Bob Moriarty's Fatal Flaw

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[Jim Nickerson]

Re: Bob Moriarty's Fatal Flaw

Dec 3, 2008
Bob Moriarty
President: 321gold
full article: http://www.321gold.com/editorials/mo...rty120408.html

You are transferring all the losses of a monopoly money casino onto the backs of the American people.

Here's an interesting explanation of who, in Sy Harding's analysis, will pay for most of the "losses."

But the dollar cost of the rescue efforts will be paid by the wealthy and corporations, while ordinary consumers and taxpayers will benefit the most, or at least suffer far less damage, if the rescue effort succeeds (which it will).

Heres is the entire article in consideration the link may disappear or change.

http://decisionpoint.com/TAC/HARDING.html

WHO IS REALLY PAYING FOR THE RESCUE EFFORTS?

November 28, 2008. Newspapers and Internet chat-rooms are full of witty comments regarding the costly government bailout and stimulus efforts.

"Where's my bailout?" "Hey, I've incorporated my piggy bank. Now I'm a failing bank, and I want my share of the bailout money."

But the most seriously intended complaints are that ordinary tax-payers, the little guys, are bailing out the wealthy bankers. So the wealthy and their big financial institutions will survive, while as a result of their greed, the economy will suffer a bad recession and the little guy is not only stuck with paying the bill for the rescue efforts, but may well lose his house or his job, or both.

Well, there's no doubt about it. Taxpayers, not only of this generation, but of the next generation, will be paying off the debt the government is incurring to save the banking system and re-stimulate the economy.

But who are those tax-payers? Are they not the very wealthy, while the main beneficiaries of the rescue efforts will be the middle class and even more so those at the bottom of the economic ladder? Interesting questions.
The U.S. tax code is a so-called progressive system, calling for those who have the highest income to provide most of the taxes the government collects, not only because they have the highest income, but also because they pay a much higher percentage of that income.
As a result, the top 1% of taxpayers by income pay roughly 36% of all income taxes paid. The top 5% of taxpayers pay 57% of all taxes paid. The top 10% pay 68% of all taxes paid.

So the small group of the wealthiest 5% of taxpayers will pay more than half of the taxpayers' cost of the rescue efforts.

Stepping down from the top 5% echelon, taxpayers who rank in the top half of taxpayers by income, pay virtually all individual income taxes collected. Taxpayers in this group pay 97% of all income taxes.

That leaves half of taxpayers paying just 3% of the total, to say nothing of the many workers who pay no income taxes at all.

Even that is only part of the equation. Individual income taxes account for only about 40% of the government's tax revenue. Payroll taxes paid by corporations, corporate income taxes, and estate and gift taxes, account for most of the rest, and that also tends to come mostly from the very wealthy. So half of taxpayers pay what, maybe 1% of the country's total tax revenues?

Yet, which half of taxpayers would suffer the most if the financial system and the economy were not rescued, and the country fell into a repeat of the Great Depression of the 1930's?

Well, it wouldn't be the very wealthy. They might have to cut back from four or five fabulous homes to only three or four. They might drive less ostentatious cars, leaving the Bentley and Ferrari in the garage, if only to appear less extravagant when driving past soup kitchens and unemployment lines. But they wouldn't be eating at those soup kitchens, or suffering from loss of employment income.

Yes, the little guy and the middle class are suffering from the recession, and homes and jobs are being lost. And the hard times were caused by the previous greed and outlandish risk-taking of financial firms, the failure of the regulators to regulate, but as well by the carelessness of consumers in buying homes they couldn't afford, and taking the equity out of homes they did own in order to buy second homes, large screen TVs, and SUV's.
But the dollar cost of the rescue efforts will be paid by the wealthy and corporations, while ordinary consumers and taxpayers will benefit the most, or at least suffer far less damage, if the rescue effort succeeds (which it will).

There are obviously many who would rather see banks, General Motors, and any other employer suffering from current economic problems caused by their previous poor governance, go under. There might be some short-lived satisfaction in that, as in seeing them pay for their sins.

But just maybe they should consider who is paying the major costs of the bailout efforts, and whether they and their families should even be grateful for that, considering who would suffer the most if the bailout efforts fail.

With the unemployment rate still only 6%, many who have not had family members lose jobs, who are feeling confident enough now to not care if major banks and corporations go under, would not be so confident in another Great Depression. The unemployment rate in the 1930's
Depression reached 24.9%. Almost one in every four workers was unemployed, with previously well-paid white-collar workers and executives well represented in those ranks.

[*T*]

Re: Bob Moriarty's Fatal Flaw

Saying the US taxpayer will bear the loss of the defaults is not entirely true. The Chinese worker who has been paid in American IOUs has already borne the cost.

[Tim T]

Re: Bob Moriarty's Fatal Flaw

Can we expect the middle class (if it exists) and poor to even have jobs if the rich are taxed to pay for all this?

[c1ue]

Re: Bob Moriarty's Fatal Flaw

Actually, this argument that the 'rich' will be paying because they pay most of the taxes is going to be less useful in the near future.

Most of the rich pay taxes in the form of capital gains.

Does anyone out there really think that capital gains tax income is going to hold up in our present investment environment? Or that it won't be depressed for YEARS as both present and future capital gains is cancelled by losses?

Secondly while the 'rich' pay some income tax now, they already have lots of money. If income stops, they can survive just fine for quite a long time.

Why does this matter? Because there are numerous ways a 'rich' person can game the system with a long term view.

For example: If they own a company, the company can retain profits literally forever. Just have the company pay expenses to break even - thus not pay taxes - and wait for the next tax cutting administration even if it is 30 years from now. And there are tons of things which can be included such as insurance, company board meetings in Aruba, etc etc.

It will be interesting to see just how much in hindsight this dynamic affected government revenue figures in the past 2 decades.

[unlucky]

Re: Bob Moriarty's Fatal Flaw

Can we expect the middle class (if it exists) and poor to even have jobs if the rich are taxed to pay for all this?

Some people, like Joe the Plumber, argue that the govt should be lenient on the rich for just this reason, "Otherwise who will we work for?"

Sure thing, as long as we keep in mind that the other way round is also valid. If the poor and middle class get screwed, where will the rich get customers for the firms that they own and manage?

In recent years, the US has leaned too hard on the poor and middle class IMHO, who have had to fund consumption through borrowing. It's irresponsible to fund consumption by borrowing. But economies need consumption. [ Until recently US consumption was 30% of world consumption. ]

[metalman]

Re: Bob Moriarty's Fatal Flaw

Dec 3, 2008
Bob Moriarty
President: 321gold
full article: http://www.321gold.com/editorials/mo...rty120408.html

who will clue moriarty in to the fact of the fire economy? the top 5% didn't make their $$$ on earned income. they paid big $$$ on earned income but shit on fire econ earnings... 100x that.

the fire econ is collapsing and crashing the real econ... the eating, drinking, shitting, sleeping humans that occupy the world of the p/c economy will suffer far more. they will vote and it ain't gonna be pretty after rubin and his harvard assholes (can't even manage their own shit) try to get the finance econ going again... and fail miserably.

uuuuuuggggglllllyyyyyy...