devoish (98.71)

How's Those Tax Cuts Working Out for You?

April 26, 2011 – Comments (8)

Suppose you are Miss Median in America and you are taking home a paycheck of $25,000/ year. In 2011 President Obama extended the Bush tax cuts for two years in order to save 1 year of unemployment benefits.

Many whiney Americans making $25,000 or less think they are broke and unable to cut back on expenses. They feel like every penny they have goes to pay taxes, and gasoline, and food, and living expennses. Even Americans earning much more are finding it difficult to save money, much lest invest for the future. Some Americans, say those earning in excess of $1million/year are doing much better. They have enough money to save some and invest, but there is uncertainty. Miss Median does not suffer from that uncertanty, she is certain she is broke and spending every penny she has. So Americans with money to save and invest are uncertain where additional profits will come from if they invest in oil futures. If Miss Median is spending every penny on food, fuel and legal requirements there is little left to find in profit in. So Congress solved that problem for investors. In order to help Miss Median pay her bills, in addition to the Bush Tax cuts and unemployment, SSI payments were lowered by 2% for 2011.

So what happened? The second thing that happened was Miss Median discovered instead of 2% of her $25,000 paycheck going to her SSI, it appeared in her paycheck the first week in January! Good news! $25,000x .02 = $500. cash to spend or save in a Christmas account of about $10.00/ week.

The third thing that happened was Miss Median replaces a handbag, or pair of shoes. Mr Median buys a box of shells.

Some Americans benefitted a little better. They do not have to pay the previously expected higher taxes on invested income, so they find they have additional income to invest. In the end they know that neccessities will come first for Miss Median. Food clothing shelter, fuel to get to her job and the supermarket. So one of the safest things to do is buy an oil etf. The moment the deal is reached to lower SSI taxes to "spur" the economy, it is safe to buy oil. Without drilling a hole, building a refinery or a storage tank, oil investors can click on a link and buy oil and get between the producer and the buyer. The producer benefits because he is getting a higher price for his oil. So the First thing that happened was early investors, those who lobbied the Government to advise our leaders knew before anyone else that Miss Median was going to have an extra $10.00 each week to spend and they probably bought oil and food futures, and then they advised us to, and traders saw the uptick in volumes and got in behind because thats what you've been told to watch for. And then it hits the news and last but not least the newbies get in because they read Miss Median needs the oil in her car to get to work. 

And then Goldman Sachs says "speculation", Congress says "speculation", Wall Street says it is legal, and CNN says it is "price discovery" and Americans throw up their hands in discust, while this American wonders if the only thing that was discovered was a few more dollars in Miss Median's hands.

And the end result is that lobbiest get a paycheck, those with the earliest information make money, secondary investors benefit on paper, Oil settles at a higher value that includesMiss Medians $10.00 and late investors follow the trend. Miss Median is just as broke, and will be more broke in retirement. Early investors will sell, late investors will lose and the standard of living for Miss Median and most Americans will continue to decline because the increases will cause the vast majority of you to spend more than your investment made you.

So it seems to me that cutting SSI taxes, has done a great job of transferring a portion of the pittance most Americans wold have gotten in retirement, to those who have discretionary money to invest all around the world.

I am not "stuck" in traffic. I am traffic.

Best wishes,

Steven