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David Walker to the Rescue

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February 17, 2008 – Comments (11)

I missed that David Walker had resigned, but what a great role he is taking.

Walker will be joining the Peterson Foundation, started with $1 billion.  According to Walker, "My new position will provide me with the ability and resources to more aggressively address a range of current and emerging challenges facing our country."

Finally some money is being put behind a strong player.

http://www.cqpolitics.com/wmspage.cfm?parm1=2&docID=news-000002672472 

11 Comments – Post Your Own

#1) On February 17, 2008 at 4:08 AM, cluelessmorgan (91.10) wrote:

“We’re headed for unprecedented rough seas that could swamp the ship of state if we don’t get serious soon,” he told the Senate Budget Committee on Jan. 29.

and it fell upon deaf ears no doubt...

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#2) On February 17, 2008 at 9:23 AM, dwot (47.53) wrote:

David Walker has been warning that the government spending is a problem since the day he had the job and the most deaf ears were Bush.

The world seems to have become everyone for themselves with no regard for the greater good all.

When was the last time there was an inspirational leader like Kennedy?

"Ask not what your country can do for you - ask what you can do for your country"

When I visited the Hoover Dam in June and saw the story of how it was built and the competitions between workers to be the most productive and that the Hoover Dam was under budget and completed something like 2 years early...  

People had a sense of working together to build a strong nation yet but now chipped away for self-interest for so long, the entire supports are collapsing.

When did government become omnipotent?  Certainly that is the way people treat it, like Jesus, government can take a single loaf of bread and break off it until the entire country is fed.

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#3) On February 17, 2008 at 11:07 AM, MakeItSeven (32.13) wrote:

I'm with you, dwot.  The last time I heard the phrase "Ask not what your country can do for you - ask what you can do for your country", it was not used to inspire a sense of common purposes but to mock it and to remind people to take care of themselves, not to listen to whatever the governments tell them !!

The irony of such attitude is that the government does not even ask the bottom 80%, maybe even 90%, of Americans to make any sacrifices, still they vote on the notion that the government just has to provide everything they need without taxing them by withdrawing from the United States ATM, just like what they have been doing with their housing ATMs.  They simply react on a kneejerk aversion to the word "tax" which they have been taught to hate on a daily basis for over 20 years, not just to hate taxes but to take a I-am-smarter-than-you stance for hating taxes.

Their warped notion comes from the belief that less taxes will cause stronger economic growth which will make up for the shortfall.  That brainwashed idea has never been supported by reality.  From Jeremy Grantham in a recent Barron's article:

"I have an exhibit that shows the 30 years prior to 1982 when the debt-to-gross domestic product ratio was completely flat at 1.2 times. Total debt is defined as government debt, personal debt, corporate debt and financial debt. Then in the 25 years after 1982, the flat line goes up at a 45 degrees angle from 1.2 times to 3.1 times GDP. Massive. In the first 30 years, when debt is flat, annual GDP growth is its usual battleship, growing at 3.5% and hardly twitching. After the massive increase in debt, GDP, far from accelerating, grew at 3%. So debt in the aggregate does not drive the economy. The economy is driven by education, man-hours worked, capital investment and technology. It is not driven by what I owe you and you owe me."

His post-1982 number on the slower GDP growth would have been much worse if the Clinton years [when (horible, horible) taxes were raised] were taken out.   Without the Clinton years, then the Reaganomics economy would have brought around 2.5% GDP growth compared to 3.5% previously.   That 2.5% GDP growth would have dropped even further when taking the fact that the CPI has been manipulated in recent years into account.

Since many people here think Warren Buffett is wise, here is a Fortune article with a quote from him, predicting that the US will become a colony:

"But here's why the trend is troublesome, and more so now than ever. According to the Bureau of Economic Analysis, the rest of the world currently owns way more of America (stocks, bonds, real estate, etc.) than America owns of the rest of the world, by a margin of $2.6 trillion (as of year-end 2006; a 2007 figure is due in July and will be larger). Net foreign ownership is increasing very rapidly; it has multiplied by a factor of five in just the past decade. As it grows, we must send more dividends and interest to foreign owners, giving them more money with which to buy more U.S. assets, earning more dividends, and so on.

This compounding effect is small when net foreign ownership is low, but at today's levels the effect is becoming significant and ever harder to reverse. Where it leads is grim: As a nation we eventually cease to be capitalists and become simply wage earners. As Warren Buffett put it in a prophetic Fortune article more than four years ago, a country that goes too far down this road can be "colonized by purchase rather than conquest.""

But, don't worry yet, the United States ATM is still there for withdrawal.   At worst, we can just sell Alaska back to the Russians to have more money to spend.

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#4) On February 17, 2008 at 12:31 PM, dwot (47.53) wrote:

That Buffett quote hits on what I said about the markets being utterly insane when they rallied over the big foreign positions in American financial institutions.  All of a sudden dividends and earnings that were going to Americans are now redirect to foreigners and that has a compounding effect on many things:

  1. There are less taxes collected.
  2. Economic models projecting budgets into the future have not been corrected for a declining tax base due to loss of that income to foreigners.
  3. Less money is available for spending due to the loss of dividend income.
  4. Reduced spending hurts business margins
  5. Less corporate taxes due to less corporate earnings
 

America is so leveraged to the hilt, relatively "small" things have the potential compound far beyond what you'd expect.

