrankyTexan wrote:

    >>> I hope America's impending total collapse at least holds itself off until Monday. <<<

    Kicking the can down the road is what socialists do best.

  • Report this Comment On February 24, 2012, at 6:33 PM, CrankyTexan wrote:

    DJDynamicNC, does the situation in Greece surprise you? Did you even think it could happen? Or do you not care?

    The president of Greece was the leader of their socialist party.

  • Report this Comment On February 24, 2012, at 6:38 PM, SMFT wrote:

    Morgan

    Do you ever "despair" of America? How many times have we had an oil crisis (or, as currently, even just the threat of one) cause people to scream about the price of gas? I am "relatively" young, and I can remember dozens of them.

    What does it take to learn?

    It has been nearly 40 years since the "Oil Embargo" in the 1970's engendered by OPEC. We could (should!) all be driving vehicles that are far more fuel efficient than they are, and otherwise weaning ourselves off this addiction, but we didn't, and we don't and any time someone steps up to announce that we need to do it, they get shouted down as crazy.

    I think America should have $7.00 per gallon gas - like the rest of the world. Seems the only way to force behavioral change is through pain, and people won't stop with the crazy V8 cars and SUV's until it just plain hurts too much. Imagine if we were 30-40% lower oil consumption today... how much less threatening these oil price spikes would be..

    @crankzytexan

    pling....pling......pling.... that one-string banjo you keep playing gets real boring, man. Try a new instrument, or maybe join a band and learn how to harmonize....

  • Report this Comment On February 24, 2012, at 6:40 PM, CrankyTexan wrote:
  • Report this Comment On February 24, 2012, at 6:41 PM, Doris411 wrote:

    @crankytexan,

    With an aging population, of course the number receiving government benefits is going to go up. Social security and medicare are government benefits.

    So are SBA loans, early childhood education programs, public immunization programs, and meals-on-wheels for shut-ins. You could argue that anyone who patronizes a public library or takes part in a village recreation program is receiving government benefits. Even snow-removal, fire and police protection are government benefits.

    It's not all unemployment and food-stamps.

  • Report this Comment On February 24, 2012, at 6:41 PM, CrankyTexan wrote:

    >>> I think America should have $7.00 per gallon gas <<<

    That pretty much sums up your radical mentality.

  • Report this Comment On February 24, 2012, at 6:48 PM, CrankyTexan wrote:

    Doris, if the government is going to force us to save for retirement, which would you choose?......

    A. An index fund account for yourself that no one else can touch.

    B. A ponzi scheme

    C. Other

    (I added choice C so I would be accused of false dilemma again)

  • Report this Comment On February 24, 2012, at 6:48 PM, CrankyTexan wrote:

    (would not)

  • Report this Comment On February 24, 2012, at 6:55 PM, SMFT wrote:

    The thing is, CT, we do pay more than $7 per gallon already. Just not at the pump. It comes through military subsidies needed to defend our supply lines, and giant tax subsidies to the oil companies.

    It's like a heroin addiction, and the oil companies have a captive, steady clientele. They have lobbied intelligently to "hide" the true cost of oil.

    Anyway, I'm out-ey. Splendid weekend....

  • Report this Comment On February 24, 2012, at 8:01 PM, vireoman wrote:

    SMFT and TrojanFan, great stuff. I couldn't agree with you more. It's reassuring to know that there are level-headed folks like you both willing to elevate the quality of the discourse. I'm every bit as cranky as the Texan, but I've come to far different conclusions as to the causes and the solutions.

  • Report this Comment On February 24, 2012, at 9:22 PM, CaptainWidget wrote:

    <<The thing is, CT, we do pay more than $7 per gallon already. Just not at the pump. It comes through military subsidies needed to defend our supply lines, and giant tax subsidies to the oil companies.>>

    That's great and all, except we buy more oil from Canada than any other nation. And we buy more oil from non-opec, "safe" political regimes that OPEC controlled war zones.

    Don't get me wrong...I'm for the abolition of oil subsidies. And all other subsidies. But the idea that oil is somehow a more "expensive" form of energy because our expansive military budget is somehow directly tied to it is bunk.

  • Report this Comment On February 24, 2012, at 9:28 PM, JGBFool wrote:

    <<Only the current president can fix this. But he doesn't give a damn about the national debt. He is a tax and spend liberal.>>

    Based on actions, no, he isn't a tax and spend liberal.

    He hasn't raised taxes-- he has actually cut taxes. He has increased spending, though.

    Lofty political rhetoric without action is meaningless, except to gullible voters.

    Based on actions, Obama's economic ideology is EXACTLY the same as Bush's ideology-- borrow and spend liberal (same as GHWB and Reagan, for that matter).

  • Report this Comment On February 24, 2012, at 10:21 PM, CrankyTexan wrote:

    >>> He hasn't raised taxes-- he has actually cut taxes. <<

    I guess you've never heard of Cap and Trade?

    I guess you've never heard of Obamacare?

    I guess you've never heard of increased capital gains?

    I guess you've never heard his repetitive socialist drivel about rich people needing to "pay their fair share?

    >>> Based on actions, Obama's economic ideology is EXACTLY the same as Bush's ideology-- borrow and spend liberal (same as GHWB and Reagan, for that matter). <<<

    Agreed. Bush and Obama both suck, yet you still admire Obama.

  • Report this Comment On February 25, 2012, at 10:55 AM, JGBFool wrote:

    Who said I admire Obama? Don't put words in my mouth. I think the worst thing for our country is party loyalists. That goes for BOTH parties.

    Regarding cap and trade-- it hasn't been passed. As for Obamacare-- it isn't a tax, it's an expense. (Just like Medicare D.) As for increased capital gains-- that hasn't been passed.

    Refer to my comment about rhetoric vs. actions.

  • Report this Comment On February 25, 2012, at 11:17 AM, CrankyTexan wrote:
  • Report this Comment On February 25, 2012, at 11:21 AM, CrankyTexan wrote:
  • Report this Comment On February 25, 2012, at 11:42 AM, CrankyTexan wrote:
  • Report this Comment On February 25, 2012, at 12:22 PM, pkgrogger wrote:

    Perhaps the fourth option included the possibility that Israel will attack Iran but you needed to state that this is just as important as the first three possibilities.

  • Report this Comment On February 25, 2012, at 12:23 PM, TMFBreakerRob wrote:

    Good job hanging in there, CrankyTexan! I would only mention that a number of your points are redundant, but overall an excellent outline of much of what faces us.

    To Morgan's list, I would increase the emphasis on the Middle East. The Iranian situation looks pretty bleak. I would also add Japan to the list. Their growing debt problem has led to the country being described (reasonably, IMO) as a "bug looking for a windshield".

    Nevertheless, I am fully invested at the moment. If nukes fly, that decision could turn out poorly, but I otherwise think being invested in solid, growing companies is a good place to be. Even in the "Great Recession", some companies continued to put up great results.... even though the stocks were pummeled. Over time, it's performance that drives stock prices, not the winds of politics or macroeconomic blips.

    Of course.... a higher capital gains tax or higher dividend tax isn't going to make those gains quite as tasty.

  • Report this Comment On February 25, 2012, at 12:49 PM, ETFsRule wrote:

    ">>> He hasn't raised taxes-- he has actually cut taxes. <<

    I guess you've never heard of Cap and Trade?

    I guess you've never heard of Obamacare?

    I guess you've never heard of increased capital gains?"

    Cap and trade hasn't been passed - in other words, you are arguing about something that doesn't exist.

    Capital gains is a relatively small increase, which hasn't gone into effect yet.

    The medical device tax is a few million dollars per year.

    We are talking about insignificant amounts of money here, compared with Obama's $858 billion tax cut bill.

    http://en.wikipedia.org/wiki/Tax_Relief,_Unemployment_Insura...

  • Report this Comment On February 25, 2012, at 12:57 PM, CrankyTexan wrote:

    Etfsrule, explain to me how the largest extension of unemployment benefits saves taxpayer money.

    Explain how increased health insurance premiums due to Obamacare saves people money.

    And you liberals are ignoring his DESIRE to raise taxes. DESIRE is just as important as past actions.

  • Report this Comment On February 25, 2012, at 12:57 PM, CrankyTexan wrote:

    Big Surprise: Obamacare’s Pre-Existing Condition Plan Costing Twice as Much Per Enrollee as Originally Estimated

    http://michellemalkin.com/2012/02/24/cost-obamacare-estimate...

