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How's Those Tax Cuts Working Out for You?

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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

8 Comments – Post Your Own

#1) On April 26, 2011 at 10:11 AM, ultrapaz (30.61) wrote:

Is there any solution to not speculating on the price of oil and gas?

 The Banks control the futures market 

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#2) On April 26, 2011 at 10:39 AM, mtf00l (49.87) wrote:

devoish,

Well expressed.

ultrapaz,

You statement should be shortened to "The Banks control the markets".

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#3) On April 26, 2011 at 10:56 AM, ChrisGraley (29.74) wrote:

I'm sure the printing presses had nothing to do with it. ;)

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#4) On April 26, 2011 at 12:44 PM, ajm101 (32.88) wrote:

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

Great line.

Anyway, there's no hope, the Republicans already one.  Just make sure you're one of the rich ones.  Just look at http://www.spn.org/ and ask if Democrats even have an apparatus close to it, or if they even care to.

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#5) On April 26, 2011 at 12:47 PM, ajm101 (32.88) wrote:

http://www.spn.org/publications/found-scholars-for-your-policy-projects

"You may know IHS for its Koch Summer Fellow intern program, or its flagship summer seminars for students interested in learning more about the ideas of liberty. But IHS can also help SPN members find scholars to write research papers, deliver testimony, review studies or speak on panels.

Now in its 50th year, IHS has spent decades working with freedom-friendly university professors across the country. In that time, we've identified thousands of the best and the brightest scholars in a range of disciplines, including economics, political science, law and policy.

While our scholars are producing great research in academia, we realized many of them could be doing more to help advance liberty in the public policy arena. [...]"

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#6) On April 26, 2011 at 8:54 PM, devoish (96.28) wrote:

Ultrapaz,

 Make anyone who buys oil futures take delivery or pay for storage? Place a 1/4% tax on every trade, and slow down the high frequency platforms? At least get small traders back in the game.

mtf00l,

Thank you.

ChrisGraley,

Actually, I think I agree with you. Beyond the " Fed printing money" which still does not match the "printing" the mortgage industry did to create the bubble, bailing out the financial industry and continuing to bail them out by buying the bad loans off their books restored money to the rent seekers to step in with and buy oil with. Yes it is a big part of the problem.

ajm101,

Thank you, but it is not my line. Feel free to re-use it, I did.

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#7) On April 27, 2011 at 3:07 AM, FleaBagger (28.14) wrote:

It is absurd to think that individuals can bid up the price of all commodities without having more money to begin with. Speculation is not the cause of rising prices, but the result of rising monetary base.

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#8) On May 04, 2011 at 6:09 PM, devoish (96.28) wrote:

I don't think that individuals can bid up the price of commidities without having more money to begin with. I think they have a bucketload of tax cut extension money to spend.

I thought I had said that.

Best wishes,

Steven

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