the discovery of fundemental values…

I’m Back

Oh friends…it seems I am ensnared in the economic whirlwind affecting our country and basically, the world……..I am laid off…..

Of course this was somewhat of a surprise but not totally unexpected, or even unwelcome, except for the dismal job market and the economy driving that (lack of) a job market.Of course this has given me an entirely new perspective on what is going on in the country today.

Of course, at first, it was simply an academic exercise to understand the financial markets, the melt down, the seeming recovery, the behind the scenes actions impacting that recovery….but of course, all mulled and debated from the security of full time employment. While indeed an interesting exercise, and of course, I do indeed care about these issues and those affected by them, it is an entirely different discussion from the ranks of the unemployed.

So: sort of the good news and the bad news as I knew I did want to spend much longer in Corporate America but not sure I am in a position to start or purchase a small business. The risks and rewards of each are worth comparing and analyzing, and yet there is a huge new component of unknowns based on the new paradigm we are calling the current economy.

There is an obvious lack of confidence, as more jobs are lost each month, as retail and consumer spending continues to disappoint and the dollar continues its slow death spiral. If there is no confidence, businesses are unwilling to invest, customers are unwilling to let go of hard earned dollars and the prospects for new beginnings seem dim.

In fact, perhaps the real challenge is to remain upbeat and confident in the face of continued economic downturns. Some monies are being spent, some business is being transacted, some companies are hiring new employees, is there hope for an upturn……?

Sadly, while those that know me know I am indeed a cock-eyed optimist, I am also securely tied to reality. I want to be positive and believe both that things will begin to turn around and/or I can be successful in spite of all this (after all, even if unemployment is 10%: 90% of folks are working…..).

I am just not encouraged by what is happening is Washington…as we spend away the recovery, as we do not cut tax rates, as our current administration continues to implement ideas focused on fairness and equality  vs growth and the promotion of the free market, they are totally ignoring the proven tacts that actually spur growth. Why can’t we cut payroll taxes, income taxes,  capital gains taxes.

It simply seems lost that increasing taxes decreases revenues: this is a confirmed correlation: in fact, causation. We know when you tax things; those things reduce.  When you raise the tax on gas, folks buy less gas. When you increase taxes on payrolls, you are in effect planning to reduce payrolls….

Hmmm, does that mean the inverse is true too? Those things that are less taxed grow? Let’s see, if the government suddenly announced that employers would only have to pay half of the current payroll taxes (ok; not likely and I am making up stuff to make a point….) but, let’s say they did cut payroll taxes….do you think companies might take those $s that they are now not sending to the IRS and invest in their own growth……

Just seems hopelessly, willfully deceptive to ignore history….ignore that when President Kennedy  cut taxes in 1964 (ok, actually, JFK proposed the cuts in ’62, he was assassinated in ’63 and President Johnson signed the bill in ’64, but we will credit Kennedy as having the guts to propose it); Anyway, when taxes were cut in ’64,

Here is a quote from JFK:

“Lower rates of taxation will stimulate economic activity and so raise the levels of personal and corporate income as to yield within a few years an increased – not a reduced – flow of revenues to the federal government.”

– John F. Kennedy, Jan. 17, 1963, annual budget message to the Congress, fiscal year 1964

and this:

“It is no contradiction – the most important single thing we can do to stimulate investment in today’s economy is to raise consumption by major reduction of individual income tax rates.”

– John F. Kennedy, Jan. 21, 1963, annual message to the Congress: “The Economic Report Of The President”

“Our tax system still siphons out of the private economy too large a share of personal and business purchasing power and reduces the incentive for risk, investment and effort – thereby aborting our recoveries and stifling our national growth rate.”

– John F. Kennedy, Jan. 24, 1963, message to Congress on tax reduction and reform, House Doc. 43, 88th Congress, 1st Session.

“A tax cut means higher family income and higher business profits and a balanced federal budget. Every taxpayer and his family will have more money left over after taxes for a new car, a new home, new conveniences, education and investment. Every businessman can keep a higher percentage of his profits in his cash register or put it to work expanding or improving his business, and as the national income grows, the federal government will ultimately end up with more revenues.”

– John F. Kennedy, Sept. 18, 1963, radio and television address to the nation on tax-reduction bill

and of course, tax revenues did go up and brought about economic boom.

Then again: Reagan cut taxes in 1981: Reagan proposed a 25% tax cut across the board, much to the consternation of many in congress: who howled about tax cuts for the rich (sound familiar?). But of course, the cuts were made and the tax revenues increased from $244B in 1980 to $446B in 1989.

And what about the tax cuts for the rich? Well, in 1981, the top 10% of tax payers paid 48% of all taxes paid. In 1988, (after the tax cut) the percentage of taxes paid by the top 10% rose to 57.2%! What! Yes, that’s right, the lowering of the tax rates on the highest wage earners increased the % of tax they paid! and yet, the wage earners paid less tax (%) and so, revenues, and then of course tax revenues increased: a win-win for all.

And we are  not considering this avenue why? In fact: the administration will raise taxes on those earning > $250k (or whatever the # is today) to pay for all the new spending.

uh oh…..increase taxes and…you know the answer by now…..revenues go down…..what are we trying to accomplish again……


October 14, 2009 Posted by | Uncategorized | Leave a comment