  • Report this Comment On February 25, 2012, at 12:59 PM, rgperrin wrote:

    Much of what we do in life (careful planning of all kinds, for example) more often creates the illusion of predictability than its reality.

  • Report this Comment On February 25, 2012, at 1:02 PM, Goddessofmusic wrote:

    ..." Japan could not have foreseen the economic hit caused by its tsunami last year."...

    I must respectfully disagree with this pronouncement. Japan most certainly, given its propensity for earthquakes due to its geography, could have and SHOULD have been more careful with its placement of its nuclear plant and its assets. This failure goes back to politics and economic malfeasance, imo.

  • Report this Comment On February 25, 2012, at 1:05 PM, ETFsRule wrote:

    "And you liberals are ignoring his DESIRE to raise taxes. DESIRE is just as important as past actions."

    Earlier, you had argued that Obama had already raised taxes (ie: an overall net increase in taxes). This is the specific point that I was responding to.

    Before we move on to discussing other issues, are you conceding that you were incorrect on this point?

  • Report this Comment On February 25, 2012, at 1:14 PM, CrankyTexan wrote:

    >>> are you conceding that you were incorrect on this point? <<<

    No. I just explained how he raised taxes. Can you read?

  • Report this Comment On February 25, 2012, at 1:15 PM, CrankyTexan wrote:

    His own administration is now calling Obamacare a tax in attempt to get it through the SCOTUS.

  • Report this Comment On February 25, 2012, at 1:16 PM, CrankyTexan wrote:

    And what part of the tax on medical devices did you not understand?

  • Report this Comment On February 25, 2012, at 1:22 PM, ETFsRule wrote:

    ">>> are you conceding that you were incorrect on this point? <<<

    No. I just explained how he raised taxes. Can you read?"

    But I explained that his tax cuts were much larger than those tax increases. And yes, the bill that I referenced earlier including many billions in tax cuts. It doesn't matter if you disagree with some of his other policies. It still included many billions in tax cuts. Go follow the link if you don't believe me.

    Here's a thought exercise:

    Jane and Bob each own a lemonade stand. Bob sells lemonade for $2 a cup, and Jane sells it for $1 a cup.

    If they each sell one cup, who gets more money?

    Well, by quantitatively comparing the numbers, we can see that the answer is Bob, because $2 is larger than $1.

    I hope you understand the relevance of this example.

  • Report this Comment On February 25, 2012, at 1:22 PM, ETFsRule wrote:

    ...

  • Report this Comment On February 25, 2012, at 1:22 PM, ETFsRule wrote:

    "And what part of the tax on medical devices did you not understand?"

    I'm pretty sure I understand the whole thing. Did you understand my response?

  • Report this Comment On February 25, 2012, at 1:24 PM, CrankyTexan wrote:

    Now you are doing fuzzy math. You probably also "saved jobs" instead of "creating jobs", right?

    You're also not factoring in the Obamacare tax.

  • Report this Comment On February 25, 2012, at 1:28 PM, CrankyTexan wrote:

    ETFsrule, show me an itemized list of tax increases and decreases with a reputable source, that includes obamacare, and the medical device tax, and lists tax brackets for the next few years.

    He said we would only increase taxes for people who make over $250,000. Show me the new tax rates for those people.

  • Report this Comment On February 25, 2012, at 1:31 PM, ETFsRule wrote:

    "Now you are doing fuzzy math."

    Are you referring to the lemonade example? Because that is the only "math" that I've posted. It was comparing $1 to $2. I can't think of anything less fuzzy.

    "You probably also "saved jobs" instead of "creating jobs", right?"

    You're going on a tangent here.

    "You're also not factoring in the Obamacare tax."

    I will be happy to factor in anything you want. The total new tax revenue from the health care act will amount to $409.2 billion over the next 10 years.

    This is still less than the money we have ALREADY recieved from his tax cuts.

  • Report this Comment On February 25, 2012, at 1:32 PM, CrankyTexan wrote:

    Oh, and include these too in your calculations....

    Since taking office, President Barack Obama has signed into law twenty-one new or higher taxes:

    1. A 156 percent increase in the federal excise tax on tobacco: On February 4, 2009, just sixteen days into his Administration, Obama signed into law a 156 percent increase in the federal excise tax on tobacco, a hike of 61 cents per pack. The median income of smokers is just over $36,000 per year.

    2. Obamacare Individual Mandate Excise Tax (takes effect in Jan 2014): Starting in 2014, anyone not buying “qualifying” health insurance must pay an income surtax according to the higher of the following

    1 Adult

    2 Adults

    3+ Adults

    2014

    1% AGI/$95

    1% AGI/$190

    1% AGI/$285

    2015

    2% AGI/$325

    2% AGI/$650

    2% AGI/$975

    2016 +

    2.5% AGI/$695

    2.5% AGI/$1390

    2.5% AGI/$2085

    Exemptions for religious objectors, undocumented immigrants, prisoners, those earning less than the poverty line, members of Indian tribes, and hardship cases (determined by HHS). Bill: PPACA; Page: 317-337

    3. Obamacare Employer Mandate Tax (takes effect Jan. 2014): If an employer does not offer health coverage, and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductible tax of $2000 for all full-time employees. Applies to all employers with 50 or more employees. If any employee actually receives coverage through the exchange, the penalty on the employer for that employee rises to $3000. If the employer requires a waiting period to enroll in coverage of 30-60 days, there is a $400 tax per employee ($600 if the period is 60 days or longer). Bill: PPACA; Page: 345-346

    Combined score of individual and employer mandate tax penalty: $65 billion/10 years

    4. Obamacare Surtax on Investment Income (Tax hike of $123 billion/takes effect Jan. 2013): Creation of a new, 3.8 percent surtax on investment income earned in households making at least $250,000 ($200,000 single). This would result in the following top tax rates on investment income: Bill: Reconciliation Act; Page: 87-93

    Capital Gains

    Dividends

    Other*

    2011-2012

    15%

    15%

    35%

    2013+ (current law)

    23.8%

    43.4%

    43.4%

    2013+ (Obama budget)

    23.8%

    23.8%

    43.4%

    *Other unearned income includes (for surtax purposes) gross income from interest, annuities, royalties, net rents, and passive income in partnerships and Subchapter-S corporations. It does not include municipal bond interest or life insurance proceeds, since those do not add to gross income. It does not include active trade or business income, fair market value sales of ownership in pass-through entities, or distributions from retirement plans. The 3.8% surtax does not apply to non-resident aliens.

    5. Obamacare Excise Tax on Comprehensive Health Insurance Plans (Tax hike of $32 bil/takes effect Jan. 2018): Starting in 2018, new 40 percent excise tax on “Cadillac” health insurance plans ($10,200 single/$27,500 family). Higher threshold ($11,500 single/$29,450 family) for early retirees and high-risk professions. CPI +1 percentage point indexed. Bill: PPACA; Page: 1,941-1,956

    6. Obamacare Hike in Medicare Payroll Tax (Tax hike of $86.8 bil/takes effect Jan. 2013): Current law and changes:

    First $200,000

    ($250,000 Married)

    Employer/Employee

    All Remaining Wages

    Employer/Employee

    Current Law

    1.45%/1.45%

    2.9% self-employed

    1.45%/1.45%

    2.9% self-employed

    Obamacare Tax Hike

    1.45%/1.45%

    2.9% self-employed

    1.45%/2.35%

    3.8% self-employed

    Bill: PPACA, Reconciliation Act; Page: 2000-2003; 87-93

    7. Obamacare Medicine Cabinet Tax (Tax hike of $5 bil/took effect Jan. 2011): Americans no longer able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin). Bill: PPACA; Page: 1,957-1,959

    8. Obamacare HSA Withdrawal Tax Hike (Tax hike of $1.4 bil/took effect Jan. 2011): Increases additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent. Bill: PPACA; Page: 1,959

    9. Obamacare Flexible Spending Account Cap – aka “Special Needs Kids Tax” (Tax hike of $13 bil/takes effect Jan. 2013): Imposes cap on FSAs of $2500 (now unlimited). Indexed to inflation after 2013. There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children. There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education. Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education. Bill: PPACA; Page: 2,388-2,389

    10. Obamacare Tax on Medical Device Manufacturers (Tax hike of $20 bil/takes effect Jan. 2013): Medical device manufacturers employ 360,000 people in 6000 plants across the country. This law imposes a new 2.3% excise tax. Exempts items retailing for <$100. Bill: PPACA; Page: 1,980-1,986