As for taxes, as a very young adult, only 19, I had a perception that taxes were the worst evil of all evils, and that is probably driven by the media which does nothing but blast taxes.

I was fortunate to meet a woman who said to me "I don't care if I have to pay $50k of taxes per year because if I do, I am very well off and very fortunate.  We should celebrate that we are fortunate to have an income that puts us in the highest tax bracket and feel blessed that we are among the truly fortunate," or something to that effect.

I have always supported taxes with good reason and I don't view them as an evil, within reason.  I did have issue that our highest tax bracked started at a mere $80k, which may have been reasonable for the rest of Canada, but with Vancouver's high housing costs it was completely unreasonable.  My husband was in the highest tax bracket yet we were making decisions to share a vehicle, delayed having children until it was too late to have children, and numerous other decisions just trying to get to a place where starting a family would be affordable in a lifestyle where I didn't feel like we'd be drowning in debt.  My feeling is that if an income can't afford a 2000 sq ft home, vehicle replacement every 10 years, and raising a family with a modest lifestyle, that income should not be the highest tax bracket.  I also draw the line at 50%.  That's my complain point.  Income over $80k was being taxed at 54.9%.  It should have been more like 45% and 50% should not have kicked in until about $100-120k.  Our highest tax braket is now less than 50% and it should go back to that, but the income bracket for it should be around $120-150k now.  And they should go back to exempting the first $1k of interest income, actually, with cost of living increases, it should probably $2.5k.  It makes a nation strong to encourage savings.

You can't deduct mortage interest in Canada, which I think is a good thing.  It is way better to give a tax exemption for money being saved for a down payment, or maybe a 5 year new home owner's tax credit that rewards debt reduction or helps with debt reduction.  Ultimately less debt leads to less debt servicing costs and more disposible income so tax breaks should be designed to encourage behaviour that makes a country stronger.

What has the US done with enabling interest to be deducted?  It has encouraged people to have an amount of debt as to maximize their interest deduction, which means don't concern yourself with paying the money back, and that simply weakens a nation.

 

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#5) On February 17, 2008 at 12:43 PM, Imperial1964 (98.28) wrote:

One of my friends who is deeply religious commented that the government is taking the place of God.

People tithe about 35% of their income to the government.

Whenever they have hardship, they cry out to the government to save them.  Crop failures, job loss, personal distress, etc.

They look to the government to tell them what is legal instead of looking to religious morals or careful introspection.

People look to the government to provide charity in time of need.

He has a point.  These things have traditionally been primarily the role of organized relition instead of government.

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#6) On February 17, 2008 at 1:04 PM, Imperial1964 (98.28) wrote:

Regarding taxes, I'd like the government to cut spending as well as taxes.  I hate it when I see my tax dollars wasted on "porkbarrel" spending.  I hate my tax dollars waging an unjustified and unending war.  I'm not big on my money going to subsidize people I know who quit their job because they don't like working and would rather collect welfare and child support. 

I know way too many people who suckle from the government teat because they don't want to get a "real" job, even though they are fully capable.

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#7) On February 17, 2008 at 1:19 PM, MakeItSeven (32.13) wrote:

I agree with you that taxes in Canada seems too high for people making 80K.  The high tax brackets should be for people making 200+K only, i.e. enough for them to have a relatively comfortably lifestyles despite the higher taxes.  I also like your idea of encouraging saving (enough for a rainy day) by providing tax exempts for interest income below certain threshold.

In the US, the highest tax bracket is at 35% for people making over $349700 as of 2007 tax year.  There should be another bracket for people making way more than they need to have a good lifestyle, say over 600K.

What has the US done with enabling interest to be deducted?  It has encouraged people to have an amount of debt as to maximize their interest deduction

This is, unfortunately, very true.  There are many people who make their financial plannings not based on how much better their money will grow but on how much less taxes they will pay.

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#8) On February 17, 2008 at 2:16 PM, MakeItSeven (32.13) wrote:

Imperial,

Porkbarrel spendings and the Iraq war are bad but you should realize that they were increased/created by the same group of people who lowered taxes.  So, the wasteful spending problems had nothing to do with the taxes and wasteful spendings can happen when taxes get lowered also. 

The emphasis should be on controlling the spendings, not refusing to pay taxes when the tax levels are fair in order to maintain a balanced budget.  In theory, that means people should vote out the Congress representatives who introduce the porkbarrel spendings but that will never happen since those porkbarrel spendings will benefit the constituents of those Congressmen.  See how that gets into a deadend ?

The only way out of that deadend is to reintroducing the concept of "Ask not what your country can do for you - ask what you can do for your country"  so people will start thinking about the common good, instead of doing everything for their own good and giving a finger sign to the rest of the country.

As for all the lazy people who soaked up the taxes, if you are talking about a national policy then you will need to use actual statistics, not some annecdotal examples. 

