Oh, How We Owe!

Conventional wisdom these days says that our debt is too large. 

And indeed it is. But the real question is, "compared to what?"

The following chart shows that as a portion of GDP, our debt is actually lower than it was after World War II.

Note that in the above chart, the drop that comes after WWII was due to a giant government spending program called the "New Deal".

Yes, we actually spent public sector funds in the face of a huge Debt-to-GDP ratio, and the result was to spur such economic growth that we grew a strong middle class, and our economy grew at such a rate that we lowered our Debt-to-GDP ratio and became the world's strongest economy.


In order to lower the deficit, we can either choose to cut spending or increase revenues.  Only one of these will work, however, because we are in a depression. Cutting spending will give the middle class and poorer people even less money to spend, further reducing Demand's ability to keep up with Supply.

So, we need to invest public funds to spur economic growth, so that the majority of people in the USA will have enough money to buy things, which in turn will be an incentive for investment on the supply side.

Our debt ratio is far less than many other countries, and less than the hole we dug in WWII. We have seen what happens when countries cut spending too rapidly, the austerity programs in Italy, Greece and Ireland have drastically hurt those countries, while our government spending programs pulled us out of the debt following WWII so that we grew a strong middle class and became the strongest economy in the world.

We should learn a lesson from history and invest public sector money in order to spur demand.

Economic growth and controlled spending will lower our debt.

Obama Cares! Tax Cut 4 MIddle Class!

This infographic from Talking Points Memo gives important information about the Affordable Care Act.

Get the facts, here...

Tax, or Penalty? Doesn't Much Matter

IN an ongoing effort to inject some rational, evidence-based thinking into the Healthcare debate, here are a couple of facts about how the tax/penalty could affect you

First, it must be mentioned that the penalty only applies to people who can afford to have insurance, but choose not to, so they can continue to 'free-ride' on the backs of American taxpayers.


Taxpayers who are required to purchase health insurance and do not will receive a notice from the Internal Revenue Service (IRS) with the amount of the penalty they owe. Individuals who fail to pay the penalty are not subject to criminal prosecutions and the government cannot file notice of lein or levy any property for a taxpayer who doesn’t pay the penalty. 

The obligation for individuals to purchase health insurance beginning in 2014 was included as part of the Affordable Care Act.  The provision requires individuals to maintain minimum essential coverage for themselves and their dependents or pay a penalty of $95 in 2014. ($95!) Families would pay half the amount for children, and the requirement includes a cap on the total allowable fine per family. If affordable health insurance coverage is not available to an individual, then the penalty would be waived.  Along with the individual responsibility requirement, the Affordable Care Act also provides subsidies to some individuals beginning in 2014 to help pay for their health insurance premiums and other costs associated with their health insurance.

Taxpayers who are required to pay a fine but fail to do so will receive a notice from Internal Revenue Service (IRS). If an individual still neglects to pay the fine, the IRS can attempt to collect the funds by reducing the amount of their tax refund in the future.  Individuals who fail to pay the penalty, however, will not be subject to criminal prosecution. The government cannot file notice of lien or levy on any property for a taxpayer who does not pay the penalty.

I urge everyone to learn the facts before they adopt a position on the ACA. It is already working in massachusetts, and people ther are overwhelmingly in favor of it.

Don't believe the malarkey of the Tea Partisan Obama-haters.

BEST Reason to Re-Eleft Obama

Here is the critical reason to re-elect President Obama.

As my previous posts have shown, the country is A LOT BETTER OFF since Obama was elected, despite ludicrous claims by ignorant Republican Tea-Party partisans.

Just as Bush was able to move the Supreme Court to the Right with his appointments, there will be opportunity for the next President to appoint up to 3 new Justices.

With Justice Roberts proving to be a more reasonable person than most people thought, the Court could get back to a more centrist position where they make judgements according to the Constitution, rather than the hyper-partisan rulings by 4 or 5 of the current justices.

Phast, Phurious and Phony!

Well well, it turns out that the Republican witch-hunt that snared A.G. Eric Holder was even more manufactured than it has long appeared to reasonable people.