    11. Obamacare "Haircut" for Medical Itemized Deduction from 7.5% to 10% of AGI (Tax hike of $15.2 bil/takes effect Jan. 2013): Currently, those facing high medical expenses are allowed a deduction for medical expenses to the extent that those expenses exceed 7.5 percent of adjusted gross income (AGI). The new provision imposes a threshold of 10 percent of AGI. Waived for 65+ taxpayers in 2013-2016 only. Bill: PPACA; Page: 1,994-1,995

    12. Obamacare Tax on Indoor Tanning Services (Tax hike of $2.7 billion/took effect July 2010): New 10 percent excise tax on Americans using indoor tanning salons. Bill: PPACA; Page: 2,397-2,399

    13. Obamacare elimination of tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D (Tax hike of $4.5 bil/takes effect Jan. 2013) Bill: PPACA; Page: 1,994

    14. Obamacare Blue Cross/Blue Shield Tax Hike (Tax hike of $0.4 bil/took effect Jan. 1 2010): The special tax deduction in current law for Blue Cross/Blue Shield companies would only be allowed if 85 percent or more of premium revenues are spent on clinical services. Bill: PPACA; Page: 2,004

    15. Obamacare Excise Tax on Charitable Hospitals (Min$/took effect immediately): $50,000 per hospital if they fail to meet new "community health assessment needs," "financial assistance," and "billing and collection" rules set by HHS. Bill: PPACA; Page: 1,961-1,971

    16. Obamacare Tax on Innovator Drug Companies (Tax hike of $22.2 bil/took effect Jan. 2011): $2.3 billion annual tax on the industry imposed relative to share of sales made that year. Bill: PPACA; Page: 1,971-1,980

    17. Obamacare Tax on Health Insurers (Tax hike of $60.1 bil/takes effect Jan. 2014): Annual tax on the industry imposed relative to health insurance premiums collected that year. Phases in gradually until 2018. Fully-imposed on firms with $50 million in profits. Bill: PPACA; Page: 1,986-1,993

    18. Obamacare $500,000 Annual Executive Compensation Limit for Health Insurance Executives (Tax hike of $0.6 bil/takes effect Jan 2013). Bill: PPACA; Page: 1,995-2,000

    19. Obamacare Employer Reporting of Insurance on W-2 ($min/takes effect Jan. 2012): Preamble to taxing health benefits on individual tax returns. Bill: PPACA; Page: 1,957

    20. Obamacare “Black liquor” tax hike (Tax hike of $23.6 billion/took effect immediately). This is a tax increase on a type of bio-fuel. Bill: Reconciliation Act; Page: 105

    21. Obamacare Codification of the “economic substance doctrine” (Tax hike of $4.5 billion/took effect immediately). This provision allows the IRS to disallow completely-legal tax deductions and other legal tax-minimizing plans just because the IRS deems that the action lacks “substance” and is merely intended to reduce taxes owed. Bill: Reconciliation Act; Page: 108-113

  • Report this Comment On February 25, 2012, at 1:32 PM, ETFsRule wrote:

    "ETFsrule, show me an itemized list of tax increases and decreases with a reputable source, that includes obamacare, and the medical device tax, and lists tax brackets for the next few years."

    You're the one trying to argue that he raised taxes. It's your responsibility to support that argument - not mine.

  • Report this Comment On February 25, 2012, at 1:33 PM, CrankyTexan wrote:

    Let me know when you are done with your fuzzy math calculations.

  • Report this Comment On February 25, 2012, at 1:34 PM, CrankyTexan wrote:

    I just gave you 21 examples of tax raises.

  • Report this Comment On February 25, 2012, at 1:37 PM, CrankyTexan wrote:

    >>> The total new tax revenue from the health care act will amount to $409.2 billion over the next 10 years. <<<

    Source?

  • Report this Comment On February 25, 2012, at 1:41 PM, CrankyTexan wrote:

    >>> You're the one trying to argue that he raised taxes. It's your responsibility to support that argument - not mine. <<<

    Actually, you're wrong. The original comment was from JGBFool, who wrote,"He hasn't raised taxes-- he has actually cut taxes. He has increased spending, though."

    So, to use your words, ETFsrule, it's JGBFool's responsibility to support that argument - not mine.

  • Report this Comment On February 25, 2012, at 1:42 PM, ETFsRule wrote:

    "I just gave you 21 examples of tax raises. "

    Yes you certainly did.

    I still don't think you understand the concept I was alluding to earlier.

    When you're comparing numbers, you need to actually use the numbers for the comparision.

    For example, posting a list of tax increases isn't very useful by itself. If you had at least taken the time to do some basic addition, then we could compare the size of his tax cuts to the size of his tax increases.

    Do you understand?

  • Report this Comment On February 25, 2012, at 1:44 PM, ETFsRule wrote:
  • Report this Comment On February 25, 2012, at 1:44 PM, CrankyTexan wrote:

    Again, you are asking me for the burden of proof. You should be asking JGBFool.

  • Report this Comment On February 25, 2012, at 1:45 PM, ETFsRule wrote:

    "So, to use your words, ETFsrule, it's JGBFool's responsibility to support that argument - not mine."

    That's a fair point. Although I have seen nothing approaching his $858 B in cuts.

  • Report this Comment On February 25, 2012, at 1:45 PM, ETFsRule wrote:

    .

  • Report this Comment On February 25, 2012, at 1:46 PM, DJDynamicNC wrote:

    What's curious is why somebody who claims to be concerned about the deficit would be opposed to raising taxes, at least in the short term.

  • Report this Comment On February 25, 2012, at 1:46 PM, CrankyTexan wrote:

    >>> That's a fair point. Although I have seen nothing approaching his $858 B in cuts. <<<

    That's because neither of us did the math.

  • Report this Comment On February 25, 2012, at 1:47 PM, CrankyTexan wrote:

    >>> What's curious is why somebody who claims to be concerned about the deficit would be opposed to raising taxes, at least in the short term. <<<

    Because taxes are already too high, socialist.

  • Report this Comment On February 25, 2012, at 1:48 PM, CrankyTexan wrote:

    Raising taxes now is like giving more cocaine to a cocaine addict.

    The correct thing to do is to reduce cocaine usage.

  • Report this Comment On February 25, 2012, at 1:51 PM, CrankyTexan wrote:

    Even Bill Clinton says that now is not the time to raise taxes. What do you think of that, socialist?

  • Report this Comment On February 25, 2012, at 1:52 PM, ETFsRule wrote:

    "That's because neither of us did the math."

    And because the vast majority of your increases are several orders of magnitude too small to be relevant.

  • Report this Comment On February 25, 2012, at 1:53 PM, ETFsRule wrote:

    "Even Bill Clinton says that now is not the time to raise taxes. What do you think of that, socialist?"

    That's a normal Keynesian response, and I agree with it 100%. Krugman says the same thing as well.

  • Report this Comment On February 25, 2012, at 1:54 PM, CrankyTexan wrote:

    >>> And because the vast majority of your increases are several orders of magnitude too small to be relevant. <<<

    Until you do the math, you are only assuming. You are also assuming that the government's calculations are correct, even though the true cost of Obamacare keeps unexpectedly rising.

    In other words, you trust the Obama administration.

  • Report this Comment On February 25, 2012, at 1:59 PM, CrankyTexan wrote:

    I guess "we have to pass the bill to see what's in it."

  • Report this Comment On February 25, 2012, at 2:06 PM, Okiehound wrote:

    The biggest risk our economy now faces is adding another 4 years under Obama rule. He says we need to "drill, drill, drill" right after blocking the Keystone pipeline. He wants to hugely increase dividend taxes in a move that will cause companies to cut dividends (best interest of shareholders to not distribute cash) which will hurt everyone...not just the "rich" who are the target. He wants to punish companies who earn foreign profits by increasing taxes on these profits...a move that will drive more companies headquarters out of the US. Our biggest risk, we have an economic moron captaining our ship and he's got plenty of stooges who are still part of his crewf!

    Great posts crankytexan, you hit the nail on the head over and over.

  • Report this Comment On February 25, 2012, at 2:09 PM, CrankyTexan wrote:

    Okie, don't worry so much. Don't you know that solar panels can power car engines?

    lol

  • Report this Comment On February 25, 2012, at 2:11 PM, wolfman225 wrote:

    ^I know I'm late to the party, but here's my $.02.

    @DJ--<<What's curious is why somebody who claims to be concerned about the deficit would be opposed to raising taxes, at least in the short term.>>

    I realize that you don't believe in supply-side economics, Austrian Theory, or the Laffer Curve, but it's undeniable that there is a point of diminishing returns relative to increased rates of taxation.

