Where is the US economy headed?

It is a provable fact that our tax rates are far below the optimum, ie, the place where cutting taxes raises revenues. The proof of this is in the history of revenues for the last 25 years, as I stated earlier in the thread; every time they were cut, revenues dropped. This is not opinion.

In the last 25 years, when taxes were raised, revenues rose as well. I don't see how you can look at this fact and not conclude that the tax rate, which has been cut significantly by Bush, doesn't have a lot of room to go up.

I personally don't give a damn about rich people; I'm happy with my life the way it is. But I can't stand tax breaks for them that they don't need in the slightest, when it is proven to hurt our country financially, when we are massively in debt! I can't stand the lies.

Cycloptichorn

Cyc, the budget continues to fail to expand per projections and Democratic Party Supporter preferences, real income is increasing steadily in terms of dollar volume, median and average wage, and wage-per-hour, and more Americans are employed today than at any time in history. While the Budget Deficit appears historically large in absolute dollar terms, considered as a percentage of GDP it is well within norms for the entire post-WWII period, and well below the average for the term of The Previous Administration. The lower reaches of the tax-paying public now pay a lesser share of their income in Federal Taxes than prior to the tax cuts, while tose in the upper reaches pay a greater share of their income than was the pre-tax-cut-case. Likewise, those in the upper 25% of all income brackets pay overwhelmingly more of the overall tax burden than do those comprising the entire lower 50% of all income brackets.

I know you don't agree, and I know you're angry. I can understand the anger you share with Democratic Party Supporters and Bushophobes in general; frustration, failure, futility, and rejection will do that.

As I've said many times before, you guys are doing a great job; please keep it up.

Timberlandko- It appears to me that even a minimal search by Cyclo would reveal that tax cuts do indeed raise revenue. This appears to be counterintuitive but further reflection reveals that the monies saved by corporations and entrepreneurs is not, as some would have it, stuffed under the mattress but recycled into the economy to produce more goods and, of course, more jobs.

It is clear that the tax cuts of the past have resulted in more revenues. According to

http://www.heritage.org/Research/Taxes/BG1086.cfm

quote

"Across the board tax rate reductions in the 1920's reduced the top rate from 71 percent to 24 percent. The economy boomed, growing by 59 percent between 1921 and 1929"

"In 1930, Herbert Hoover raised tax rates from 25percent to a maximum of 63 percent, and Franklin Roosevelt boosted them to 79 percent later in the decade. The 1930's, to put it mildly, are not remembered as one of the American economy's better decades"

"Across the board tax rate reductions introduced by President John F. Kennedy reduced the top rate from 91 percent to 70 percent. These lower rates, along with substantially lower taxes on savings and investment are associated with the longest economic expansion in American history"

"The Johnson surtax, enacted in 1968 during the administration of president Lyndon Johnson, combined with the inflation-induced bracket creep of tghe 1970's, resulted in a decade of stagflation"

"Reagan's across the board tax cuts ushered in America's longest peacetime expansion, helping to create 20 million new jobs and pushing incomes and living standards to record highs"

Tax cuts have worked to improve our economy. It is irrefutable.

Good evening to yall. So far the discussion on this thread has been civil. As soon as it turns nasty...I am gone.

Mortkat: I don't claim to be an economist. I took several courses in undergrad and later in grad school. I was taught that an unemployment rate of 5% or so meant, pretty much, that everyone was working except for some folks who, for one reason or another, were temporarily out of work, 5% is good,

But then I read about companies like GM and Ford etc eliminating thousands of jobs. Those folks did what? Not, apparently, going on unemployment. Underemployment, They went to work for Wal-Mart (a cheap shot, I would admit. Perhaps we will get into talking about wages at a later time).

Can't believe I'm breaking my personal rule against responding to you, Chiczaira.

The reason I don't trust your article is because it contains false information. Specifically,

"Reagan's across the board tax cuts ushered in America's longest peacetime expansion, helping to create 20 million new jobs and pushing incomes and living standards to record highs"

http://www.cbo.gov/showdoc.cfm?index=1821&sequence=0

It wasn't until 1984, when Reagan raised taxes, that federal revenues began to rise. It wasn't his tax cuts.

Cycloptichorn

Nevermind Reagan. Here's a look at the Clintoon administration's employment and wage performance across its entire tenure from 1993 through 2000 and the performance of Bush The Greater's Administration from 2001 onwards.

Everyone must keep in mind here that the face of the American economy has been changing long before Bush, whether Democrat or Republican, with world market factors driving the change. Manufacturing has been moving overseas for decades. Virtually everything in Walmart was made in China or some other country. Not Bush's fault. Not Clinton's fault. Not Reagan's fault, and not Carter's fault either. Probably all of our faults, starting with Unions decades ago maybe having at least something to do with it. I think we're lucky to be as well off as we are.

And here are your "Tax Cuts For The Rich"

Just who pays taxes anyway? Those in the top 20% of income level pay 80% of all Income Tax, while those in the lower 60% of income brackets pay 4.1% of Income Tax collected, and the top 1% of earners alone chip in 31.6% of all Income Taxes paid. In terms of overall Federal Tax burden, the top 20% pay 64.3% of all Federal Taxes, the top 1% accounting for 21.5% by itself, while the lower 60% account for 16.5% of Federal Tax Revenue.

Thank goodness for rich people or we'd all be in terrible shape.

Do you have any stats on the percentage of the country's wealth that top 20% controls.

The % of wealth that lower 60% produces for the top 20%.

Straw Man, Amigo. Without the top 20% the bottom 80% would have no jobs with which to produce anything.

