<p>Also while the quips about sending all the stimulus money to China make good copy, the facts are that total net Chinese imports are less than 3% of the US GDP. Just as a portion of total retail sales it is only about 8%.</p>
<p>I am a big believer that things revert to their mean. (Because they do).</p>
<p>I don’t know how bad things are going to get. I said that in the last post in that other thread. (The stimulus plans are flying).</p>
<p>Now that the stock market has reverted to the mean, I feel better about the stock market. I don’t know which way it is going to go in the short term.</p>
<p>This link that I posted is very close to my thinking. You will notice the link mentioned Tuesday and I mentioned, “I better shut up”…on Tuesday. :)</p>
<p>What I wrote…</p>
<p>"I have hated the market for many years as I said earlier, but now I am not so sure. </p>
<p>I have hated the economy for many years. The credit expansion was incredible. </p>
<p>Now that things are coming to a head, and I am not as sure of the outcome, I should shut up. </p>
<p>I think I will."</p>
<p>What I don’t know is how bad the shape of our financial companies are in. </p>
<p>The companies don’t know either. Makes things difficult to make a rational judgment.</p>
<p>Will lower interest rates take care of the problem?</p>
<p>Or are there too many loans that are worth more than the assets out there?</p>
<p>The following has bothered me for the last several years.</p>
<p>There are problems when asset prices are too high. Capital gets misallocated. Poor financial decisions develop.</p>
<p>The biggest busts come after the biggest booms. </p>
<p>Our federal government spending is out of control.</p>
<p>The Us economy created too much debt.</p>
<p>The income and wealth disparity is widening to 1920s levels in our society. Not good.</p>
<p>Except for federal government spending, and the income and wealth disparity, these problems are being worked out.</p>
<p>Arthur Laffer recommends a cut in the top tax rates instead.</p>
<p>
</p>
<p>[The</a> Tax Threat to Prosperity - WSJ.com](<a href=“http://online.wsj.com/article/SB120122126173315299.html]The”>http://online.wsj.com/article/SB120122126173315299.html)</p>
<p>I already wrote about Laffer…</p>
<p>"Laffer made a nice career out of the Laffer curve. He said recently on CNBC that lowering the tax rates on capital gains worked in getting more government revenues but he didn’t know if cutting income tax rates worked.</p>
<p>I thought that was an interesting admission. Since the show was on CNBC that comment was ignored immediately."</p>
<p>Cutting taxes without cutting spending is not the way to go in the long run.</p>
<p>"EFFECT OF REAGAN TAX CUT ON REVENUES - SHORT ANALYSIS
The argument that the near-doubling of revenues during Reagan’s two terms proves the value of tax cuts is an old argument. It’s also extremely flawed. At 99.6 percent, revenues did nearly double during the 80s. However, they had likewise doubled during EVERY SINGLE DECADE SINCE THE GREAT DEPRESSION! They went up 502.4% during the 40’s, 134.5% during the 50’s, 108.5% during the 60’s, and 168.2% during the 70’s. At 96.2 percent, they nearly doubled in the 90s as well. Hence, claiming that the Reagan tax cuts caused the doubling of revenues is like a rooster claiming credit for the dawn. </p>
<p>Furthermore, the receipts from individual income taxes (the only receipts directly affected by the tax cuts) went up only 91.3 percent during the 80’s. Meanwhile, receipts from Social Insurance, which is directly affected by the FICA tax rate, went up 140.8 percent. This large increase was largely due to the fact that the FICA tax rate went up 25% from 6.13 to 7.65 percent of payroll. Hence, the claim that the doubling of TOTAL revenues proves the effectiveness of tax cuts is including revenues which resulted from a tax hike to prove the effectiveness of a tax cut. This seems like the height of hypocrisy. </p>
<p>Hence, what evidence there is suggests there to be a correlation between lower taxes and LOWER revenues, not HIGHER revenues as suggested by supply-siders. There may well be valid arguments in favor of tax cuts. But higher tax revenues does not appear to be one of them."</p>
<p>I agree with the conclusion. There are reasons why tax rates should be low. I think the economy will grow more with low tax rates compared to high tax rates, but we need to pay for our government. If we want low tax rates, keep spending down.</p>
<p>Effect of the Reagan and Kennedy Tax Cuts</p>
<p>I think the tax rates are OK where they are. To fix the SS fund they should keep collecting, maybe at a lower rate on income over the current max with no limit. Maybe the current % as is and then half that on income over 100K or wherever the current max is set. That will bring in a fair amount of extra $$ without too much pain. It also cannot be easily avoided. I want that money to be there in a few years and for the next 20 or so without cuts in benefits.</p>
<p>I’d like to see us raise the top income tax rate back go up to 39.6% like it was under Clinton until we get a balanced budget.</p>
<p>A part of me would like to see the capital gains tax rate raised back up to 20%. I don’t like capital taxed less than labor. The problem is reality. People well sell their assets less as capital gains taxes go up and we may get less government revenue if we raise the capital gains tax. We probably should just leave that rate alone.</p>
<p>Your idea of raising the SS tax for those that make more income doesn’t thrill me because the rate of return on SS is so low already (plus that would be one large tax increase), but we may have to do that.</p>
<p>I would like to leave SS alone and just get the needed revenues from the general fund.</p>
<p>We have overpaid into SS forever, and underpaying for awhile doesn’t bother me.</p>