patrick.net

It's getting clearer by the day that deficit spending is the main driver of sucking out the wealth of the middle class. The good thing is that more people will come around to finally put an end to this criminal practice of indebting future generations which have no right to vote and using the excess liquidity to fuel rampant crony capitalism - look no further than the housing market. Hey, but our resident patnet experts will have everybody cornered, and that's really all that matters!

tr6 says

On the other hand the money that's taken in as taxes could be loaned to "students" to make 8% a year.

it could, yes, but student loans are about 3% of .gov's current outgo

Does "starve the beast" work ?

Did Bush's tax cuts which redirected SS surplus to the rich in the form of tax cuts, have an impact on how much room the government had to increase government spending 10 years later ?

Assholes should have voted Democratic & Republican & their wealth would have been protected. FMTT

Vicente says

Middle Class Wealth Gone!

That's not true.

It is not "gone"....

It merely transferred from the middle class to me.

I'm scum and proud of it. Fuck the middle class.

The chart shows middle class wealth correlated with outsourcing.

Outsourcing and the 4X increase in Lawyers/Engineers is the root cause of the decline of the Middle Class.

This has been my observation since about 1987, and others are also starting to observe the same:

http://fas.org/sgp/crs/misc/R42400.pdf

humanity says

there are times when larger deficits (ie larger than they would have been with higher taxes) make lower taxes possible. And that during these times the level of the deficit is not independent of the the level of the taxes.

Therefore if wealth disparity has anything to do with how progressive taxes are, it also (sometimes) has something to do with the level of the deficits.

If A and B are not independent of each other and C is dependent on B, then A is not independent of C.

I couldn't have said it better myself.

When you realized that we (I) never made a statement about an absolute direct causal relationship between deficits and wealth inequality, and that I repeatedly asserted that I was not trying to suggest that it was the root cause of wealth disparity, you lowered yourbar to this provably false statement.

"Deficits have nothing whatsoever to do with increasing wealth disparity."

Why don't you have the common courtesy to read and comprehend this.

humanity says

Yes, but you're talking deficits versus not deficits (ie simplistic black and white). I'm talking about the magnitude of deficits. But I'm not even saying that larger deficits always cause larger wealth disparity. I'm saying that there are times when larger deficits (ie larger than they would have been with higher taxes) make lower taxes possible. And that during these times the level of the deficit is not independent of the the level of the taxes.

Therefore if wealth disparity has anything to do with how progressive taxes are, it also (sometimes) has something to do with the level of the deficits.

If A and B are not independent of each other and C is dependent on B, then A is not independent of C.

I know that you're smart enough to comprehend what I'm saying.

Apparently you think that deficits are independent of tax levels. For example if we had a mini revolution, and income taxes were made substantially more progressive, and estate taxes were raised, maybe to kick in at 2 million, and capital gains tax rate were raised significantly, you think that these new revenues would almost immediately be spent, resulting soon thereafter in deficits just as high as they would have been had taxes not been raised ?

Thanks a lot CIC. You're too kind. Just trying to refer back to what I said.

Let's look at the chart again:

The 2001 tax cuts were front-loaded for the middle-quintiles, while the 2003 tax cuts accelerated the scheduled 2005-2009 phase-ins to that year.

The full package was a trillion-dollar give-back to the wealthy.

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/02/the-legacy-of-the-bush-tax-cuts-in-four-charts/

2. Fueled income inequality: This chart from the Congressional Research Service suggests that the Bush tax cuts, which significantly reduce top marginal tax rates and capital gains rates, helped widen income inequality in the 2000s. As the report says, “as the top tax rates are reduced, the share of income accruing to the top of the income distribution increases — that is, income disparities increase.” This chart shows how the percentage of income flowing to the top 0.1 percent of earners increases as top tax rates decrease.

I'm not going to get into mell's argument, only repeat mine that cutting taxes on the rich basically resulted in them buying treasuries instead of paying taxes.

Not only will they get the interest -- the 30 year treasury was sold for 5% 2006-2007, but a tax payment hits their net worth while bond buys are neutral to their balance sheet.

Romney had a 14.1% tax rate in 2011. Case closed.

First, as said elsewhere, the choice is voluntary. The buyer can choose bonds over other instrument, commodities, assets or cash. The taxpayer has no choice.

Second, the buyer expects his money back, and interest, and he may trade the instrument before maturity and enjoy profits in capital gains. The taxpayer gets nothing back.

Tax collections and bond sales may be treated by the government as revenue, but only the bond is also booked as a liability.

Pretty big difference.

Bellingham Bill says

Not only will they get the interest -- the 30 year treasury was sold for 5% 2006-2007, but a tax payment hits their net worth while bond buys are neutral to their balance sheet.