    When the people and business owners come to the opinion that the cost of taxation and over-regulation has become too onerous, they start looking for ways to limit or eliminate their impact on their lives/businesses. Making sure that tax levels are no more than a reasonable part of the operating overhead is essential to maximize revenue. It always seems to be overlooked or ignored by many on the left that simply raising taxes doesn't result in straight-line percentage increases in revenue.

    Besides, in the opinion of many (not just us cold-hearted conservatives) leaving as much of the citizen's hard-earned income as possible in their hands, to be spent at their discretion, has a much greater and direct impact on the economy than having the government first take that money out of the private economy only to later claim that they are "helping the middle class" by putting a much smaller amount back in, filtered through demonstrably inefficient programs.

    Besides, you can put me solidly in the camp of doubtfull of tax increases being only short term fixes. Since government never actually shrinks, there will always be a need to keep tax rates elevated to fund the now-essential progams. What we need is more self-reliance and less dependence, but we've pretty much agreed to disagree on that point.

    All that said, I think Cranky has some valid points you-all chould consider before you label him as simply another "right-wing extremist crackpot" that "hates the poor". You know that's not true of me, and I don't think it's true of him, either.

  • Report this Comment On February 25, 2012, at 2:15 PM, CrankyTexan wrote:

    wolfman, DJ called himself a socialist. You cannot change a socialist's mind.

    Socialists don't want your opinion. They want your money.

  • Report this Comment On February 25, 2012, at 2:27 PM, ETFsRule wrote:

    "Making sure that tax levels are no more than a reasonable part of the operating overhead is essential to maximize revenue. It always seems to be overlooked or ignored by many on the left that simply raising taxes doesn't result in straight-line percentage increases in revenue."

    I don't think this is an overlooked phenomenon. For one thing, it is pretty well-established (by both sides, I think) that the Bush tax cuts did not provide any significant boost to the economy.

    That seems to be clear evidence that tax rates were not at an onerous level. If tax rates were indeed too high, then the Bush tax cuts should have significantly improved our economic growth.

    Our tax rates are low compared to other developed economies. It would take a huge increase to cause us to lose any competitiveness against Japan, Europe, Canada, etc.

    As far as losing competitiveness against emerging markets... there isn't much that we can do about it, and taxes are not the problem.

  • Report this Comment On February 25, 2012, at 2:29 PM, gkirkmf wrote:

    @ CrankyTexan

    Looks good.. just change "Obama entered the White House" to "Bush bailed out of the White House" and you will have it perfect.

  • Report this Comment On February 25, 2012, at 2:35 PM, CrankyTexan wrote:

    >>> Our tax rates are low compared to other developed economies. It would take a huge increase to cause us to lose any competitiveness against Japan, Europe, Canada, etc. <<<

    Instead of comparing USA tax rates to higher tax nations, you should be comparing USA tax rates to zero taxes.

    Taxes are like overeating. It should be minimized whenever possible.

    Instead you are comparing an obese person to 3 more-obese people.

    Think about it. You support forcing Americans to give their personal property to corrupt politicians. You should be ashamed of yourself.

  • Report this Comment On February 25, 2012, at 2:36 PM, CrankyTexan wrote:

    >>> Looks good.. just change "Obama entered the White House" to "Bush bailed out of the White House" and you will have it perfect. <<<

    Uh yeah, Obama has not hurt the economy AT ALL.

    What flavor kool aid are you drinking?

  • Report this Comment On February 25, 2012, at 2:54 PM, wolfman225 wrote:

    <<"Making sure that tax levels are no more than a reasonable part of the operating overhead is essential to maximize revenue. It always seems to be overlooked or ignored by many on the left that simply raising taxes doesn't result in straight-line percentage increases in revenue."

    I don't think this is an overlooked phenomenon. For one thing, it is pretty well-established (by both sides, I think) that the Bush tax cuts did not provide any significant boost to the economy.>>

    Actually, it is often overlooked when any politician promoting a tax increase says that "an increase of x% in tax rates will result in (y)billions of dollars in increased revenue". The only way such a calculation can be made is if you first assume a static economic model that doesn't account for the dynamics of an economy where people respond to government actions. It is illogical to assume that you can increase the tax burden on a person or business and that they will capitulate without seeking alternatives.

    As for the "Bush tax cuts" not helping to boost the economy, it's impossible to say for sure, but I lean towards thinking that they helped more than some would like to admit. When you look at what the economy had to weather in the first decade of the 2000's, it's a wonder it didn't collapse under the stresses. We had the Tech Bubble, 9/11, various weather disasters, Desert Storm, the War on Terror, etc, etc.

    Given all of that, it's a testament to the resilience of the American economy that we remained (and remain) the world's strongest. The fact that average unemployment under his 8 years averaged around 5% in such an environment is truly astounding. While President Bush made his share of mis-steps ("Mission Accomplished" kinda comes to mind), if you are going to give Pres. Obama credit for "created or saved" jobs, and for saving the economy from a second Great Depression due to his stimulus spending, you also must give Pres. Bush credit for preserving the economy as well as he did, given the events of his tenure.

  • Report this Comment On February 25, 2012, at 2:55 PM, wolfman225 wrote:

    Also, congratulations, Morgan! Another article garnering 100+ comments. Nice work.

  • Report this Comment On February 25, 2012, at 3:45 PM, cackywon wrote:

    Cranky Texan, you state an awful lot of very dismal sounding statistics. Are they all relativley accurate with legitimate sources? If so it really sounds like we are in deep doodoo...I am niether a dem or repub, a socialist or hyper-capitalist, communist, or whatever. I'd just like to see our politicians get your stats, if accurate, maybe back to where they were in the 50's or 60's. But I don't blame Obama or Bush. Our problems started,I feel, sometime during Reagan's reign... .

  • Report this Comment On February 25, 2012, at 3:50 PM, CrankyTexan wrote:

    >>>Our problems started,I feel, sometime during Reagan's reign... . <<<

    How so?

  • Report this Comment On February 25, 2012, at 5:04 PM, bigdividends wrote:

    Cranky texan list is fairly accurate. As a nation, we have a serious problem that neither party is willing to address at this time. And it is not because either party is evil, but simple because society as a whole is not willing to make the sacrifices to address the issue. The reality is, we need to seriously cut programs while raising taxes.

    To do this, you need to cut into medicare, social security and defense while raising personal income tax or adding a national sales tax. But there isn't a politician (except maybe ron paul) who is willing to sacrifice their careers to change the process. Why? Because society doesn't want to sacrifice and until the masses are willing to do this, you will have a divergence until we reach a critical point. When we reach that critical point, it will be really bad.

    Before election day, I believe that we will have a significant drop in the market. Not because of what Obama or the republicans did or didn't do, but because society is going to panic over an event and it is going to be much more difficult for the feds to mitigate the damages (QE3).

    P.S. someone mention above that Clinton was the only president to cut the deficit. True statement, but the reason for this had more to do with a significant increase in revenue. What caused that: The dot com bubble. When the bubble burst, the revenue fell off the cliff and we failed to reign in spending at that time.

  • Report this Comment On February 25, 2012, at 5:26 PM, ETFsRule wrote:

    "P.S. someone mention above that Clinton was the only president to cut the deficit."

    Well, he wasn't the only one. The last 5 democratic presidents (Bill Clinton, Jimmy Carter, Lyndon B. Johnson, John F. Kennedy, and Harry S. Truman) all reduced the debt to GDP ratio while they were in office.

    The last 4 republican presidents (George W. Bush, George H. W. Bush, Ronald Reagan, and Gerald Ford) all increased our debt to GDP ratio during their presidencies.

    Obama is clearly going to break the streak, but it's still an impressive statistic - one that goes back to 1945. Democrats and specifically Keynesians have always been much more fiscally responsible than so-called "conservatives".

  • Report this Comment On February 25, 2012, at 7:48 PM, NotJesseL wrote:

    Nobody mentioned epidemics as a potential risk the the economy. The Black Plague had a very large effect on the world economy. There are lots of micro organisms that are developing resistance to antibiotics and the potential to spread worldwide very fast has never been greater.

  • Report this Comment On February 25, 2012, at 7:50 PM, CaptainWidget wrote:

    Spending does not originate in the executive office, it originates in the house. And the democrats enjoyed a few decades of almost uninterrupted control of the House until the early 1990's. Take of it what you will, but the president has very little actual power in the matter of federal government spending.