Thanks to well-documented reporting by Fortune Magazines' Katherine Eban, we have learned that the so-called 'gun-walking' program Fast & Furious was a fiction from get-to-go.  ATF agents didn't intentionally allow2000 guns to 'walk' to Mexico in order to track them, instead it turns out that federal prosecutors felt that the gun purchases were legal according to current gun laws, and the agents had no legal standing to interdict the guns.

Issa's kangaroo-court has been making the claim that ATF agents lost track of 2000 guns that they let go to Mexico, resulting in the death of one agent.  But his investigation didn't pursue the F n F program, nor the people responsible for the first gun-walking operation from the Bush administration. Issa didn't interview anyone related to the actual operation, instead he focused solely on Eric Holder, demanding and receiving more than 7000 documents until he came to some that, by law, Holder wasn't allowed to release.

That was what Issa was waiting for as he badgered Holder relentlessly. No matter how much the A.G. cooperated it wasn't enough for the Tea Partisan,  who are now making the insulting and ludicrous claim that President Obama intentionally let the program go forward in hopes that the resulting violence would give him public backing to enact new gun laws and get rid of the 2nd amendment.

This is completely idiotic. Obama has made no attempt to further restrict guns, and if he had such a desire he didn't need any more evidence to justify doing so. Thanks to the NRA, the United States is awash with semi-automatic weapons, and the result is exactly what Issa accuses the President of...thousands of weapons causing millions of deaths in Mexico and the USA.

As the Issa farce went forward, several ATf  'whistle-blowers' came forth to tell their side of the story. They knew of purchasers who were buying hundreds of weapons each week, and wanted to pursue these buyers to make arrests. However, as mentioned, prosecutors recognized that this type of sale is legal, and the ATF agents had no choice unless they wanted to break the law by arresting the buyers in question.

The truth is that the GOP has been following the plan they created on Obama's very first day in office, continue to attack him with coordinated accusation regardless of the truth value of such claims. The result of that plan has been to convince some otherwise intelligent people that the Obama administration is rife with scandal. Those people watching other news sources besides Fox and the Wall Street journal, however, are aware that none of the trumped up charges against Obama add up to anything other than a man trying his best to work across the aisle and pass legislation to improve the economy.

Readers of this blog know that every single economic indicator is better now than it was before Obama took office, and that the economy is improving despite the fierce opposition to such by a recalcitrant congress more interested in voting on abortion bills than jobs or other legislation. Case in point, the US Flood Insurance bill was just stalled in congress due to "personhood" amendments being added to it by the GOP. What, you might ask, does a  flood insurance bill have to do with  abortion?" Nothing. 
Despite Issa's rationale for pursuing Holder being laid bare and revealed as a large load of partisan crap, the Tea party congress held Holder in contempt.

The irony here is that the only real case of contempt is the contempt that this congress has for the American people, as witnessed by their willingness to throw the country under the bus in order to get rid of Obama.

Disgusting.

One Simple Chart

What's Wrong With The Economy, In One Simple Chart

Here it is, the most important chart of the year

This chart shows the history of income inequality in America.

Highlights include the peak in 1928 and subsequent fall, otherwise known as The Great Depression.

The share of income going to the top 1% fell to around 10% in 1953.

In the period from WWII to 1970,  the middle class grew & the American economy was the best in the world, as was American achievement.

Economic success came to every income bracket, as the government safety net, including social Security, pulled millions out of poverty.

Unfortunately, beginning in 1976, the share of income going to the top 1% rose again, and once again led directly to a crash of the economy, aka The Great Recession.

While the top 1% chowed-down a bit less in 2008, they still ate 21 of 100 pieces of the American Pie, and got fatter than at any time in U.S. History.

So here we are. The chart disproves many ill-thought-out ideas, including the concept that giving more money to the top income brackets is somehow good for the American economy.

Look at it again.

Twice now the share of income going to the top 1% of the people has risen to almost 25%!

 That's ONE-QUARTER of ALL the money, folks!

It's like taking 100 people, combining all the money they have into one big pile, then giving 1/4th of it to a single person!

After we did exactly that with the US economy,  the US economy has been wiped out.

TWICE.



SUPPLY AND DEMAND ("Demand and Supply" would be more precise).

