U.S. Debt discussion

[Shazam]

Originally Posted by VladtheImpaler

Indeed. Of course, as fuel prices rise, and the cost of shipping widgets from China to Long Beach grows prohibitive, it may once again become economically viable to make widgets on Ohio. The number variables is manifold, however, so this is all speculation...

Doubtful. Even with increased shipping rates, it's murderously cheap to make stuff in China and ship it via sea. Like, it's ludicrously cheap. My FIL works in the book industry here in town and it's literally 10X cheaper to print books in China and ship them here than it is to print them anywhere in Canada or the USA.

[VladtheImpaler]

Originally Posted by Shazam

Doubtful. Even with increased shipping rates, it's murderously cheap to make stuff in China and ship it via sea. Like, it's ludicrously cheap. My FIL works in the book industry here in town and it's literally 10X cheaper to print books in China and ship them here than it is to print them anywhere in Canada or the USA.

I know, but I am not talking years - more like decades. You know, when China has less workers (see the demographic reference in Cowperson's post) who get paid more, and when oil is $350/barrel... It's all just speculation because who knows if ships will use oil-based fuel in 30 years and what other developments will take place (scientific, political, etc)...

[HotHotHeat]

Originally Posted by KTrain

Thought this was funny in a sad, sad way.



http://www.bbc.co.uk/news/technology-14340470

Off topic question.... But why would Apple want to hold that much cash in their reserves? As opposed to reinvesting it or buying up other assets?

[Shazam]

Originally Posted by VladtheImpaler

I know, but I am not talking years - more like decades. You know, when China has less workers (see the demographic reference in Cowperson's post) who get paid more, and when oil is $350/barrel... It's all just speculation because who knows if ships will use oil-based fuel in 30 years and what other developments will take place (scientific, political, etc)...

If oil is $350, there will be no economy. Stock up on guns and ammo, canned goods, buy a place out in the country, dig a well for water and start farming...

[Agamemnon]

Originally Posted by HotHotHeat

Off topic question.... But why would Apple want to hold that much cash in their reserves? As opposed to reinvesting it or buying up other assets?

Maybe because the current economic climate is dire and unstable, and Apple thinks its wiser to hold the cash and only invest/spend when there's more economic certainty.

[Shazam]

Originally Posted by Agamemnon

Maybe because the current economic climate is dire and unstable, and Apple thinks its wiser to hold the cash and only invest/spend when there's more economic certainty.

Nah, it's used as stuffing for Steve Jobs' mattress.

[Frequitude]

Interesting. The US bond yield curve is actually down today...except for the 6-month.



Why not the 3 month too?


*note I'm no finance/bond guy so this ain't my arena.

[Cowperson]

Originally Posted by Calgaryborn

No it shows a quick turn around after 9/11. You don't seem to recall what happened to the economy as a result of 9/11. The recovery afterwards was remarkable. You can't look at the receipts in the year of a tax increase or decrease. It takes time for those things to work through the economy. My point is valid: Revenue increased with lower taxes.

In a single year in the mid-2000's, USA tax receipts increased more than the entire USA defence budget.

On the other hand, in the late 2000's, USA tax receipts collapsed by about one-third, which is really an underrated problem today.

Basically, the USA has too few taxpayers and its collections are very concentrated in the higher end (20% of taxpayers footing 80% of tax receipts) meaning the consequence is the potential for tremendous volatility and a certain lack of predictability in revenues.

Other countries - although not necessarily Canada - seem to have more predictability because the tax base might be wider.

Again, markets - watch the money - aren't giving this debt crisis much of a pulse - far less than you could be seeing - because everyone knows the USA could raise taxes pretty easily and be fairly covered in a hurry.

Cowperson

[BloodFetish]

Originally Posted by Shazam

If oil is $350, there will be no economy. Stock up on guns and ammo, canned goods, buy a place out in the country, dig a well for water and start farming...

Monsanto will be in touch to make sure you're using their seeds.

I'm admittedly dumb about economics, but would it be a good idea to base US tax rates not on how much money someone makes, but on the number of Americans a person employs?

For example, three small business people each make $250,000 a year. Person A employs only himself and pays a basic 30% tax rate. Person B employs himself and 20 others and pays a basic 30% tax rate less a 5% discount. Person C employs himself and 50 others and pays the basic 30% tax rate less a 7% discount. Obviously I made these numbers up but hopefully it conveys the general idea.

An employee doesn't count towards the discount unless they have an American social security number, and this would be true for small business or large corporations. Therefore, companies who employ illegal immigrants, Chinese, Indians, etc, do not receive the tax discounts.

Feel free to pick this apart. Like I said I am not an economics professor and just wanted to float the idea for general discussion.

[Flash Walken]

One thing not being discussed is...

If so much of the population isn't making enough money to pay taxes on their earnings, maybe there is a much larger problem than collecting tax revenue?

[Displaced Flames fan]

Originally Posted by Flash Walken

One thing not being discussed is...

If so much of the population isn't making enough money to pay taxes on their earnings, maybe there is a much larger problem than collecting tax revenue?

What do you mean?

Maybe the tax code needs to be revised so that many of those who aren't paying taxes now can start paying them. That income floor for zero taxes is a lot higher than most people think.

Another idea would be to stop refunding 'tax payers' who aren't required to pay taxes.