  • Report this Comment On February 25, 2012, at 9:20 PM, rmondave2 wrote:

    The majority of the baby boomers not only have passed on crushing debt to their children and grandchildren, they neglected to teach them the skills, and demand the character to deal with anything but being coddled and spoiled.

    Hardship motivates discipline, discipline results in success and wealth, wealth enables spoiled children and debt creation, debt creation accumulates and becomes excessive and eventually brings down the entire economy and social system, which creates hardship and starts the cycle all over again, every 80 to 100 years or so. We are due for great hardship, it is here already but most are too muddle brained to see its early warning signs from 1971 to 2005 it was building momentum, now the reset is inevitable.

  • Report this Comment On February 26, 2012, at 2:29 AM, DJDynamicNC wrote:

    -->"but it's undeniable that there is a point of diminishing returns relative to increased rates of taxation." <--

    Agreed. I simply question the premise that we're already at that point, given the fact that we've previously sustained far higher tax rates (and commensurately higher revenues).

    Many more good points to address but it's 2:30 AM - hope this is still up on Monday.

    Cheers!

  • Report this Comment On February 26, 2012, at 6:26 AM, CaptainWidget wrote:

    <<Agreed. I simply question the premise that we're already at that point, given the fact that we've previously sustained far higher tax rates (and commensurately higher revenues).>>

    By what metric are you judging that on? My math completely disagrees. Total federal tax revenues have never exceeded 20% of GDP and have historically averaged around 17% since 1950. When the marginal rates were at their highest in our country's history (post WWII) collections as a percentage of GDP were among the lowest (sub 15%)

    It doesn't matter what the marginal rate or how many avenues you attempt to monetize, the US people aren't give up more than 20% of their money without a serious fight. So why provoke the fight? Ask for 20%, reduce compliance costs and make some happy freaking citizens for once.

  • Report this Comment On February 26, 2012, at 11:55 AM, wolfman225 wrote:

    ^+1. Aye, aye, Captain!

  • Report this Comment On February 26, 2012, at 12:22 PM, Gorm wrote:

    Thank you, CrankyTexan!!

    1) Too many are engaged in happy talk to take a realistic assessment of reality and risks posed.

    2) Only an idiot ignores reality. Demographics are working against us, ie too great a share of our population will contract spending, increase savings and end a real federal government expense

    3) Just like the housing bubble, a FEW warned but most sheepishly followed the flow. 20/20 is almost always perfect. When this market corrects, the analysts will all claim they warned us!!

    4) Debt will be our undoing. It is just too deep, too broad to believe in a happy ending. There is NO magic pill. There are three choices, ie hyperinflate it away (debase the USD), default, or slow and painful deleveraging.

    5) Our GDP is consumer driven. Consumers are mired in debt. When DEBT was such a critical factor in our growth, we're unlikely to achieve that growth rate anytime soon.

    6) Unemployment is understated. How do you rationalize a record low job force participation rate of 63.7% in January as unemployment falls to 8.3%???

    7) Congress has a reputation for engaging ONLY when crisis stage confronts them. We just get more happy talk and promises of painless remedy. Ya, right!!

    8) Look at bank stocks. Talk about damaged goods. What do their balance sheets reflect? Where are all the toxic assets? What about off sheet exposures? How quickly will leveraged positions erase capital?

    9) There is JUST TOO much money out there. Rates are ridiculously LOW - even below the rate of inflation. How unbelievable!! If rates were to rise, it would balloon our deficits further. Even CBO projects debt service will surge $581B by 2020. If Congress couldn't deal with a lousy $100B/$61B/$39.4B what are they going to CUT when debt service surges $600B ANNUALLY?

    10) Yet Obama hedges the truth, ignores budget constraints and just keeps adding $1T+ deficits. Yes, we will just spend ourselves into prosperity. That is ALWAYS the solution - feeling good as we merrily sail over the cliff!!

    While no one wants to dwell on the negatives there is NO dismissing reality. Thank you, CrankyTexan.

    Gorm

  • Report this Comment On February 26, 2012, at 12:31 PM, ETFsRule wrote:

    "When the marginal rates were at their highest in our country's history (post WWII) collections as a percentage of GDP were among the lowest (sub 15%)"

    There is way too much variance to make a conclusion like that. In the early 50's, revenues went above 19% of GDP.

    http://research.stlouisfed.org/fred2/graph/?g=5h7

    It seems to go up or down based on economic cycles more than anything else.

    GDP doesn't always tell the whole story. In my opinion, a more accurate way to look at it is federal tax revenue as a % of corporate profits... this figure is currently at an all-time low, based on the available data:

    http://research.stlouisfed.org/fred2/graph/?g=5h8

    If the economy picks up a bit more, it wouldn't be unreasonable to raise corporate taxes.

  • Report this Comment On February 26, 2012, at 1:46 PM, bobdog47 wrote:

    I'm probably the least informed (that means blue collar) of all posting here but after reading all of the posts here I find it interesting to note that the beginning posts were about our economic outlook and ended up heavy into the tax arena. I believe our taxes on all earnings is very detrimental to our economy. Imagine not being taxed on our hard work, business endeavors, etc. A system where we are taxed only when we spend. Americans like to spend, right.....I know, FAIR TAX SYSTEMS WON'T WORK. Not sure I understand why not, but???? Maybe our business community would be psyched about doing business here in the USA for a change? I'm not talking about a system that refunds anything to anyone. You but, pay the tax (may be seriously high for some items) and that's it. No more tax returns, cheating on returns, audits, IRS, and many more expenses of collecting the $2.4 trillion (2007) each year. Estimates run in the 30-35% range of taxes used to prop up all of the gov't depts involved in tax collection. I know I'm just paranoid and crazy but I think we all spend pretty much according to our income. Under revamped tax collection (using sales tax) those earning the most would probably pay the most in taxes, unless, they just want to SAVE money. There's my $.02 worth, maybe only worth a penny. thanks all, bobdog

  • Report this Comment On February 26, 2012, at 1:49 PM, wolfman225 wrote:

    <<--GDP doesn't always tell the whole story-->>.

    Exactly. Which is why I don't buy the administration's main argument for raising taxes. Namely: "Currently, the tax burden as a percentage of GDP is at historic lows."

    In contrast, tracking the percentage the government takes out of the private economy "off the top" for expenditures gives a clearer view of the burden government puts on the economy and is largely self-correcting. Tracking the percentages evens out a lot of the "noise" you invariably get when you try comparing 1970 dollars to 2011 dollars, for example.

    I kinda like Cranky's idea of 20%. It's historically the norm, and I'd be quite content with a flat tax rate of 20% for all income; no deductions, exclusions, carve outs, incentives for "disadvantaged groups/industries", or the like allowed.

    If we, as a people, could constrain our government to operate within those reasonable limits, perhaps we could then see the result actually budgeting our national expenses (as opposed to a never-ending stream of CRs funding spend-as-we-go pipe dreams) would have on the economy.

    As for emergencys such as war/national defense emergencies and national disasters, those expenses could be accomodated by a national referendum or bond issue, the same way the states manage unforseen expenses. It would prohibit expensing these items "off the books" and impose a true obligation on government to pay the debts incurred.

  • Report this Comment On February 26, 2012, at 2:01 PM, wolfman225 wrote:

    <<<FAIR TAX SYSTEMS WON'T WORK. Not sure I understand why not, but????>>>

    Here's my view on why (worth what you paid for it):

    Liberal/Progressives don't like the Fair Tax because they view it as "regressive" and believe it unfairly places an out-of-proportion burden on the poor, who spend customarily spend 100+% of their income.

    Conservatives like me don't like the idea because, while the notion of rewarding thrift and responsible money management and savings is attractive, the usual means of addressing the (quite valid) concerns of the other side usually entails government setting up certain expenditures that are exempt from the tax, either by setting them up as carveouts in the tax code itself, or by handing out monthly or quarterly "prebates" based on an assumed cost of living. The government bureaucracy(sp?) required to manage such a system would dwarf the current IRS in both size and complexity.

    And both sides would agree (I think) that, as long as the American economy is dependent on consumerism, anything that directly acts to inhibit spending would bring everything to a screeching, crashing halt.

  • Report this Comment On February 26, 2012, at 2:02 PM, wolfman225 wrote:

    <<<Under revamped tax collection (using sales tax) those earning the most would probably pay the most in taxes,>>>

    They already do.

