Michael Hudson: America's Free Lunch is Over

[Guest]

Re: Michael Hudson: America's Free Lunch is Over

I guess you don't pay FICA like the rest of us do! For a person who earns $ 60,000 FiCA comes to $9180 -- add to that your $4000 in Federal income taxes plus another $1000 on state income tax -- that leaves ! $44,000 -- for a state like California take out $24000 for rent That leaves $20,000 -- Take out another 10% for sales tax on half of that amount -- you get $19000 -- to feed, clothe and transport a family of four

But according to you that is what 60% of US families are -- namely stupid, lazy and poor -- since $60,000 is the 60th percentile of household income. (in other words 60% of US households earn less than $60,000 gross per year!)

1. Just what do you think payroll taxes are?
2. And just why do you think I mentioned the $4,000 they do pay?
3. You're adding in the half paid by the employer.
4. You're also tossing in various state and local taxes. You're just being nutty bringing them into this.
5. You're pulling things out of your rear end, claiming I think 60% of Americans are lazy, stupid, etc. More nuttiness.
6. I pay 15.3% myself so I'm well aware of all that. But, you can't say someone makes $51,000 a year, tax them based on that, then say "but they pay $4500 more in taxes their employer paid on their behalf. Wouldn't that make their income $4500 higher? You're wanting to have it both ways.
7. Who said I was happy with the level of taxation or spending? Did you even read my post or look at the attached chart?
8. What part of the bottom two quintiles paying NEGATIVE tax rates do you object to? Do I need to go find the chart on that too?
9. You think I'm some out of touch rich guy? I mow lawns for a living, genius.

Maybe whatever socialist paradise you came from is a better fit for your style.

I think this qualifies as a "YOU FAIL' moment.

[Brooks Gracie]

Re: Michael Hudson: America's Free Lunch is Over

I think the way out is to re-structure capital gains taxes, and I cannot figure out why no one ever suggests this. Capital gains on money invested directly into company coffers should receive a capital gains preference when the investment is sold (although 15% is still too low), while money spent buying stocks, real estate, or other non-productive speculation from another holder, and not placed directly into an operating enterprise should be taxed at ordinary income rates. That simple. Eliminates the tax preferences enjoyed that helped fuel the FIRE economy, and encourages entrepreneurship and the building of viable businesses.

This plan worked for §1045 rollovers in §1202 companies during the internet buildout era.

[Guest]

Re: Michael Hudson: America's Free Lunch is Over

Brucec42 - Appreciate where you're coming from there. Just for your general interest, I don't think anyone's come closer to causing Rajiv to "blow a gasket". I'm always curious what happens to such infallibly polite and courteous people as Rajiv, when they really go off the deep end! Maybe they morph into "berserkers!! :eek:

All kidding aside, Rajiv's got a point though. At the Federal level you can argue that the tax burden is manageable, or (if you strained the point) even sensible for this income bracket, but in the high cost states the corrolary overt and implicit taxes quickly degrade that observation down to a farce. My observation to Rajiv in this context, is sitting somewhere between your two viewpoints. I think Rajiv is right, that in states like California the cumulative "rent cost to merely exist" is high enough to render large chunks of the "middle class" effectively marginal today. But I would also note, that our tax "burden" at the Federal level is a burden that would have a lot of Europeans looking at your accusations of US Government "paternalism" incredulously. They would instead be feeling like they had just passed through an airlock into a tax world filled with helium.

Our tax structure is absurdly low compared to the spider's web of taxes that truss up European middle class families tighter than a turkey being taken to market.

And you just may be even further are off the mark, thinking that the US government represents a "paternalistic" overgrowth of structures protecting and coddling Americans. If you had grown up in Europe (I did), and you ever stepped off a plane for the first time in America flying in from Europe, you immediately would get hit with that "raw capitalism" sensation. Like it was whacking you vigorously across the side of the head with a two by four! Our tax and government "social services" environment, to a European, feels like a typical South American country, and not necessarily one of the more stable - where the divide between the privileged hereditary aristocracy and the masses is raw, bleeding, and left abjectly to it's own devices.

You may be a little out of touch with international benchmark comparisons if you think the US government "coddles" anyone here. I will make the excception of course of Wall Street, who is today coddled like a newborn infant - and also of course our government employee sector, growing rapidly. But even that sclerosis, expressed as a per-capita percentage permeation of the economy is a hesitant imitation of it's advancement in some EU nations ie. France and Italy.

