Fiscal crisis? Overblown or serious?

[Oh Shoot]

Yessir. I have the degree to prove it. I stand by the previous statements. Just the same, we caught a huge peace dividend - a lot money that had been spent on defense went towards other programs or just wasn't spent - thus the surpluses.

Agree with third sentence. But don't understand your inflation statement at all. I don't have degree in economy, but can look at past economic indices and read history.

The 90's just did not have much inflation, and what was there was normal outcome of pretty much universal healthy growth indicators in general. And I can't fathom why higher inflation not tied to increase in economic growth is a positive thing ever. Quick inflation after a flat or deflationary period is typical of some of the most disastrous crashes of countries over the world -- and that's what I fear is coming.

And yes, war has historically pulled our economy out of a rut. Global war, that is, not regional wars like the ones we're stuck in.

Yeah, it has worked in the past, but see my comments in other response above re this.

- OS

Edited July 26, 2011 by OhShoot

[Guest nicemac]

You sure about that? Cause I am pretty sure you are dead wrong. Corporations pay all kinds of taxes and those taxes aren't necessarily passed on to the consumer.

I know what you're thinking, you're imagining that the cost of doing business is X. The cost of doing business plus making it worth your while is is X+10% (or something). Then you further imagine that taxes are piled on top of that.

So something that costs a dollar is now a dollar and ten cents. Add taxes into that and you are looking at two bucks or something.

It doesn't work that way, that is econ 101 where everyone is rational and products are sold only according to price. If you take econ 102 you'll realize that that isn't the real world. In the real world businesses don't necessarily pass the the costs onto consumers.

This makes no sense. I'm with you. It does seem like crazy talk. But most businesses charge what the market will bear. They don't worry about the tax burden, they worry about profit. If they can sell something for a million dollars that costs them a nickel to make the tax burden is not a big deal. That's a great business by the way, if you find one let me get in on that.

But, you argue, businesses have to cover the costs! Right you are, doing something is either worth or not, you can either sell it for a profit or you can't.

And now you think I've proved your point, all costs are paid by the consumer.

At th is point I ask you to think about Pepsi. Sure it tastes like malted battery acid but you can buy two types of Pepsi for the same price. You can buy the throwback or the standard pepsi. They cost the same.

The weird thing is that the sugar in the throwback costs 8x the the sweetener in the standard pepsi. How is this possible if all costs are passed on to the consumer? The answer should be obvious.

At the end of the day, all costs are eventually passed on to the consumer. Pepsi wants/needs x profit margin. They get x+2 on this item, they get x-2 on that item. In the end, they get the profit they want, or they raise prices.

In your example, sugar costs 8x high fructose corn syrup. Man, they lose a bundle on throwback, right? Maybe, but throwback is a market test right now. High fructose corn syrup has a really bad rap and it is getting worse. This is a trial balloon to see if consumers really want it. Also remember that the sweetener is but one small part of the total cost of delivering the drink. (bottling, transportation, etc…)

Think about bottled water. All the big bottlers sell it–and usually at the same price or higher than their sweetened drinks. No sugar costs there at all. Why is the price higher if costs are lower? Whatever the market will bear, right?

Until the point the corporation's profits are squeezed (by transportation costs, taxes or whatever) to a level they or their shareholders can no longer stand it, one of two things will happen. Either prices will go up or the company will go on a cost-cutting binge.

[Guest Lester Weevils]

Yep, strangely some people buy stocks that do not pay dividends and probably won't pay dividends any time soon (go figger), but corps need an attractive P/E ratio or most "sane" stockholders will sell and buy something else.

Even if a lowered stock price had no other bad side-effects, at the very least the corporate officers typically own a lot of stock and want to keep the price up out of self-interest. Also, if the stock falls too much they risk getting sacked from stockholder revolt (though it doesn't seem to often happen).

Dividends are paid POST-CORPORATE-TAX. So if you hike the corp tax and everything else stays the same, then the dividends will fall. Eventually driving down the stock price.

So in order to keep up the stock price, management would try to do SOMETHING to raise profits to offset the tax hike and raise dividends payments. Raising price on the product would be one of many options.