MEanwhile this shows the impact on the governments balance sheet, the difference between what was projected before those tax cuts,and what happened. Of course there's the spending on two wars and medicare part D occurring too. Not to mention the spending that Bush and Obama did because of the crash in '08, and also the reduction in revenues due to the recession. So it's hard to isolate exactly how much of the area between the curves is just due to the tax cuts. They do estimate it on the right. Clearly the single biggest factor.

Bellingham Bill says

I'm not going to get into mell's argument, only repeat mine that cutting taxes on the rich basically resulted in them buying treasuries instead of paying taxes.

That's an interesting thought. I don't think so. Equities I would buy into. Real estate for sure. Tbills are being bought by governments, banks, and funds. Maybe indirectly through a balanced mutual fund or IRA you could make that argument.

It is easier for a politician, either Democratic or Republican, to cajole 1 rich guy swimming in disposable income for donations than 100 middle class folks who increasingly have trouble covering their bills. This is why the trend will continue no matter who is elected, unless laws change to remove the incentive to cater to the rich. Politicians will continue to distract from this by grandstanding about abortion and gay marriage, things that affect people's day to day life much less than the massive income gap and disappearing middle class.

wave9x says

It is easier for a politician, either Democratic or Republican, to cajole 1 rich guy swimming in disposable income for donations than 100 middle class folks who increasingly have trouble covering their bills. This is why the trend will continue no matter who is elected, unless laws change to remove the incentive to cater to the rich. Politicians will continue to distract from this by grandstanding about abortion and gay marriage, things that affect people's day to day life much less than the massive income gap and disappearing middle class.

Perhaps related to the subject of this overall tread:

Today on the show, a Republican governor lives the dream. He cuts taxes dramatically in his state, and he promises good times ahead. But the good times do not come. Now he's fighting for his political life.

http://www.npr.org/blogs/money/2014/10/22/358105415/episode-577-sam-brownback-s-kansas-experiment

sbh says

As the wealthy encounter lower taxes they are going to buy more of every investment across the board. I bet that currently they own a whole lot more treasuries than you might think, given that they tend to be boomers.

Your basing this on what?

sbh says

if I could nail down a risk-free 5% treasury yield tomorrow I would hang it up and clip coupons until I was as feeble and decrepit as CaptainFuckup,

There are many risk-free 5% treasuries out there. They just aren't US treasuries.

sbh says

Right. But if you want the currency risk you can reach for a hell of a lot more yield. I don't want that risk anymore.

Do you really think the dollar isn't without substantial risk at this point? Being the least shitty major currency isn't the same as being a good currency. I have a substantial amount of money overseas without worrying at all about currency risk. I'm not an arbitrage trader, it's long term. Do I worry about the dollar with 17 Trillion in debt against it and a totally bankrupt banking system suddenly making huge up moves against countries with no debt and very well capitalized banks. Not a chance. There will be some fluctuations but long term it will equal out.

Call it Crazy says

sbh says

Having just come back from spending three weeks

at rehab...

Looks like it didn't work..

sbh says

I plan to vacation

at rehab

sbh says

in retirement is a grand idea.

Instead of clogging up the post with your trash why don't you have mommy get you a warm glass of mild and cookie then go to bed. Be sure to lock the door so she doesn't catch you abusing yourself to the lingerie section of the sears catalogue. That would be embarressing.

sbh says

I'm content to hedge the USD with ownership in EM miners and energy producers.

I'm not in equities of any kind any more, but commodities right now are pretty scary even indirectly through miners. China is just such a huge part of the market yet is totally opaque. I've been reading some of the mining companies in Australia have stock valuations way less than assets. That wouldn't be a bad play. I can't see how energy won't drop through the floor in the next few years. The US ins't the only market that is going to take up fracking. I can't see how there won't be oversupply coming with so much production coming on line while demand isn't really going anywhere. When oil fell to give away prices in the late 90's oil driller and oilfield suppliers stock went to give away prices along with it.. I bought a ton and sold it 5 years later for an obscene gain.

Call it Crazy says

bob2356 says

then go to bed.

Oh Bob, is your Dementia really bad today? Go look at the clock, it's 10 AM in the Northeast... Do you know where you are? Better go check with your home health aide!

Children need their nap times, so 10AM is just about right. Don't forget to lock the door.

sbh says

Just seat of the pants observation of the nation: the boomers have the money and their appetite for risk is shrinking as they age. Treasuries pay a pittance but they are safe and liquid and look good if deflation persists or increases. The wealthy spread risk capital across the spectrum, and if they have lavish life style costs they need cash. Treasuries act as cash. I think the 1% own a shitload of them. JMO. I own a shitload.

Yep. The government bond bubble may still have a ways to go. Watch out for cracks in the corporate bond market though.

Not investment advice.