The Jobless Recovery

[Spector]

For me it seems a large part of the economy is built upon what happens to fuel costs and we know that they are skyrocketing. People planning summer vacations will be impacted, anything delivered by trucks etc. When fuel is high I just do not see a chance for a recovery. Unemployment is everywhere and the corporations only care about next quarters results, no one cares about bulding a respectable business with decent dividends every year, it has to earn more every quarter and they will do whatever it takes to accomplish it, falsify records, out source, whatever. The American investor must also change his/her attitude.

The previous poster asked " Just for future reference, what is the lowest yearly income that defines "wealthy"? What do you think their tax rate should be?"

My vote is over gross income of $500,000/year taxed at the 40$ rate, no deductions, flat tax!

 

[k1xv]

The Bush tax plan has created millions of jobs....in India and China.

The Bush tax plan, instead of creating tax credits for the creation of domestic job positions, instead just reduces overall tax rates on profits. Profits, by definition, are revenues minus expenses. Therefore, profits can be maximized by reducing expenses. Expenses can be reduced by eliminating American jobs at higher wage rates with third world jobs at lower wage rates.

I believe that the Bush tax plan has accelerated the export of jobs from the USA. Traditionally, tax policies to improve employment require higher tax rates, but also provide for liberal tax credits for the creation of actual, real jobs to offset that high tax rate. That way, you get taxed a lot unless you create jobs, and the creation of jobs will generate tax savings to offset the higher taxes. Under the Bush plan, taxes are reduced on profits regardless of how those profits are generated. So I hope the folks in India and China are appreciating their new found prosperity.

Corporate profits up are reported in the financial press as "economic recovery". But for the man in the street (or unemployment line, or working beneath his ability in a job he is overqualified for) a more meaningful measure of economic recovery would be labor payrolls. I have seen nothing that indicates any recovery in labor payrolls. Even unemployment percentages are not a true measure of prosperity. If someone making $50K per year loses his/her job and can only find a replacement job at $25K, that loss of earnings and purchasing power never gets reported in the unemployment figures.

 

[k1xv]

PS, to Groucho:

If you analyze our exports, our biggest export is grains. It is agricultural products, not manufactured goods. Also technology and capital goods, such as means of production so that other countries can set up shop and ship manufactured goods back here!!

I remember after NAFTA was first passed, it was reported that our trade relationship with Mexico had changed from a deficit to a surplus, as we were exporting more to Mexico. What they didn't point out is what we were exporting to Mexico was factories and the manufacturing equipment to fill them, so that Mexico could later send manufactured goods back here.

Our dollar is weakening due, in part, to our massive trade deficit and low interest rates that shore up what remains of our economy. The low interest rates have the temporary effect of boosting US corporate profits because foreign earnings in foreign currencies, when traslated into weaker US dollars, look like they have grown. In other words, if IBM makes 100 million Euros in Europe and the exchange rate is 1 Euro = 1 US Dollar, the profit is reported here as $100 million dollars. But if the dollar weakens to 1 Euro = 1.25 US Dollars, then the profit is reported as $125 million dollars. But profits did not really go up 25%. All that happened is that the dollar got weaker.

There's a lot of smoke and mirrors going on in reported financial information. What is prosperity and recovery to an investor may not be of much benefit to Joe SixPack.

 

[needtoknow]

Once again Groucho starts a great topic.
During the Great Depression nothing Hoover did really made much difference on jobs. Roosevelt's New Deal tried to put people to work with government projects, it helped but again the rise in government spending sent interest rates rising and the country suffered. It was actually WW2 that raised the nation out of the depression. War is massive amounts of government spending. It provided thousands of jobs. It also created a critical mass of income and demand that was self sustaining when the soldiers returned. As well the GI Bill helped many GI's get an education and buy houses. It was also a time of continued growth that sustained a rising middle class with rising incomes and taxes. High School grads could get that $30,000/year job which meant they were in the middle class. Now the world, not just the U.S., is hunting for low cost centers. With technology no job is safe. IBM is laying off thousands because it can outsource to India. As well your local cashier is on the way out with electronic self checkouts. If this country cannot sustain a growing middle class then we will all suffer. I think it's interesting that companies can outsource cheaper labor but when consumers can outsourse cheaper products i.e. Canadian Drugs, then the government steps in to stop it. Kurt Vonnigut (spelling?) wrote "Player Piano", a look into the future when machines produce all goods and services. The only people to have jobs were a few engineers to build new machines and firefighters to put out the fires set by the rest of the unemployed population. I don't see any large job growth bubble out there. I think the reason reducing taxes is such an issue now is that it shows how much in trouble this economy is in. People cannot afford to pay higher or existing taxes because their declining real incomes can't support them. No more input then you have to slow output.

 

[Shannow]

Something to keep in mind is that the extremely wealthy (at least in Oz), pay little to no tax.

Our tax free threshhold is a bit over $6k (Oz), and our highest rate of 48.9c/$ kicks in at $60k (Oz, or about $45k U.S.)

The richest man in the country, who regularly loses a quarter of a million bucks in the casino, paid cash for a kidney transplant, and paid cash for heart surgery in the U.S. does not (legally and technically) meet the $6k tax free threshhold, and hasn't for nearly a decade.

One of the all time classic tax swindles down here was when the government wanted to introduce "Fringe Benefits Tax", a tax on extra lurks and perks that executives got. Late in the process they realised that THEY in fact recieved a lot of these fringe benefits and would be taxed themselves. So they made the tax payable by the employer. So the politicians are taxing US for their perks.

 

[GROUCHO MARX]

k1xv, thanks for the information on the agricultural exports. I have always had a gut feeling that the farmer was the foundation that this country continues to thrive on.

One problem we have is differentiating between income taxes and payroll taxes. If you include payroll taxes in any formula of tax revenues, the wealthy's portion would crater.