[Displaced Flames fan]

BTW...from my seat as an American, what is going on right now with this on Capitol Hill is flat out embarassing, and both parties, their leadership and the President should be ashamed of themselves.

[Shazam]

Originally Posted by BloodFetish

Monsanto will be in touch to make sure you're using their seeds.

Large corporations won't exist with $350 oil. Unless you think Monsanto will send the seeds by catapult.

[Cowboy89]

Originally Posted by Frequitude

Interesting. The US bond yield curve is actually down today...except for the 6-month.



Why not the 3 month too?


*note I'm no finance/bond guy so this ain't my arena.

Spain got put on watch for a downgrade today, so even a downgraded US rating of AA would seem less risky in comparison, so there must be some funds flowing into Treasuries from that. The USD is up today too. As for the 3 Month, LIBOR is spiking a little as banks are more concerned about each other as counterparties than the US government. As a result there might be some money moving into 90-day T-bills as a result to overcompensate for the risk of a US default.

Not really sure, but just my guess from looking at what's going on.

[Flash Walken]

Originally Posted by Displaced Flames fan

What do you mean?

Maybe the tax code needs to be revised so that many of those who aren't paying taxes now can start paying them. That income floor for zero taxes is a lot higher than most people think.

Another idea would be to stop refunding 'tax payers' who aren't required to pay taxes.

What I'm saying is, if the tax floor is X and only Y amounts of people earn enough to reach it, maybe it isn't the tax floor that needs lowering, but that wages need to be increasing.

[Frequitude]

Originally Posted by Cowboy89

Spain got put on watch for a downgrade today, so even a downgraded US rating of AA would seem less risky in comparison, so there must be some funds flowing into Treasuries from that. The USD is up today too. As for the 3 Month, LIBOR is spiking a little as banks are more concerned about each other as counterparties than the US government. As a result there might be some money moving into 90-day T-bills as a result to overcompensate for the risk of a US default.

Not really sure, but just my guess from looking at what's going on.

Great answer.

Looks like the 3 month is now up a couple basis points, which makes more sense directionally.

What's the best place to get a chart that shows the yield curve shifting over the last couple months, or the historical price/yield chart for specific bonds? I'm curious to see how this whole debt situation has affected them.

[Calgaryborn]

Originally Posted by Flash Walken

What I'm saying is, if the tax floor is X and only Y amounts of people earn enough to reach it, maybe it isn't the tax floor that needs lowering, but that wages need to be increasing.

Someone used the figure of 50 000 dollars as an income that may not be taxed if a guy had a few dependants. I don't know if that is true but, if it is then there is a problem. You can't raise the wages past the value of the service or else it simply will be done out of country. Or in country by illegal aliens under the table. Increased wages also increases inflation which hurts the value of the money. I also don't know how you increase middle income salaries in order to have them meet the tax floor.

[calgaryrocks]

^^^ yea if middle income people are below the tax floor the floor should be lowered. if they are middle income they should still be able to afford things even after (heaven forbid) paying taxes. they are still using the services. maybe if middle income people didn't get as many tax writeoffs they wouldn't live beyond thier means as much, basically paying for things with what should be tax dollars. maybe that lessened spending means prices don't go up as much (less elasticity - is that the right term here?). then they can still afford things.
although if these people don't spend as much, the economy suffers because of less consumer spending, but the government gets more money to spend. there isn't an easy answer here, the government should spend less, but a little more tax revenue wouldn't be a bad thing to balance things, even if it hurts the economy. really the big corporations being involved in the politics as much as they are is a big problem, as they are going to influence politicians for their benefit. At this point america needs to decide which way they want to go with the economic structure. should be interesting to watch

[afc wimbledon]

Originally Posted by Calgaryborn

Are you sure? Obama's big spending last year didn't improve the economy and this year with far less to play with the economy has niether crashed or improved.

The bond rating company doesn't seem to agree with you either. They see a need for the government to control spending and will down grade the US rating if they don't.

The goverment is a huge employer, if it cuts its emlpoyees to make ends meet, a laudable goal by the way, then they cant buy houses cars etc, if they cut social security than a vast swathe of the US who spend all their money on rent food etc have to cut back, this is a basic economic function, the effect of this is to drive tax revenues down, which further spurs spending cuts and can lead into a death spiral.

You have to differentiate between when goverment gives money to banks and when they employ people, whole different economic effect, you also are assuming goverment spending last year didn't work because everything isn't rosy now when for all you and I know if Obama and Bush hadn't shoveled money out we might be in a far worse state, what if every city in the US turned into Detroit?

[Azure]

Originally Posted by Flames Fan, Ph.D.

For the life of me I don't know where you get your stuff. If you don't want to go to the government websites, you can even wikipedia this stuff. Bush cut taxes in 2001 and then accelerated those tax cuts via 2003 legislation. Tax revenue as a percentage of GDP fell from 2001 until 2004, recovered until 2007 then back down in 2008.

Net net, over this term, tax revenue as percentage of GDP fell. This is true if you consider 2001 his starting point, or even if you consider 2002 the starting point. And this is gratuitous because I'm using the end of 2008 as his endpoint.

Seriously man.

And if you want to strictly look at the supposed growth in the economy during that time, much of it was attributed to the financial sector generating record profits year after year.

And we all know how that ended up.

IIRC, the strongest year the economy had during the Bush era, 40% of all the profit generated in the US came from the financial sector.