The top 20% can go without a source of production?

We would hardly miss the boss nor do we need him like he needs us. I don't believe in myths.

I notice you don't answer my first questions

Well at least I know one of them 20% is Irish, ay buddy.

Till next time.

Without one another neither component have much to look forward to. It ain't a competition, its a team effort. for your First question, dignifying it with a response, I offer the following:

The lower 40% of US households control approxomately 1% of the National Wealth, while the top 1% of US households control a bit less than 30% of the National Wealth. The upper 20% of households, those which pay 80% of the taxes, hold 80% of the National Wealth. Largely, Business Ownership - Enteprenurialism - is the chief driver of this disparity; it takes money to make money. A surprisingly small proportion of US wealth is "Inherited", less, in fact than is common in the rest of the "Western World"; by far the bulk of it is "Earned". Notable also is that what would be a poverty-level income in the US (defined by the UN's WHO as below 50% of a nation's median income) would rank that income within the "well-to-do" categories in around 60% of the rest of the world by population. The US "poor" on average are better off than any other "poor" on the planet.
Primary Source (Note: 15 page .pdf document)

From another source, a 1998 US Wealth Distribution Chart

That aside, nearly 70% of US households live in their own homes, a higher home-ownership rate than will be found elsewhere. Residential structures and real estate account for over half the Real National Wealth of the US. Nowhere else on the planet is the populace of a nation so broadly invested in the actual real wealth of that nation - Americans invest in themselves.

A paper you may find interesting: Housing, Portfolio Choice and the Macroeconomy (Note: 45 page .pdf document)
Silos, P., PhD, Research Economist and Assistant Policy Adviser, Federal Reserve Bank of Atlanta
Presented March, 2005, University of Maryland.



Now of course it isn't all milk and honey and luxury SUVs - Utopia simply is not acheiveable. That is no reason to shy from striving for improvement, but heaven ain't on earth. There will be inequity, there will be tragedy, there will be pain. Some places of less of those than do others, and the US share of that sorry list is such that among the greatest problems facing the US is illegal immigration; folks hate America and its system so much - want so little to do with The US and its policies and economy - that we as a nation find ourselves seriously talking of building fences to keep them out.

A fine post, Timberlandko. And to add to that, according to THE WORLD FACTBOOK, the USA is No. 2 in the world in GDP Per Capita. The USA has a GDP per capita of $40,100 in 2004 second only to Luxembourg who ranks No. 1 with a per capita GDP of $58,900.


Some of the countries whose citizens snipe at the USA( ENVY?) have a far lower GDP per capita--

Canada--$31,500

Australia--$30,700

U K--------$29.600

Netherlands--$29,500

France-------$28,700

Germany----$28,700

Some of those anemic GDP per capita numbers are doubtlessly due to the countries' unfortunate philosophical and political alliance with the putative advantages of Socialism.

Just what is the "base rate" of unemployment as you describred it is the subject of a good deal of inquiry among economists. There is reason to believe that the 5% base rate you describe in the United States has decreased somewhat in recent years. Conversely in other countries with very generous and long-lasting unemployment benefits (susch as Germany until recently) the base rate appears to be a good deal hiugher. No surpriise here as the incentive to work is reduced.

The layoffs at Ford and GM are a result of their declining sales. Some say the causes are a lack of innovation and product improvement on theoir parts: others note the several thousand dollars per vehicle of extra cost they must pay to meet the requirements of their agreements with the United Auto Workers Union. (It is noiteworthy that the Tyotas, Hondas, Volvos and other msakes taking market share from them are assembled in the US in non-union shops.)

It is likely that both factors are operating to some degree. Bottom line - there is no free lunch. The job security and retirement medical benefits enjoyed by senior UAW auto workers come at the expense of lost job opportunities for younger workers,, and, ultimately for the senior workers as well.

GM is losing market share. One of the most cogent reasons is that robots do not require Health Insurance or Sick Day Pay. Thomas Friedman, in his fine book-"The Lexus and the Olive Tree" illustrates that perfectly when he reports his visit to a Lexus Plant in South Tokyo. Friedman reports that he asked the output of the plant. He was told that the plant made 300 Lexus Autos a day. When he asked about the number of employees he was told there were about 60. Upon inspection, he found that the 60 were mainly supervisors who merely oversaw the work of the untiring ROBOTS.

The world of automation has arrived. The Luddites have lost and the solution, according to Friedman, is for us to specialize in the areas in which we are best.

At the risk of going a bit off topic, but I think one solution to this problem of manufacturing going overseas is to enact the retail sales tax to replace the income tax, which of course would do away with corporate income tax as well. Everybody knows that corporations don't pay tax anyway, they just pass the cost of business to the consumer, and if it was done at the end of the chain, then the same tax would apply to all products regardless of where made. It would lessen the incentive to go offshore to avoid taxes, which I think is perhaps one factor, not the total reasons I am sure for going overseas. I would only be in favor of such a move if the income tax was totally eliminated without the possibility of rejuvenating it, so that we would end up with both taxes. That would be worse.

This, quite simply, is false. If it were true, then companies wouldn't be so eager to avoid paying the tax.

Duh! Sure they try to avoid paying tax, as everyone does, which of course is perfectly proper and legal. They do it in an effort to compete with their competition to stay in business. My point is that business should be making business decisions based on good business reasons rather than tax reasons. Tortuous tax laws only end up hindering the most efficient business activity, and often cause companies to do things not in the best interest of consumers. The market should be dictating good business decisions, not politicians sitting in Washington.