At least compared to a whole slew of European countries we are perhaps inching a little closer to Paraguay than to their own comparatively more civilized and humane (even if impossibly expensive) social services. You would pick this up instinctively by spending five years over in Europe - especially Northern Europe and then flying back to the US. The feeling you get climbing off that plane can best be described as "fear". There is a contradiction in terms inherent in your observations. One the one had the government is "paternalistically stealing from us" and on the other hand a lrge chunk of middle class Americans get away nearly scot-free from paying any real tax burden at all. The fiscal angle in your thesis does not fully add up as described, at least not compared to EU countries that have a good deal higher net tax burdens.

I suggest A) the government is indeed getting more paternalistic, but has a great distance yet to go, to catch up to the egregiously taxing EU governments, who are past masters at this art (hint, you definitely don't want to be a business owner over there) and B) you can't easily combine a portrayal of government as on the one had paternalistic, and on the other hand the middle class effectively not having a real tax burden up to 60K in earnings. A genuinely paternalistic government would be taxing that hapless middle class at 35%++ at the Federal level right off the bat, just to fund the kind of rampant "paternalism" you suggest. I notice that iTulip also regularly refer to creeping US Govt. paternalism. The truth is in the numbers however. Federal taxes in the US have a good ways to go to match the average of Federal taxes in the EU. JK has noted elsewhere in recent days this recurring reflexivity of America-centric analsyis here, and I agree with that. It pops up repeatedly.

Agree with many points in your post. FICA taxes are a significant burden, hence my mentioning them in my post. However, please see the following column by Thomas Sowell called "the imitator" pointing out how trying to compare us with European socialist states is unwise.

http://www.townhall.com/columnists/T.../the_imitators

I'm not sure where you guys are reading in all these patrician attitudes from my post. I simply pointed out that you can't rationally claim poor/middle class people pay more taxes than the rich when they don't. The facts are the facts.

My point is that when over half the people pay virtually no significant income tax, which is where money additional spending comes from, that they have no incentive not to simply vote themselves goodies, since it won't affect their taxes. That is dangerous beyond belief. FICA taxes are not being used (well actually they are but they shouldn't be) to fund this week's new bailout or giveaway program or foolish military adventure.

Doubt it? Look at today's populist giveaway. http://apnews.myway.com/article/20080624/D91GKJ4G1.html As of 5pm today so far no rioting in the streets by the masses concerned about it increasing deficits or taxes.

"here, let daddy take care of that mortgage problem, honey". What could be more paternalistic? Well, maybe big daddy sending his kids a check for $2100 for that family of five to help them out in a rough patch where the economy has barely started a downturn. What do we get if the economy tails off 10%, free cars?

I'm more of a cautious Ron Paul libertarian type, but the Heritage Foundation has a good report on all this stuff that points out the myth of the poor shouldering the tax burden.

The middle class are the ones getting squeezed, as they still pay full FICA taxes as wage earners or small business people and do not rely on investment income taxed far more favorably.

But the solution is NOT to tax dividends, interest, and capital gains more, it's to reduce the bloated government back down to something approaching constitutional levels.

And no, that doesn't mean no services, no safety net, or any other post-apocolyptic scenario leftists want to assume it does if you try to even hold spending down to the level of inflation.

Sometimes I think people don't get it. We're not simply arguing over how to spend money. We don't HAVE the money. We never did. It's all been borrowed and printed. The very people hurt most by this inflation are .....the lower middle class and poor! What's the deficit gonna be this year, half a TRILLION? Does anyone think a hyperinflationary total economic collapse is going to free anyone from poverty? If it were just a matter of writing a larger check and knowing we have a sound fiscally responsible government with a balanced budget forever more, I'd be glad to fork it over. But feeding the beast only encourages it.

Simply setting the socialism bar lower than Chairman Mao or Karl Marx or even a modern day european socialist would have it doesn't mean you're setting it anywhere close to where the optimal point is. From what I've read here Europe isn't exactly thriving either. But that's another debate I'm sure.

