unfortunately, spending our way out of a recession is probably the best bet. this recession started because of tightened credit -> less spending. sucks that we have a huge debt but I have to commend Obama on this one. a prolonged recession, etc. can also drastically reduce tax revenues which may have the same net effect of expanding the deficit without any sort of fiscal stimulus. i think best bet is just to make sure any fiscal stimulus is prudently dispensed. giving checks to consumers to spend at Toys R Us right before Xmas time would not be the right thing to do. sort of wish we could be in China's situation and have 600 billion lying around to throw in infrastructure projects.
All that fiscal conservative talk from the republican presidents is fantasy. They have been pushing bigger government and larger deficits for decades. I'll take 2 years of deficit spending and 6 years of deficit reduction over 2-3 decades of republican tax redistribution and big government policies.
i just noticed this line...the credit bubble has NOT popped yet. the r****ded lending has stopped but there is still a mountain of debt that has not begun to shrink yet. our total credit market debt to gdp ratio is still insanely high at 3.56:1...the deleveraging process still has a long way to go. http://www.federalreserve.gov/releases/z1/Current/accessible/l1.htm
the recession didn't start because of tightened credit. the recession began because we were living at completely unsustainable levels because credit was out of control. much of the wealth we perceived to be real simply was not real. we can't just spend spend spend and magically cure the problem. now we have this tarp program where we are giving money away and for some reason people think banks should somehow use that money to lend and at the same time deleverage. it's not a 2 way street...you can't delever and lend more.
I'm wrong that we have too much debt or I'm wrong that we can borrow more and solve the problem that we have too much debt? What research? The Fed, the govt. Over 150 economists signed a paper rejecting the bailout and further borrowing. I don't have anything to prove on this... It is just common sense that if our standard of living is supported by debt or credit bubbles, it can't keep going without a correction. You cannot borrow your way to wealth. Either we stop spending and pay off the debt or we break.
Exactly. debt creates living above your means. Now we are in danger of maxing out our federal credit card. The world seems to be in a panic mode looking to the US dollar as the cash position of last resort. This gives us a reprieve because we can borrow more if we want to. Problem is at some point mainstreet USA has to foot the bill, that's when all dookie is going to hit the fan. jobs, credit, maybe severe deflation. I recommend strongly that we take our medicine now and slash spending, cut up credit cards, let the economy contract and face the piper. We need to make a crash landing and avoid a nosedive later. Am I missing something... is there another way to pay off the debt by adding to it?
It's stuff like this that gives me sleepless nights. David Walker 2007 <object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/KIgrxpp97OQ&hl=en&fs=1"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/KIgrxpp97OQ&hl=en&fs=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object> <object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/DXr_Ga_n0pY&hl=en&fs=1"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/DXr_Ga_n0pY&hl=en&fs=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object>
We aren't close to establishing a democratic country in the Middle East. If you honestly believe that, you are wrong. The bottom line is that the majority of Americans share this "dysfunction in priorities" about getting out of Iraq and that reality has forced Obama and McCain into relatively close positions on the issue. Iraqis are also insisting our troops pull out, so the decision on remaining isn't the sole decision of the next administration. The more things improve, the more they insist we leave. That's just the way it is because if the mainsteam Shia clans were to turn on us, our presence there is completely de-legitimized. One thing McCain never did was define what "leaving with victory" was. I wish he had put some meat on the bones.
100% agree. I have a theory on this. I believe that the economic engine over the last 5-10 years has been propelled by easy credit, HELOC's, etc. In fact I think it is safe to say that that is true. Problem is it seems our economic livelihood is dependent on people spending beyond their means. Look what happens when people pull back a little. Linen's N Things, Bennigan's, Circuit City, Whitehall Jewelers, Meryvn's these are companies going out of business in my area. I believe that wages are rising in equitably with consumer needs. In 1965 average wage was like $33k and in 2005 it was $43K. Average home price now is $250K but what did a home cost in 1965? $40-45K maybe? Am I way off here? Does that seem equitable to you? Healthcare, gasoline, insurance, etc. all of these things that we have to have are rising much faster than our wages. Plus cell phone, internet, cars, etc. these items are almost necessities. So now we have more bills then we did in say 1965. Plus now instead of pensions we are funding 401K's so there goes more disposable income. My problem is take a look at three companies. Apple, Exxon, and Merck. Apple has about $20Billion in cash, Merck $40B and Exxon $100B. Just cash laying around. They're not using it to hire people so IMO we are being gouged as consumers. All three make products that are arguably necessities. Computers, medicine, and gasoline. Why are these things so damn expensive if these companies have Billions just laying around from profit?! Thus my point wages are not rising with the cost of necessities thus we have less disposable income. Less disposable income means we have to spend above our means to continue to push the economy forward. Solution? A major contraction in the price of necessities is needed. Stopping this trend of wages and inflation or we are doomed. This is not supply and demand driven IMO.
The service economy is going to contract to reflect the amount of good credit at hand. And that means less big box stores and less random malls that can hire people. There's no way around it.
In the Bush administration, capital gains taxes were lowered for people in higher tax brackets. Not only is that true, but the reduced tax rates were passed with a "sunset provision" and are effective through 2011. That means that Obama can't raise the capital gains tax on rich people for two years. That's probably where he's coming up with the "two years" thing. Since he knows that he can't raise capital gains taxes for the next two years, he's gonna focus on the current issue of the economy until he can raise those taxes.
are you sure that the tax is different based on your income? I thought it was all the same and the only difference was short or long term holdings?
I guess I consider the bubble is deflating as we speak. We will never be fully de-leveraged as a healthy credit market is essential. Only thing we are doing is pumping enough air into the balloon so the deflating rate is slow enough to a mere deep recession.
You are correct. The capital gains tax effects people with investments "rich people" but equally effects everyone except that most poor people don't have capital gains.
Who are these "rich" people you speak of? I am far from considered rich, yet my capital gains tax rates are lower and if Obama repeals the Bush tax cuts in the next 2 years or later, my capital gains tax rate will rise to the same level as Warren Buffet and Bill Gates.
You two are both wrong. You are right in the sense that short-term holdings are taxed as regular income, whereas long-term holdings qualify for a lower tax. If your maximum tax rate is in the bottom 2 brackets(10 & 15%) your capital gains were taxed at 5% for 2007, but if your maximum tax rate was 25% or higher, you were subject to 15% in 2007. It changes in 2008 to 0% for the first two brackets, and 20% for the 25% and higher brackets. Isn't it nice to learn something?
It is nice to learn something, I had no idea that your tax bracket could affect capital gains taxes. I am pretty sure that when I was in the 10 & 15% brackets I wasn't worried about capital gains in the least. Portraying people above the 15% tax bracket as "rich" is probably a bit misleading but I'm sure that when I was in that tax bracket everyone above me seemed rich at the time. I also find it interesting that the fact that the lower tax brackets get a 15% decrease in Bush's plan and will subsequently get a 15% tax hike if Obama repeals the tax is not an issue.