Until investors are forbidden investing in foreign corps, then a USA corp tax increase would reduce dividends payments from all USA corps, at least a little bit. That would cause many stockholders to dump USA stock and buy foreign stock which shows better P/E ratio.

[Glock30]

Until investors are forbidden investing in foreign corps, then a USA corp tax increase would reduce dividends payments from all USA corps, at least a little bit. That would cause many stockholders to dump USA stock and buy foreign stock which shows better P/E ratio.

On top of that, you would see even more tax farming and offshore subsidiaries than you already see now. THIS is what is driving jobs out of the US economy and the tax revenue/spending/activity that it creates.

[Guest lostpass]

At the end of the day, all costs are eventually passed on to the consumer. Pepsi wants/needs x profit margin. They get x+2 on this item, they get x-2 on that item. In the end, they get the profit they want, or they raise prices.

Uh, no. If it were that simple every company would be profitable. That much is obvious, right?

In your example, sugar costs 8x high fructose corn syrup. Man, they lose a bundle on throwback, right? Maybe, but throwback is a market test right now. High fructose corn syrup has a really bad rap and it is getting worse. This is a trial balloon to see if consumers really want it. Also remember that the sweetener is but one small part of the total cost of delivering the drink. (bottling, transportation, etc…)

One small part... But taxes are one small part... And everything is passed on to the consumer...Are you sure what you are arguing is right?

Think about bottled water. All the big bottlers sell it–and usually at the same price or higher than their sweetened drinks. No sugar costs there at all. Why is the price higher if costs are lower? Whatever the market will bear, right?

That is pretty much the whole point of my post

Until the point the corporation's profits are squeezed (by transportation costs, taxes or whatever) to a level they or their shareholders can no longer stand it, one of two things will happen. Either prices will go up or the company will go on a cost-cutting binge.

Thanks for agreeing with me completely.

[Guest nicemac]

RE "Uh, no. If it were that simple every company would be profitable. That much is obvious, right?"

Let me re-state: In the end, they get the profit they want, they raise prices, or they close.

All costs are passed on to the consumer one way or another. Higher taxes on business will cause higher prices to consumers. If a business is not profitable, it will close.

Whatever the market will bear. You and I agree.

Enter competition. The guy down the street is willing to make a little less profit than you or he can control costs better, so he undercuts your price. But if you tax an entire industry x amount, all companies across that industry will have increased costs. All of their prices will go up (including that guy down the street) and their profits will go down. Period.

The price of crude goes up a few cents on the exchange, the price at the pump goes up the same day. The oil company has increased costs. They are going to maintain x profit margin so they pass that cost on to you and me. You think that if the federal or state tax goes up a few cents, the oil companies will just eat it? No way. No other business will either.

I hear the drumbeat for taxing business getting louder. It is insane to think that will not result in higher prices to consumers.

[G27]

I hear the drumbeat for taxing business getting louder. It is insane to think that will not result in higher prices to consumers.

Well, what's worse is the inevitable movement of business HQ out of the US. Now that Japan has lowered their corporate tax rate (as they finally admitted it was pushing businesses away) we now boast the highest corporate tax rate in the world. And businesses are moving out like there's no tomorrow. It doesn't have to cost them much as most taxes are based on where the company's HQ are located, so many US-based companies are simply moving their 'official HQ' to a small office in another country, keeping most everything else intact, so they can escape the burdensome taxation from the fed gov.

It still amazes me that people think it's the government's job to be their safety net and provide so much crap for them. Some folks need to re-read the US Constitution and note what the fed govt's role is supposed to be - by advocating greater taxation, you're advocating greater power in the hands of the government instead of the individual.

[Jonnin]

IMHO the situation is hyped, its politics as usual and most of it is posturing for the 2012 election cycle by the president and congress. If we do not pay our bills, it will have some consequences but they will be minor, probably an additional decrease in our credit rating, possibly some fines/fees, that sort of thing, but hardly the end of the world. The big problem is that if this happens, investors will go ape and the stock market will have a period of absolute chaos, if not a downright crash. This is media caused: the media hype over the problem will lead to this panic. If it had not been such a hot topic for the past month, the effect would likely have been smaller. I voted no increase and cut spending. To be blunt, 50% of the tax revenue needs to be debt payment, the other 50% can be divided into government services. We need to end the wars, all of them, and we need to stop all foreign aid cold, as 2 places to start to recover. In that regard, Reid's plan to end the wars as part of the package was a good idea. If a country wants our soldiers, they pay us 2x our expenses for our presence. If not, the UN can take care of it, and we send no more soldiers than the least of the UN members to support that joint effort.