[Rajiv]

Re: Michael Hudson: America's Free Lunch is Over

See my response to Jim Nickerson -- If you are self employed you pay 15.3% -- so it really doesn't matter who pays the taxes -- ultimately your employer is incurring a certain amount of cost on you -- it doesn't matter to the employer whether you get it or the Government -- It is a cost item -- and the amount of work the employer can get out of you -- if the employer can get away with reducing the cost, and getting more work out of you -- he or she will!

[c1ue]

Re: Michael Hudson: America's Free Lunch is Over

I simply pointed out that you can't rationally claim poor/middle class people pay more taxes than the rich when they don't.

The total amount of taxes paid by the poor/middle class is in aggregate lower than what the rich pay.

But the rich have more money.

Let's look at some actual data:

                             EFFECTIVE INDIVIDUAL INCOME TAX RATE
                                                                                       Individ
                Lowest   Second   Middle   Fourth  Highest                              Income
Year    Total Quintile Quintile Quintile Quintile Quintile  Top 10%   Top 5%   Top 1%    Taxes*
---- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
1994     10.0     -3.9      1.9      5.3      7.8     15.0     17.1     19.2     23.0     7.80
1995     10.2     -4.4      2.0      5.3      7.8     15.5     17.7     19.8     23.7     8.06
1996     10.7     -5.1      1.8      5.4      7.9     16.1     18.3     20.5     24.2     8.53
1997     11.0     -5.2      2.1      5.6      8.0     16.4     18.5     20.6     23.8     9.01
1998     11.0     -5.4      1.5      5.0      7.9     16.5     18.7     20.6     23.4     9.60
1999     11.4     -5.2      1.7      5.0      8.0     17.1     19.3     21.3     24.0     9.64
2000     11.8     -4.6      1.5      5.0      8.1     17.5     19.7     21.6     24.2    10.34
2001     10.3     -5.6      0.3      3.9      7.1     16.3     18.7     20.8     24.1     9.89
2002      9.7     -6.0     -0.2      3.6      6.7     15.5     17.9     20.0     23.7     8.27
2003      8.4     -6.0     -1.1      2.8      5.9     13.7     15.8     17.7     20.4     7.34
2004      8.7     -6.2     -0.9      3.0      5.9     13.9     15.9     17.6     19.7     7.03
2005      9.0     -6.5     -1.0      3.0      6.0     14.1     16.0     17.6     19.4     7.58

Sure, the top 20% pay an effective tax rate of 14.1% on income tax, with the top 1% paying an effective rate of 19.4%.

But how much other taxes are there? I would argue that you must add at least 7.65% for Social Security payroll withholdings for the bottom 3 quintiles (60%), plus another 6% to 8% sales tax. State income taxes, property taxes, etc also apply but are somewhat less uniform.

Unless the top quintile spends all of their money on furs, jets, and yachts IN THIS COUNTRY, sales tax is an insignificant overall tax burden on the rich. Similarly Social Security impact drops as you make over $200K, and at $500K/year is completely irrelevant.

Thus it is not clear at all to me that the actual overall amount of taxes paid out of pocket by the 'rich' is necessarily more than what everyone else pays.

Then there's the old saying: Follow the money

In 2001, the top 20% of the population owned 84% of the wealth.

In that same year, income taxes paid by this top quintile were roughly the same.

And we're supposed to have a progressive tax system?

[Brooks Gracie]

Re: Michael Hudson: America's Free Lunch is Over

Shift the "tax burden" from the lower and lower/middle class? WHAT tax burden? They barely pay any taxes.

Does it occur to anyone that the reason we've spent ourselves into oblivion as a nation is that so many of us pay relatively no taxes that it's possible to continue enlarging the size of government w/o having to worry about the constraint of an angry voting populace? This is what they always dreamed of and what they have already basically acheived.

Based on some quick math, your lower middle class working hero married father of 3 doesn't pay a dime of income tax till the family income surpasses $51,533. Make that $61,533 if they save for retirement with deductible IRAs.

They only need to shuck out under $4,000/year in payroll taxes to enjoy the same benefits of living in the USA as the guy who pays $40,000 in taxes.

And even that will at least partly be returned to them in the form of (at least promises of) social security and medicare benefits from a paternalistic government that steals what they would have saved for retirement under the classic socialist concept that "government knows best", returning it as a pittance in their retirement.