  • Report this Comment On February 26, 2012, at 6:41 PM, CaptainWidget wrote:

    <<GDP doesn't always tell the whole story. In my opinion, a more accurate way to look at it is federal tax revenue as a % of corporate profits... this figure is currently at an all-time low, based on the available data:>>

    Sorry....that doesn't make any sense. GDP is our economy as a whole. Why would comparing total federal revenues against a narrow revenue source of the economy be a good indicator of anything? Why not federal revenue as a percentage of water park revenue? Federal revenue vs ice hockey revenue?

    Most businesses are not corporations, and most taxes come from people, not corporate accounts. Period. Your assertation otherwise is ridiculous.

    Yes corporate collections are lowering. They're decreasing at the same rate that social taxes are increasing.

    http://www.deptofnumbers.com/blog/2010/08/tax-revenue-as-a-f...

    Hauser's law in action. The more the federal government tries to pump the citizens, the more the citizens work to defend their cash through corporate protection.

    In my (correct) opinion, the US government isn't going to get more than 20%, so why bother asking for it? Let's call it 18.5% for everyone, give a huge personal deduction (the first 20K is untaxable) and get rid of the social safety net. Let people be their own advocates.

  • Report this Comment On February 26, 2012, at 11:14 PM, ETFsRule wrote:

    "GDP is our economy as a whole."

    Hopefully this will help you understand why GDP is useless for this comparision (link contains crude language):

    http://larouchepac.com/node/17494

    The only meaningful comparision is to look at tax receipts as a % of income - whether it is business income or personal income. Income is where tax revenue comes from, and income is the limiting factor on how much the gov't can sustainably collect.

    You correctly pointed out that personal income taxes are the single largest contributor to federal tax receipts.

    Well, tax receipts as a % of personal income are also near an all-time low:

    http://research.stlouisfed.org/fred2/graph/?g=5ip

    Is there some reason why this couldn't be adjusted back to its historical average?

  • Report this Comment On February 27, 2012, at 5:48 AM, CaptainWidget wrote:

    Yes, because you've failed to add in the 14.5% (or whatever the rate is) in FICA income tax to that number. Once you include that, you'll see we're back up to "historical averages".

    Why would you want higher taxes? If you want to pay higher taxes, cut a check to the treasury.

  • Report this Comment On February 27, 2012, at 9:04 AM, ETFsRule wrote:

    "Yes, because you've failed to add in the 14.5% (or whatever the rate is) in FICA income tax to that number. Once you include that, you'll see we're back up to "historical averages".

    I'm not sure where you got this idea but it is incorrect. The federal receipts statistic already accounts for payroll taxes and everything else, including FICA.

    "Why would you want higher taxes? If you want to pay higher taxes, cut a check to the treasury. "

    Cute response.

    Any realistic solution to the federal budget will include restoring tax rates closer to their normal levels.

  • Report this Comment On February 27, 2012, at 10:06 AM, wolfman225 wrote:

    <<Well, tax receipts as a % of personal income are also near an all-time low:>>

    Couldn't this be a result of the fact that, as of last report, somewhere between 47-51% of working Americans (the % varies with the report cited) pay no Federal Income Tax, rather than the current rates being too low? Don't forget, one of the results of the "Bush Tax Cuts" was that many taxpayers in the bottom bracket were eliminated from the tax roles altogether. That number has only grown with the recession.

    We need a system that brings as many as possible back into the system as payers if we're going to solve our financial problems. Remember the old adage: "An ounce apiece from the many, far outweighs a pound apiece from the few."

  • Report this Comment On February 27, 2012, at 10:27 AM, actuary99 wrote:

    "on Amazon for your Kindle or iPad."

    Not sure why you don't want money from people owning Nook readers, or those who want a physical copy, or most generally, anyone without a Kindle or iPad.

  • Report this Comment On February 27, 2012, at 2:44 PM, CrankyTexan wrote:

    >>>Cute response.<<<

    ETFsrule, his response was cute and accurate. You want to pay more taxes. Why don't you? Here, I'll make it easy for you. Let us know when you do it....

    https://www.pay.gov/paygov/forms/formInstance.html?agencyFor...

  • Report this Comment On February 27, 2012, at 2:51 PM, TMFMorgan wrote:

    actuary99,

    The Nook version should be ready shortly.

    And people still print books?

  • Report this Comment On February 27, 2012, at 7:07 PM, CaptainWidget wrote:

    <<"I'm not sure where you got this idea but it is incorrect. The federal receipts statistic already accounts for payroll taxes and everything else, including FICA.">>

    The total, but the total percentage payroll taxes plays in federal revenues has gone up. I don't get how people try to segregate payroll taxes from income taxes. They're both taxes you pay on your income. They both go into the same pool. Add them together and realize that the average American owes something on the order of 35% of their income...JUST TO THE FEDERAL GOVERNMENT...JUST FOR THE RIGHT TO WORK!!!!

    If that's not enough, I don't know what is. Again, if you feel we owe more, lead by example. Click the treasury's link and pay down the debt.

    Until you voluntarily donate even an extra dollar, you have no legs to stand on. The only thing you're advocating is a tax increase on others, not yourself.

  • Report this Comment On February 27, 2012, at 10:37 PM, ETFsRule wrote:

    "I don't get how people try to segregate payroll taxes from income taxes. They're both taxes you pay on your income."

    You're not making sense. Federal receipts already include both of these taxes. Nothing is being segregated. Everything you're talking about here is already included in the figures I cited.

    "If that's not enough, I don't know what is. Again, if you feel we owe more, lead by example. Click the treasury's link and pay down the debt. "

    blah blah blah

    I never advocated raising taxes in the short term.

    I understand that you obviously want smaller gov't, less taxes, etc, etc. That's a matter of opinion and no facts will ever change your mind. That's why I am not trying to change your mind. Talking about politics is useless.

    You tried to argue that tax rates are currently high relative to their historical norms. I am merely proving that you were incorrect. That is all.

  • Report this Comment On February 27, 2012, at 10:37 PM, ETFsRule wrote:

    .

  • Report this Comment On February 27, 2012, at 11:13 PM, CrankyTexan wrote:

    >>> I never advocated raising taxes in the short term. <<<

    Yes you did....

    >>> Well, tax receipts as a % of personal income are also near an all-time low. Is there some reason why this couldn't be adjusted back to its historical average? <<<

  • Report this Comment On February 28, 2012, at 8:59 AM, ETFsRule wrote:

    That was after I specifically said we should wait until the economy picks up more before we raise taxes...

  • Report this Comment On February 28, 2012, at 8:59 AM, ETFsRule wrote:

    .

  • Report this Comment On February 28, 2012, at 1:43 PM, DJDynamicNC wrote:

    --> "Couldn't this be a result of the fact that, as of last report, somewhere between 47-51% of working Americans (the % varies with the report cited) pay no Federal Income Tax, rather than the current rates being too low?" <--

    Actually, since we appear to have decided in the comments that we're going to include payroll taxes in the Federal tax receipts, then this statistic is false. Every employee pays payroll taxes.

    But you're right, there exists a certain number of people in this country who make so little money that they don't even climb into the lowest tax bracket for federal income taxes. I suppose one solution there is to increase taxes so those people have even less money, but from an economic and social policy standpoint I can't see that being the optimal solution, particularly since the resulting gains in revenue would be negligable. 5% of income from people who are making $10,000 a year is 500 dollars... there are 138 million tax filers, of whom half pay federal income taxes. 69 million people, times $500 each is 34 billion dollars.

    I'm not clear on why this is a superior policy option to simply ending the carried interest loophole and increasing the tax on capital gains.

  • Report this Comment On February 28, 2012, at 1:53 PM, DJDynamicNC wrote:

    -->"Until you voluntarily donate even an extra dollar, you have no legs to stand on. The only thing you're advocating is a tax increase on others, not yourself." <--

    You're in luck. I do this every year. I even have the letter from the Dept. of the Treasury from when I first wrote to them about where and how to make such a donation. It was a form letter, so plenty of people must do this.

    But my tax rate is far too low. It was acceptable before I got married, but now that I'm married I pay far less (my wife is Canadian so her income is exempt under foreign earnings). This year's donation will be substantial.

    Of course, I also have a voluntarily imposed maximum wage. It's important to lead by example.

    So, since we're playing this game, I now get to be allowed to complain about taxes being too low because I put my money where my mouth is (as per your specific request).

    You get to complain about the size of the deficit when you make your own contribution. Otherwise, you "don't have a leg to stand on," to quote somebody who would engage in arguments lijke these.

  • Report this Comment On February 28, 2012, at 3:35 PM, CrankyTexan wrote:

    >>> You get to complain about the size of the deficit when you make your own contribution. <<<

    lol. That is ridiculous (as usual). Unlike Canadians, Americans have freedom of speech.