[Guest Lester Weevils]

To balance on cuts alone requires about a 38% across the board cut. Lots of conservatives are gonna scream bloody murder if we cut that much.

Most "super conservative" guys who sell supplies and services to the gov are gonna turn socialist in order to defend against their own revenue dropping by 38%. All that gov money goes somewhere, and less than half of that gov money goes to the old, po, and disabled. Many people who get the other half might claim to be conservative until the contracts start getting cancelled.

Just sayin, it doesn't seem politically feasible to cut much and stay in office.

[G27]

Just sayin, it doesn't seem politically feasible to cut much and stay in office.

Which is why more and more of us think this country is lost.

When the people vote tax dollars for themselves en masse, it's over. And we're basically there now.

Sad that so many 'fiscal conservatives' are fine with stealing other's money via taxation...

[Guest nicemac]

If we cut by 50%, that only takes us back to 2008 spending levels. Cuts have to be made…

[Jonnin]

To balance on cuts alone requires about a 38% across the board cut. Lots of conservatives are gonna scream bloody murder if we cut that much. Most "super conservative" guys who sell supplies and services to the gov are gonna turn socialist in order to defend against their own revenue dropping by 38%. All that gov money goes somewhere, and less than half of that gov money goes to the old, po, and disabled. Many people who get the other half might claim to be conservative until the contracts start getting cancelled.Just sayin, it doesn't seem politically feasible to cut much and stay in office.

That is why the ammendment is a good idea. If they can ONLY spend what they take in, they are forced to cut or raise taxes (or both), neither one is popular. We can't vote out everyone every term... at some point someone has to do these 2 things and while I can see some folks voting against the one who cut their part of the pie, an equal number may support them for getting the country back on track. Its going to hurt, for sure. I certainly will lose out some as a defense contractor, already have as the funding for projects has been nil for over a year now, this story is nothing new to me =(

[mav]

To balance on cuts alone requires about a 38% across the board cut. Lots of conservatives are gonna scream bloody murder if we cut that much.

Maybe or maybe not. During the Clinton administration, the gov was spending around 500 plus million per day, during Bush it was 1.7 billion per day, and under Obama it is 4.1 billion per day (numbers taken from O'Reilly). I don't think a bunch of conservatives were screaming during the Clinton years that the gov needed to spend more. From what I remember of the 90s, a lot were screaming we were spending too much.

Edited July 27, 2011 by mav

[Guest nicemac]

We can't vote out everyone every term...

Congress is up for election every two years. All of them. While unlikely to ever happen, all of them could be booted out at once.

[Guest Lester Weevils]

Yes I'm not arguing that we should not cut, or that we couldn't survive cutting enough to balance.

Just the feasibility angle. Daddy Warbucks or the BoonDogglesRUs construction company might contribute to Rick Perry or Romney as long as they promise to reduce tax and cut welfare. But Daddy Warbucks and all the employees of BoonDogglesRUs are gonna turn commie when their flavor of "gov checks" gets cut.

[Jonnin]

Congress is up for election every two years. All of them. While unlikely to ever happen, all of them could be booted out at once.

Haha, not what I meant anyway. I meant the cutting or taxing is going to happen if the ammendment does, at which point anyone elected will only have unpopular choices to make, replace every single member of congress, the new group will have the same unpopular choices, I think eventually even the dumbest voter will understand that. But the ammendment is not gonna happen anyway. If it did, it should also force states to present a balanced budget each year as well IMHO. Im full of crazy ideas lol, I say they raise taxes on corporations BUT subtract from their total taxes a large amount for every person they employee full time, say -10k taxes owed per employee. Im sure there are reasons that is a bad idea, but there are so many things no one has tried or even mentioned. They cant seem to think of anything new to do-- and that alone is going to mean that nothing good gets done.