"They only need to shuck out under $4,000/year in payroll taxes to enjoy the same benefits of living in the USA as the guy who pays $40,000 in taxes"

No, most of the governmental benefits in the U.S. are enjoyed by the wealthy. Start with police to protect one's property. Then the court system which is there to protect one's property. Then the infrastructure and the schools to increase commerce for the companies owned by the wealthy. Even the social programs are basically there to prevent blood on the streets. Or would it be okay with you if ten or twelve armed poor people showed up and said "get out, this is our house now"?

[bill]

Re: Michael Hudson: America's Free Lunch is Over

Thanks Rajiv for the post.


How much pain can people and the economy withstand before policy reform change is accepted? The economic pain will accelerate as this administration hands it to the next. Obama will have plenty of screaming public soon after he takes office and he should directly funnel it in the faces of financial oligarchy and demand reform.


America might as well move in the direction to solve its biggest economic pain problem first even though it’s going to hurt.
No.1 pain problem “energy” causing severe economic conditions and change is needed.
To attract foreign capital for an energy expansion project the US must offer real value. Energy projects with a low carbon foot print, similar to the deal recently done by UK.
http://www.world-nuclear-news.org/NP...r-2306088.html


A low-carbon re-industrialization
http://www.itulip.com/forums/showthr...33297#poststop

Obama said no.1 problem “energy”

Audio/Video Reports

Obama Says Slowing Economy Will Bring `Short-Term Pain' June 26 (Bloomberg) -- Democratic presidential candidate Barack Obama talks with Bloomberg's Peter Cook in Pittsburgh about the U.S. Supreme Court's ruling on gun ownership, North Korea's disclosure of its nuclear programs, the U.S. automotive industry and Obama's economic policy. Obama is in Pittsburgh for an economic summit at Carnegie Mellon University that included General Motors Corp. Chief Executive Officer Richard Wagoner. (Source: Bloomberg) Watch

http://www.bloomberg.com/news/av/

[flintlock]

Re: Michael Hudson: America's Free Lunch is Over

Wow, when did this become, Imarxist.com?

[metalman]

Re: Michael Hudson: America's Free Lunch is Over

Wow, when did this become, Imarxist.com?

we got a range here, fer sure. i agree in part. if you got $$$ in the usa you smoke pot and cops look the other way. if you don't, you wind up in the joint.

word.

seriously, maybe brooks has a background in this? speaks like one who does...

[Rajiv]

Re: Michael Hudson: America's Free Lunch is Over

See Sapiens' post from yesterday

[metalman]

Re: Michael Hudson: America's Free Lunch is Over

See Sapiens' post from yesterday

sorry, dude. made it to the 4th page before the scent of bs oozed off of it.

no escaping the propaganda of the usa edu system? why so much consumerism in australia, uk, ireland?

ever been to hong kong?

bwah ha ha ha! and singapore is one giant fuking mall.

or did usa industrialists design their schools, too?

[Guest]

Re: Michael Hudson: America's Free Lunch is Over

See Sapiens' post from yesterday

Rajiv -

OK I read through it. I have the highest regard for all your contributions here, and many of your views I uphold with a lot of conviction - but this stuff Sapiens posted really sounds dubious to me. Yes, there are a few real conspiracies. A few, and one or two may even be large. But sooner or later the inclination to look at the world through a conspiracist lens habitually can become more befuddling than enlightening. I mean, 60% - 80% of everything Sapiens posts has a cabal behind it. You really think 60%-80% ++ of our world is a product of cabals? I don't. Maybe it's just a matter of one's personality. You see this maybe as a large part of why America is in critical decline. I think the critical decline (on that we are in full agreement) is a product of the entropy that assails all democracies. People get spoon fed this kind of democracy destroying mulch everywhere - in every fully industrialised country I've ever visited. This is what Sapiens (and you, if you buy into this) overlook. It's a feeling of "oh, but our democratic decay is special over here" - It's not, it's merely that the US has been the superpower and therefore is embroiled in all sorts of places these other countries aren't. Other democracies are equally complacent and ill-informed within their relative contexts. They simply are not in the US's shoes, large, formerly preponderant on a global scale, and in decline due to severe imperial overstretch. I make these observations with considerable respect, but if I was stuck on a desert island with someone expressing the views expressed below too frequently I might eventually elect to just swim out to sea for the chance to have a little peace and respite from such opinions. The flaw in this person's outlook, and it's a dangerous flaw, is a perception that they have insights few others are privy to. This sensation is intoxicating. Beware of it. Sapiens thread title "are you too stupid to ... etc." is a perfect description of the syndrome :

>> Naturally, teachers and administrators weren't let in on this plan; they didn't need to be.