From the Congressional Budget Office for 2007 budget,  I add spendings for Food Stamps, Family Support, and Child Nutrition and they come out to be 73B.  The latest government budget from Bush is 3.1T without any of the supplemental bills yet.  Adding the estimated supplemental bill then the budget will be at least 3.5B.  That means all the welfare spendings amount to around 2% of the total budget.  Assuming that 10% of those spendings go to the lazy people who don't really deserve any help, then that creates a .2% waste in the government budget. 

Is that sufficient reason to claim that we should not pay taxes because of such waste or is it just a hatred-mongering excuse created by the people who invented the word "welfare queen" as if they led a luxurious lifestyles on foodstamps ?  The few people (really the top .5% of the population, not even the top 1%) will hide behind such hatred to benefit themselves with the lower taxes while the rest of the country sinks into debt and its citizens turn into debt slaves.

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#9) On February 17, 2008 at 5:15 PM, dwot (47.53) wrote:

Something I dislike about social programs immensely is you can look at the economy and make a calculation about what a real need is and who the target people are, and human nature is such that others see a free ride and move towards it and we tget he whole attitude of entitlement and we are owed this.

I tend to be against hand outs as they simply seem to multiply and do nothing to make you better or stronger.  Comparing the US to Canada in certain areas convinced me of that.  I suppose 15 years ago the atlantic economies of the US and Canada were compared on this show.  The regions were as similar as to suggest they ought to have the same economic opportunity.  Canada had about 15% unemployment in the region and huge entitlement attitudes with people interviewed talking about their right to collect unemployment for a year after 4 months of working, and indeed, some had geared their whole life to get the minimum work to collect the maximum benefit.  The US had about 5% unemployment and the people talked about how they changed their type of work with the seasons, basically doing something to enable them to pay their bills.

Our unemployment isn't as generous as it once was and Canada IS better for it because what I saw on that show disgusted me, but that is human nature.

Our welfare rates go up, so does the percent on welfare, plain and simple.  I'd much rather see the money go to tax credits for working poor, education and skills training.

And it is high time to let go of the line-the-rich-pocket media bite about raising minimum wage hurting the economy.  Jobs that don't pay a living wage are an equally mal-adjustment of the economy.  When I look at what happened to commericial real estate, well, not paying wages simply meant there was more money to pay leases and it seems to me that leases went up disporportionately to wages.  So, where are the sob stories that high commerical leases are hurting business?  That would hit up another group of the wealthy and it is just easier to pick on the working poor. 

Workers getting a decent wage would have helped to keep lease prices in line and the change in the ratio of leases cost to wages is a huge maladjustment in the economy.  These workers have no ability to stimulate the economy and it should not be the cash cow it is because you get property zoning changed to commercial.  It is grossly inbalanced.

I should add that we have health care included in our taxes.  And that tax rate was federal and provincial combined, but not municipal or consumption taxes. 

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#10) On February 18, 2008 at 2:07 PM, MakeItSeven (32.13) wrote:

Canada had about 15% unemployment in the region...  The US had about 5% unemployment

These numbers can be misleading.  What is the Labor Participation Rate in Canada ?   In the US, the 5% unemployment rate is only achieved by classifying 1/3rd of the adult population as "not actively looking for work" and, therefore, not consider as "unemployed".

Canada is nothing compared to Australia where I used to live.  In Australia, if you don't have a job then you can collect unemployment benefit for life.  Right now, my friends there say that the unemployment rate is around 4% since the economy is doing so well.  Anybody who want a job can get one,  Since the unemployment benefit in Australia is for life, the Labor Participation Rate there should be close to 100%.  After all, who does not want to get the free money by just saying "I'm looking for a job" ?

Our welfare rates go up, so does the percent on welfare, plain and simple.  I'd much rather see the money go to tax credits for working poor, education and skills training.

A lot of the welfare money in the US goes to the working poor, like the Family Support program, or the Child Nutrition program.

Another factor to consider is when you allow people to fall off the social safety net, then crimes will increase ?  I bet the number of prisoners (and the cost of prosecuting and jailing them) is much lower than in the US.

Another factor to think about is: "Are there really a shortage of workers in Canada ?" .  If there are no shortage of workers then a lazy person who quits his job and goes on welfare will be replaced by a hard-working person who will take that job (and gets off the welfare which helps him while he was earnestly looking for a job).  In that case, the extra cost to the government is zero.

Anyway, taking the Labor Participation Rate in the US in consideration, then the unemployment rate has increased from 4.2% in 1/2001 to 6.7% now.  There's no reason to believe that millions of people suddenly become lazier and stop looking for jobs.  The only rational explanation is that it is much harder to find a job now and many people do not have the patience to pursue it.

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#11) On February 18, 2008 at 10:03 PM, dwot (47.53) wrote:

The high unemployment was just the east coast of Canada.  I just checked, http://www40.statcan.ca/l01/cst01/labor07a.htm, and it is still significantly higher than the rest of Canada, although I do think it has gone down.

Another thing on welfare rates, BC had many people moving there when welfare rates were higher.

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