[Guest 6.8 AR]

What's wrong with trying pure capitalism? Getting rid of the vast regulatory agencies and

letting the marketplace sort itself out has never really been tried. Always has to be some

kind of manipulation from government to make or break a company. Taxing companies just

taxes the people that much more.

[Guest nicemac]

Taxing companies just taxes the people that much more.

This ^^^^^^^^^^^^^^^^^^^^^^^^

[Jonnin]

What's wrong with trying pure capitalism? Getting rid of the vast regulatory agencies andletting the marketplace sort itself out has never really been tried. Always has to be somekind of manipulation from government to make or break a company. Taxing companies just taxes the people that much more.

The pure version leads to monopolys which, after killing off all competition, can then charge 1000x the prices or whatever. This is not so good (think arabic oil cartels which work as a single entity even if they are not to keep prices high). There are a number of other problems with it but business without regulations can cause a fair amount of trouble, from slave labor (remember pure form would mean no min wage) to corruption (shoddy goods, no regulation..!) and so on. I wouldnt recommend this. No regulation means insider trading and so on for the markets as well, enron comes to mind...?

[Guest nicemac]

No minimum wage would be the best thing to happen to our economy yet. Why should an employer be forced (by law) to pay someone more than a job is worth?

[G27]

No minimum wage would be the best thing to happen to our economy yet. Why should an employer be forced (by law) to pay someone more than a job is worth?

Yah, people seem to forget that minimum wage is directly tied to inflation - it's just another form of wealth distribution.

[Guest 6.8 AR]

The pure version leads to monopolys which, after killing off all competition, can then charge 1000x the prices or whatever. This is not so good (think arabic oil cartels which work as a single entity even if they are not to keep prices high). There are a number of other problems with it but business without regulations can cause a fair amount of trouble, from slave labor (remember pure form would mean no min wage) to corruption (shoddy goods, no regulation..!) and so on. I wouldnt recommend this. No regulation means insider trading and so on for the markets as well, enron comes to mind...?

Do you really think those things don't happen

in a regulated marketplace? There is no magic

answer, but free markets are what built this

country, with all the good and bad in tow.

We were actually doing quite well before

the regulatory reforms came about.

Sent from my iPhone using Tapatalk

[Jonnin]

No, I am not saying any of those things are bad or good, just that its an exchange of one set of troubles for another with a lot of chaos during the transition. I do not think a drastic change can be done overnight without rocking an already unstable system. I do not support a min wage but what I am saying is that taking it out overnight woud lead to who knows what sort of reactions -- might be great by 2025 but it could also mean that 2013 will envy the good old days of 1930! The only way a drastic change can be done without causing as many problems as it solves is if the changes made involve a great deal of common sense and sound economics... which is simply not possible with today's leadership, IMHO. Going "pure" is very risky for an already bleak short term, at the very least, that is my main point, and probably not a solution long term either. Go back to look at the history of the cartel of big oil, big train, big business from the 1870s and the many problems caused by zero regulation before giving a return to this environment a serious consideration. If you think walmart or microsoft or the others are bad NOW, imagine them with a free rein and get back to me on that. They may create some jobs, but would that be enough to justify the rest of it?

[Guest Lester Weevils]

We can't have a modern life without various kinds of mining. Well, even in the ancient days we had to have mining except if it was acceptable to only have whatever copper or iron could be picked up in ore rocks laying on the ground.

On the other hand, "The right to swing my fist ends where the other man's nose begins."

Somebody sets up an operation near my property that damages my property with pollution or other nuisance, then he can either spend whatever money is required to keep his mess off my little bit of property, or he can go somewhere else to do it.

If the only way to prevent encroachment would be lawsuit-- What odds would I have of suing General Bullmoose Inc and winning?

I'm not real big on the numerous alphabet agencies, but OTOH without them there would also be problems.

[mav]

Anyone want to take a guess on who said the following:

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that “the buck stops here.†Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.

That was from Senator Obama's giving his floor speech on March 20, 2006.

Ya know, I have heard from a lot of conservatives who I respected cry that the Boehner bill has got to be passed. You have to compromise. We can't default. Sheesh . It is like I am stuck in the Twilight Zone. All of this hype reminds me so much of the TARP debates during Bush's term.