>> Since systematic forms of employment demand that employees specialize their efforts in one or another function of systematic production, then clear thinking warns us that incomplete people make the best corporate and government employees.

>> but ironically, as it turned out in the twentieth century, big business and big government were best served by making schoolrooms antechambers to Hell.

>> schools evolved into behavioral training centers, laboratories of experimentation in the interests of corporations and the government

>> Only then could the necessary training in boredom and bewilderment begin. Such training is necessary to produce dependable consumers and dependent citizens who would always look for a teacher to tell them what to do in later life,

>> A free cassette recording ($8.00 value) of one of John Gatto's famous speeches attacking the sinister structure of modern forced government schooling and a free original autograph plate are yours when you order a copy of his new book

[Guest]

Re: Michael Hudson: America's Free Lunch is Over

"They only need to shuck out under $4,000/year in payroll taxes to enjoy the same benefits of living in the USA as the guy who pays $40,000 in taxes"

No, most of the governmental benefits in the U.S. are enjoyed by the wealthy. Start with police to protect one's property. Then the court system which is there to protect one's property. Then the infrastructure and the schools to increase commerce for the companies owned by the wealthy. Even the social programs are basically there to prevent blood on the streets. Or would it be okay with you if ten or twelve armed poor people showed up and said "get out, this is our house now"?

Ok, comrade. I won't disagree that the wealthy can sometimes benefit more from the system of law and order, and have more to protect. But again, I refer you to the attached chart from my previous post. The rich pay much much more in taxes. By that I mean DOLLARS, not percentages, not proportions, etc. Real dollars. The kind they make you fork over at the grocery store. So if they get more service they've paid for it. That's kinda hard to argue. Unless one wants to look like a horse's rear, I guess.

A poor person also gets protections under the law. Imperfect, but far better than in most of the world. They are certainly statistically far more likely to consume the services of a police dept! Also, we spend far more per capita servicing poorer areas with public safety (fire, paramedic, police) services, so I'm not sure what point you're making on that.

I get it now. Schools are a sinister way for corporations to get trained labor! How diabolical!

My only problem would be gathering up clorox, tarps, and hydrogen peroxide by the drum for the massive cleanup if 12 criminals showed up at my door trying to take my home. And a back hoe would be nice. But the criminals I can't handle are the kind who steal with their votes. The worst offenders are those who, in their wisdom, know what's best for all the rest of us and our money. If only we'd shut up and let them run our lives.


Hey, what about the Fair Tax? Takes care of payroll and income taxes and the poor pay nothing after the prebate. Or does it fail to punish enough people?

[c1ue]

Re: Michael Hudson: America's Free Lunch is Over

I cannot speak for others, but I am not a believer in 'from each according to his ability, to each according to his need'.

My issues with the tax system is not unique to the United States: the idea that whomever contributes the most to said system should control it.

Despite my inherent economic conservatism, it is becoming abundantly clear that the moneyed elites in this country are successfully throwing their weight into moving the system from being one which tries to benefit the overall, to one which tries to benefit its benefactors.

This is the feudalism of which Dr. Michael Hudson speaks: Feudalism is not specifically a system where a king rules over earls, princes, and barons whom in turn rule over peasants via monopoly of military power, but rather the concept of government by levels and network of patronage.

While corporations see this all the time - note the 'management changes' that occur when any high profile executive comes into a new company - at least corporations have competition.

When this occurs in government, the only way out is revolution.

[merry]

Re: Michael Hudson: America's Free Lunch is Over

There is a pretty interesting audio interview from Guns and Butter from a couple of days ago with Dr. Hudson.

Over the last couple of years I've listened to just about every Michael Hudson interview I could ever find and *this* one is the most scary.

I managed to piece together a URL that points directly to the mp3 file for your listening pleasure. It's about 1 hour and the file is 10.5 mbytes.

http://aud1.kpfa.org/data/20080625-Wed1300.mp3