    And your comment is equivalent to saying "you get to complain about a cocaine addict when you give that addict some cocaine."

  • Report this Comment On February 28, 2012, at 3:49 PM, CrankyTexan wrote:

    Allow me to correct myself. Since CaptainWidget ALREADY pays too much tax, my statement should have been......

    "And your comment is equivalent to saying 'you get to complain about a cocaine addict when you give that addict EVEN MORE cocaine than you already are.' "

  • Report this Comment On February 28, 2012, at 3:54 PM, DJDynamicNC wrote:

    --> "lol. That is ridiculous (as usual). Unlike Canadians, Americans have freedom of speech."<--

    1) That's not what freedom of speech means. I'm thoroughly unsurprised that you misapprehend the Constitution, though.

    2) I get that it's ridiculous. In fact, it's precisely as ridiculous as the argument: "Until you voluntarily donate even an extra dollar, you have no legs to stand on." Wouldn't you say?

    3) I'm not Canadian (yet). I have lived all of my life in upstate New York, other than my time in the Army and at Penn State. But don't worry, I'll be moving to our socialist neighbour soon enough. But if you really think Canadians don't have freedom of speech, I encourage you to someday try visiting. It's a lovely place - but if you disagree, you can say so if you like!

  • Report this Comment On February 28, 2012, at 3:58 PM, CrankyTexan wrote:

    >>> In fact, it's precisely as ridiculous as the argument: "Until you voluntarily donate even an extra dollar, you have no legs to stand on." Wouldn't you say? <<<

    Ummm, no. YOU are the one who WANTS to pay more tax. Furthermore, he did not tell you not to shut up. Instead he said that your case has no merit.

  • Report this Comment On February 28, 2012, at 4:57 PM, DJDynamicNC wrote:

    And he is the one who claims to WANT the deficit to be addressed.

    I want to address the budget situation, so I advocate for raising taxes on MYSELF and OTHERS as well as putting MY OWN money in. He wants to address the budget situation, so he advocates for cutting spending that OTHER PEOPLE benefit from and, in some cases, depend on.

    That's fine, that's his opinion and he's up front about it and has rational reasons for espousing it, but I figured if we're going to play the "put your money where your mouth is" game, I'd play to win.

  • Report this Comment On February 28, 2012, at 5:06 PM, CrankyTexan wrote:

    >>> I want to address the budget situation, so I advocate for raising taxes on MYSELF and OTHERS as well as putting MY OWN money in. <<<

    Raising taxes would not decrease the deficit. The Obama Administration would just spend the funds.

    >>> He wants to address the budget situation, so he advocates for cutting spending that OTHER PEOPLE benefit from and, in some cases, depend on. <<<

    EVERY American would benefit from cutting spending because it would prevent a Greece -like situation.

  • Report this Comment On February 28, 2012, at 5:48 PM, DJDynamicNC wrote:

    "Raising taxes would not decrease the deficit. The Obama Administration would just spend the funds."

    If we're looking at rational measures of addressing the budget long term, then that makes sense - just like it makes sense to invest in a car in order to drive yourself to a new job to help you get out of debt.

    "EVERY American would benefit from cutting spending because it would prevent a Greece -like situation."

    You mean a situation where the government embraces massive austerity, the economy crumples, and people are rioting in the streets? Yes, avoiding that would be ideal.

    Meanwhile, your claim to speak for EVERY American is impressive. At best I can claim to speak as part of 99%

  • Report this Comment On February 28, 2012, at 6:08 PM, CrankyTexan wrote:

    >>> Meanwhile, your claim to speak for EVERY American is impressive. At best I can claim to speak as part of 99% <<<

    I am part of the 99% too. I do not hate the 1%. And I do not feel sorry for myself. I am very thankful to have my lifestyle.

    And you're right; I do not speak for EVERY American. I do not speak for spoiled liberals who demand handouts from other taxpayers.

  • Report this Comment On February 28, 2012, at 6:09 PM, CrankyTexan wrote:

    And YOU do not speak for the 99%. Less than half of the 99% are socialists like you are.

  • Report this Comment On February 28, 2012, at 6:11 PM, DJDynamicNC wrote:

    Which handout have I demanded, exactly?

  • Report this Comment On February 28, 2012, at 9:31 PM, CaptainWidget wrote:

    <<So, since we're playing this game, I now get to be allowed to complain about taxes being too low because I put my money where my mouth is (as per your specific request).

    You get to complain about the size of the deficit when you make your own contribution. Otherwise, you "don't have a leg to stand on," to quote somebody who would engage in arguments lijke these.>>

    That doesn't make sense. You advocate higher taxes, and you voluntarily pay them (quite noble by the way).

    I advocate lower government spending....which I cannot voluntarily change in any way, shape, or form.

    I DO however go out of my way to prevent the government from spending money. I very likely could qualify for food stamps, HUD, welfare, SSD, medicade, and a host of whatever other government programs exist to take care of the voluntarily poor.

    But I don't. Instead I take care of myself like a grown up, make ends meet, and don't take on liabilities that I can't afford to pay. So I'd say I'm leading by example perfectly.

  • Report this Comment On February 29, 2012, at 12:24 AM, Darp wrote:

    Hi,

    This is generally a good article, but it has one huge error in it. That is during the debt ceiling debate the choice was a balanced budjet immediately or a huge deficeit increase.

    Defaluting on our debt was never an issue. In the past we have had partial shurdowns and it had nothing as in nada to do with defaulting on debt.

    It amazes me that this political lie keeps getting repeated as if it were a fact when it is not. As Twain said a "well told lie can circle the globe before the truth can tie its shoes." or something close to that.

    I gladly challenge the author to a $1,000 wager on this issue.

    Are you willing to take it?

    Just image if in 2000 or 1995 or 1985 we had refused to raise the debt ceiling how incerdiibly better off we and the USA would be today. Our national debt might be $500 today billion not 16 trillion.

    Not raising the debt ceiling, is the best thing we could have done over and over in the past, why should we think now is any different?

    If we have to raise it that means we are hopelessly bankrupt now.

    This is how we got into the mess we are in today, we raised it in the past. Not raising is the best thing for debt holders, it means they are more likely to get paid off, not less likley. Ask Greek debt hodlers like Jon Corizine about that, Greece just kept raising the debt ceiling and KABOOM.

    Cheers

  • Report this Comment On February 29, 2012, at 4:59 AM, wolfman225 wrote:

    <<"....there exists a certain number of people in this country who make so little money that they don't even climb into the lowest tax bracket for federal income taxes. I suppose one solution there is to increase taxes so those people have even less money, but from an economic and social policy standpoint I can't see that being the optimal solution, particularly since the resulting gains in revenue would be negligable. 5% of income from people who are making $10,000 a year is 500 dollars... ">>

    You are correct in saying that the financial impact of bringing more of the lower wage earners into the ranks of taxpayers would be negligible. From a purely monetary standpoint. Where we disagree (and I have no illusions about bringing you over to my point of view, I'm simply asking you to consider a different paradigm) is on the social impact.

    I happen to believe that it is critical that we have as many as possible paying in to the system, even if only the nominal amount of your example of $500. It's the ripple effect that makes this such a potentially powerfull economic change of course. The biggest threat to our financial solvency is the over-sized and under-funded future promises that have been made (and continue to be made) by politicians to their constituents in return for their support and vote at election time. The only hope we, as a nation, have of avoiding a Greece-like crisis is to have as many people with "skin in the game" as possible.

    The vast majority of Americans are notoriously short-sighted. The best way to get them motivated to act to head off our looming economic problems is for them to feel the economic pinch of these unfullfillable promises. As long as they continue to be encouraged to believe that government benefits are both "free" and perpetual, there will be zero interest in holding our representatives accountable.

    That is truly the biggest risk to the economy.

  • Report this Comment On February 29, 2012, at 10:11 AM, DJDynamicNC wrote:

    "But I don't. Instead I take care of myself like a grown up, make ends meet, and don't take on liabilities that I can't afford to pay. So I'd say I'm leading by example perfectly. "

    Fair enough. I suppose it's a matter of priorities. If deficit reduction itself were your primary goal, then yes I'd call you out for not donating yourself (since that would, in fact, be an aspect of reducing the deficit). But if your primary goal is reduction in government spending regardless of the deficit - and I'm willing to believe that - then I'd say you're absolutely right and are doing what you can (which is admittedly limited) to live that example.