We can understand why we produce the negative effects of having a large inequality in income by looking at the free-market process of Supply and Demand.  For that system to work, the Demand-side needs to push the Supply-side to manufacture services and products at their most efficient level, to fill the needs of the Demand-side.

As Demand pushes, Supply reacts, and the economy grows.

However, when Demand falls, Supply ends up with a surplus of goods and services. Too much inventory. More stuff than is needed to meet the Demand.  Then the economy slows down and stalls, because Supply doesn't need to make more stuff, and they need fewer people to make or sell the stuff they already have on hand.

When the top 1% takes too great a share of the national income, the rest of the people don't have enough money to buy all the stuff that the businesses owned by the high earners can produce.

So the people with money to invest hold onto their money, because even a tiny % in interest is better than a losing investment in a business because the customers don't have the money to buy the products.

That is what is happening now. There is a lot of money available, but it's not being invested in American commerce, because of the lack of Demand.

With this understanding comes another. It simply makes no sense to give the investor class even more money, if the money they already have is sitting on the sideline, not helping the economy.

Money needs to go to the Demand side, to the middle class and poorer who will use all of the money.

Whether in terms of actual cash, or benefits that free-up cash, when the great majority of Americans can afford to go ahead and buy the products and services the investors make, from hi-tech  to solar panels, kids birthday parties to after-school sports and art programs, the economy grows and Supply reacts and grows to meet the Demand.

The chart also illustrates another important idea.  In order to get the investor class to put the money they already have into action, something needs to 'jump-start' the economy.

It's no coincidence that the small rapid drops in the 80s, 90s and 2000s to the share of income to the 1% are there, that is when government investment went into the general economy to stop previous recessions, providing the middle class with a temporary but slightly larger share of the overall money. 

Economists from both political parties have understood this for years, which is why we have recovered  from every previous recession by investing government money into the economy, putting people to work either directly for the government, or through investment in private industry backed up by government funds.

Once the middle class is employed and investors are making money by investing, the economy rolls right along, and everyone benefits. We then have the money to fund the social safety net, to provide for defense and education, and other things a good government provides for the populace. The middle class thrives, and the top income brackets continue to make a healthy profit.

Looking at these simple facts, it is readily apparent that reducing taxes on the wealthiest Americans will not fix any of the problems we face. The problem is not too little money available to invest, it's too little incentive to entice investment, which comes from people having too little money to provide that incentive.

So we have not only a well-understood Theory of Supply and Demand arguing strongly in favor of government investment in jobs and industry, we have a clear history of the negative effects on the economy when we have such massive income inequality.

All of this makes it pretty obvious that to make American strong again we need to return money to the middle class by a combination of slightly higher taxes on the top income bracket, strong investment in American small business, education and new industries, and increased social benefits to the poor and middle class.

Here's to Stupidity

This one is for all you stupid people out there. You know who you are.

Wait a minute! Maybe you DON'T know who you are!

Let's review.

After the Great Depression, we regulated the banking industry, and had a stable banking system for 70 years.

Then we de-regulated the banking industry, and within a decade the banks failed and wrecked the US economy on a scale not seen since, well, the Great Depression.

Despite high taxes on upper income brackets, we had over 70 years of prosperity, and built the strongest middle class of any nation at any time, and the strongest overall economy in the history of the world.

Then we cut taxes on the higher income brackets, and the result was not only the largest income gap since the Great Depression, but also the transformation of our budget from a surplus of 4 years running into massive and continuous deficits.

We cut taxes, it didn't work.

We de-regulated, it didn't work.

 And the lesson the GOP learned from these mistakes?

Do it again!

Ha ha, you laugh, the voters are too smart for that, they certainly won't elect someone who wants to do more of the very two things that ruined the economy and wiped out millions of people's life savings. No way!

Yes, way.

In fact, almost 40% of Americans think we should get rid of the guy who stopped a second Great Depression and produced 27 straight months of GDP and jobs growth, and instead we should elect the guy who wants to cut more regulations and further reduce taxes for the top income brackets.

America, the home of the free and the land of the brave, has in monetary terms become the home of the greedy and land of the craven.

Ironically, the 40% who think they are the most patriotic are the same ones who support the craven, greedy few who have brought our great country to the brink of ruin.

40% - this one's for you!