  • Report this Comment On February 29, 2012, at 10:25 AM, DJDynamicNC wrote:

    "The vast majority of Americans are notoriously short-sighted. The best way to get them motivated to act to head off our looming economic problems is for them to feel the economic pinch of these unfullfillable promises."

    I see your point, but I think that very concept contains the seeds of its own dismissal. If you're a lower income American - something I and my cohort are quite familiar with - then sure, you'd absolutely notice 20 bucks a week more being taken out of your paycheck, to an extent. But the impact of that pales in comparison to the loss of services and government programs. For lower income Americans, these programs are essential and there is definitely an awareness of that.

    Further, I think there is plenty of interest in holding our representatives accountable. We just have different things we want to hold them accountable for.

  • Report this Comment On February 29, 2012, at 2:37 PM, wolfman225 wrote:

    <<"....you'd absolutely notice 20 bucks a week more being taken out of your paycheck, to an extent. But the impact of that pales in comparison to the loss of services and government programs...I think there is plenty of interest in holding our representatives accountable. We just have different things we want to hold them accountable for.">>

    That's exactly my point. Most "essential" government services and programs aren't. It's simply that people have gotten used to them and have become dependent upon them, as opposed to being used to providing for themselves and their families. What far too many in this country want to hold politician's accountable for isn't what is best for the country as a whole, but rather the fulfillment of their short-sighted demands.

    .....

  • Report this Comment On February 29, 2012, at 10:02 PM, kyleleeh wrote:

    <<This is generally a good article, but it has one huge error in it. That is during the debt ceiling debate the choice was a balanced budjet immediately or a huge deficeit increase.

    Defaluting on our debt was never an issue. In the past we have had partial shurdowns and it had nothing as in nada to do with defaulting on debt.

    It amazes me that this political lie keeps getting repeated as if it were a fact when it is not. As Twain said a "well told lie can circle the globe before the truth can tie its shoes." or something close to that.

    I gladly challenge the author to a $1,000 wager on this issue.

    Are you willing to take it? >>

    It doesn't say that anywhere in this article, in fact he specifically says:

    "Throughout the ruckus, most analysts reassured that this was mere posturing, and that Congress would never actually allow a default. In hindsight, they were right."

    It amazes me the selective reading ability that people demonstrate on here.

  • Report this Comment On March 01, 2012, at 10:47 AM, DJDynamicNC wrote:

    --> "That's exactly my point. Most "essential" government services and programs aren't. It's simply that people have gotten used to them and have become dependent upon them, as opposed to being used to providing for themselves and their families" <--

    I mean, when you get down to it, no government service is "essential." You and I would survive, in some fashion, for some amount of time, with no formal government at all (at least until somebody else started a formal government and levied an army and crushed us). That's why I'm not a fan of trying to classify government as "essential" or "non-essential." All we have is what we as a nation are willing to bear as the cost of civilization, and what we as a nation are willing to accept as the framework around which the nation's day to day operations can be built.

    I think it's worth asking for quite a bit from each citizen in order to provide the highest quality of life to the greatest number of people, even if that means those who benefit the most from the arrangement are asked to give up a substantial amount of their own quality of life gains (and I have taken large strides towards being one of those people in the last three years, so I'm not just giving away other people's money) and even if it means accepting additional inefficiencies in the system as a whole. You accept the need for government in principle, so you accept the same basic premise, it's just a matter of degree.

    In other words, I'm ok with people depending on government services. I depend on government services - certainly I wouldn't want to have to personally inspect every factory that made the toys I buy my kids, or navigate some sort of "enforcement insurance" contract for police protection - and I don't have a problem when other people depend on those and other government services. That's what civilization is - building a system that is bigger than the self.

  • Report this Comment On March 01, 2012, at 3:04 PM, wolfman225 wrote:

    <<"I think it's worth asking for quite a bit from each citizen in order to provide the highest quality of life to the greatest number of people">>

    <b> from each citizen</b> is the key. There is a larger percentage of the population NOT contributing than at nearly any other time in our history (don't waste my time with irrelevancies such as "hey, the poor pay sales taxes, property taxes, payroll taxes", etc. Everybody pays those taxes in exactly the same percentage). The current argument about the unfairness of the gap between the rich and poor is a straw man propped up to destract from the fact that we are dangerously close to the <i>intentional</i> up-ending of our economy.

    In earlier posts I used the visual example of an inverted pyramid to illustrate our potential problem. By narrowing the focus of tax revenue collection to a relatively few rich people and corporations, the source of government funding is increasingly made vulnerable to the swings of the economy as a whole.

    A slowing economy=lower income for the "rich"=lower tax revenue avail for government=attempts by government to recoup lost revenue by increasing taxes=a slowing economy=greater demands on the "safety net"=more demands for government to increase spending on social programs=further "tax the rich" schemes to increase revenue=lower capital available for business expansion/job creation=slowing economy=less tax revenue avail for the government.......you can see where this is leading. Eventually, the demand for services will become so top heavy, and the tax base so narrow, that the pyramid will topple. At that point, to quote a once-popular nursery rhyme "....we all fall down."

  • Report this Comment On March 01, 2012, at 3:05 PM, wolfman225 wrote:

    ^ Sigh. I don't understand why sometimes I can use HTML tags for emphasis and sometimes I can't.

  • Report this Comment On March 01, 2012, at 5:53 PM, DJDynamicNC wrote:

    --> "There is a larger percentage of the population NOT contributing than at nearly any other time in our history" <--

    I don't have the numbers at my fingertips, but I'm willing to accept this as true.

    That said, there is ALSO a greater concentration fo wealth in the hands of a very few than at almost any other time in our nation's history. This too presents a danger. I do not find it surprising that at a time when very few people control very much wealth, that a great many others are finding that they need assistance just to get buy.

    I'm openly in favour of redistributing wealth from those who have a great deal to those who have none or very little. I would be very open to accepting an expansion of the tax base to a much larger pool of Americans provided it was accompanied by an expanded distributory framework for captured wealth. Remember, a lot of those people who aren't paying taxes ARE working, and working hard; they just make so little that they aren't hitting the lowest brackets. I would be happy to expand the tax brackets to capture those workers provided that the trade off is an improvement in quality of life for them through enhanced redistribution. We're not ruining their incentive to work - they're already working - we're just generating real quality of life improvements in exchange for increased contributions to the collective whole.

    My guiding principle is improving quality of life for human beings and by far the greatest effect can be found by working with the lowest income classes who endure the lion's share of what suffering remains in developed society, but if I thought a capitalist solution could genuinely deliver those kinds of improvements then I'd sign right on board, and I'm happy to compromise my procedural preferences in service of my ethical values.

  • Report this Comment On March 02, 2012, at 4:53 PM, drborst wrote:

    @CrankyTexan

    I was a socalist for a few weeks in college, and now I'm still fairly liberal. So I should probably hate you, and based on your comments about liberals and socialists, you'd probably hate me if I spent more time on this site.

    But I find you're "commenting on Morgan's column" blog/forum oddly compelling. I think I might actually like you. So thanks and keep it comming.

    Can I add a challenge for you? Say one good thing about Obama. I dare you.

    DRB

  • Report this Comment On March 07, 2012, at 7:06 PM, KMAFool wrote:

    If Iran wants a Nuke so bad, I am all in favor of giving them one - or a bunch.

  • Report this Comment On March 07, 2012, at 7:23 PM, Sunny7039 wrote:

    To think that this economy is "about Obama" is beyond ridiculous. It's not worth any serious person's time to try to refute that. We're not far from the realm of Aztec calendars and alien abductions.

    My only advice is to keep your eye on Economonitor, Roubini's public website (he teaches at NYU, like Taleb), and also to read Simon Johnson, currently at MIT. Bloomberg.com is surprisingly good as well, and had a very interesting article on the Greek debt crisis and the role played by GS.

    Frankly, making this forum about partisan politics (as certain letters here have done) borders on a disservice. Most small investors do not have time to waste on such debates. We have enough to do to keep up with our investments. But if we are going talk politics, then at least make it about political economy, and take a truly broad perspective. This can actually help you understand the world and do the right thing when you're called upon to act.

    I am so sick and tired of people who imagine that their little corner of the world is Reality with a capital R, when the entire population of the United States is barely 5% of the whole world's, if that. Of course our lives will be affected by people and events entirely beyond our control. So why waste time in fruitless, insular partisan one-upmanship? Pfft! I don't automatically believe the statistics of anyone with an agenda, even though I have to say that I don't dispute these. They could be right. But would you make a serious decision on the basis of "they could be right?" Neither would I.

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