Hildegarde

Getting To Be Fall

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1. I posted that email to the Hedgehog blog.

   I’m generally a supporter of unions, as is only fair since I’ve benefitted from my membership in a couple of different ones. However, like any human organization, a union is only as good as its membership and leadership, and I could tell some stories about that too.

   From north of the border, the US still seems to be flailing about in a kind of economic meltdown, and if all those experts you have don’t have the answers, I sure don’t. I keep telling my mother in calming tones that the US often seems to go right down to the wire when doing budgets, and they always got out of it before. I didn’t share with my mother my sister’s concerns – a union member in a state not mentioned above with a family and an employer ready to take every advantage and then some of new anti-union legislation. Her husband’s job isn’t that secure or well-paying, both boys are still at home and in school…. Sometimes I wonder if the US’s chickens are finally coming home to roost – all those decades of programs that were supposed to be paid for out of future revenues and loans suddenly are coming due during terrible financial times. I don’t say that to my mother, either, since her pension comes mostly from the years in the US.

   

   Cheryl

   26 Jul 11 at 6:57 am
2. Does Connecticut have a state income tax? Illinois, Missouri, and Idaho (all states where I used to live and have had to pay income tax) do, as well as most other states, and all of them are suffering financial woes because of the Federal income tax cuts for the rich. Every state that I have direct knowledge of has its income tax keyed to the Federal income tax. Instead of having all sorts of state income tax forms to fill out, you just enter the amount of your taxable income from your Federal tax form, and then your state tax is figured on that amount. So as soon as Bush originally pushed through his tax cuts for the wealthiest, the states’ income tax revenues were cut drastically. Back then was when the states’ financial woes hit, which was well before the financial meltdown of more recent years. Of course the latest crisis has only made things worse for the states.

   

   Charlou

   26 Jul 11 at 3:34 pm
3. Disclaimer: I live in Australia, do not pay taxes to the US and do not vote in the US. But I do receive a monthly payment from US social security. Several yeara ago it was worth 450 Australian dollars. Bow it is worth 320 Australian dollars because of the change in exchange rate.

   So far as I can tell from this distance, “wealthy” is being defined as $200,000 for a single person, That does not strike me as wealthy. I’d call it middle class.

   Moreove, according to

   http://www.taxfoundation.org/news/show/250.html#Data

   The top 1% of taxpayers are paying 38% of income tax,
   the top 10% are paying 70% of income tax and the botton 50% are paying 3% of income tax.

   I really see no evidence that the “wealthy” are escaping taxation.

   

   jd

   26 Jul 11 at 4:13 pm
4. [Charlou, I think you’ll find most states ask for the gross income from your Federal form–not the income tax paid. That’s true in the states where I’ve filed. At any rate I’ve yet to hear a state complain that their income tax revenue went down because of either of the Bush tax cuts. Steeply progressive income taxes went down–drastically–when the economy went bust. But a state can calculate–and tax–income any way it pleases.]

   Two more general points. I think as a nation and possibly as a civilization, we’ve been making it steadily easier for a small number of intransigents to gum up the works. Read in history books how rapidly a decision could be made and implemented under FDR and Eisenhower, and compare it with today’s expectations. This does not, I think, have anything to do with individual freedoms, but with the concept of “minority rights” (as opposed to individual ones) and steadily more elaborate procedures. Just as an example, a US Senate without “silent” holds, and where a filibuster involved continuous speech instead of the odd “closure” vote, would move a good deal faster without costing any state or Senator any constitutional prerogatives.

   Second point: we’ve seriously messed up the spending system. As set up, it was hard to spend money: only the House could do it, and then the spending had to get through the Senate and not be vetoed. The states generally had something similar. Now, starting with the New Deal, but greatly accelerating with the Great Society, Sam the politician passes a deal in which he doesn’t spend much–but it’s spent every year, and at an accelerating rate, so Sam’s replacement Joe 10 or 20 years later is already on the hook for immense amounts of spending he never voted for. (If you do this to private property held in trust, it’s called waste, and you can be sued for it–possibly jailed.) And Joe can’t just refuse to vote for the spending: he has to pass a bill reducing it, which is much trickier. (See intransigents gumming up the works, above.)

   So in the states, which mostly can’t borrow, this comes out in budget shortfalls and crises, and in the Federal government, it makes for a train wreck over the debt limit. Until we change the system, this is just going to go on happening, and maybe get worse. Only things I can think to do are (1) all spending is for two years only; and (2) no accelerator clauses. You can spend your constituent’s money, but you can’t spend the next Congress’s–or your constituents’ children’s–money.

   Or we can go on like this forever.

   

   robert_piepenbrink

   26 Jul 11 at 5:10 pm
5. Robert makes a good point about spending. I want to comment on borrowing. I was in high school and college in the 1950s. It was common to hear people say that it was reasonable to issue bonds to pay for highways and hospitals and schools because they would be in use for many years and bonds spread the cost over time. People also said the debt wouldn’t be a problen because we would owe it to ourselves.

   The first point was reasonable but, when bonds came due, treasury issued new bonds and used the money to pay off the original bond holders. And then it issued still more bonds. The fancy term is “rolling over” or “refinancing” but in non-government circles its called a Ponzi Scheme.

   Ponzi schemes always when the scheme runs out of new “investors” to cover the payments to the earlier ones or when investors start asking for their money back.

   The US long ago ran out of new US investors with the result that countries such as China and Saudi Arabia hold a large fraction of the debt.

   Another of the large “investors” is the Social Security Trust which will soon be trying to redeem its bonds to pay retirement benefits.

   The US debt looks to me like a Ponzi scheme about to become a train wreak.

   

   jd

   26 Jul 11 at 7:15 pm
6. $200,000 for a single person is middle class???

   I don’t think so. The most recent figures I can find are from 2007, and the median income for the top quintile (household, not individual) is about $267,000.

   I make less than half that, provide some support for my kid, and I’m upper middle class.

   You may not consider top quintile “wealthy”–I don’t–but they are at least upper class.

   My definition of wealthy is that you live off of investment proceeds rather than working for a living.

   

   CAFiorello

   26 Jul 11 at 8:20 pm
7. “Taxable income” is not the same thing as “income tax.” Please go back and re-read my posting.
   Over the years, my husband and I have paid state income tax in 8 different states, and none of them required us to pay on our gross income, but rather on our Federal “taxable income,” which was arrived at after all deductions, exemptions, etc., on the huge stack of Federal forms were filled out.
   I don’t know what state you live in, but the state I was living in when Bush’s first tax cut for the wealthy went through had to immediately cut all sorts of programs because of the shortfall caused by that tax cut, which caught the states completely unprepared, as their budgets were generally passed in the fall and based on their expected revenues in April.

   I do not know where you got your figures, JD, but I would be extremely surprised if they are correct about who is paying what income tax. One can always check online, but can one then trust the figures one finds there? Also check the percentage of wealth in the hands of, say, the richest 5% of the people in this country.

   Back in 1959-1960 when I was a senior in high school, I took Civics (1 semester) and Senior Social Studies (1 semester) under Mr. Pickens. I learned a lot of things I wish the U.S. Senators and Congressmen could learn.

   One thing Mr. Pickens explained to us is if a new factory came to town and hired ten men (hey, this was before women’s lib!) and paid them each $10,000/year, that meant the factory had a payroll of $100,000/year. The people earning that money would not only pay taxes on it, but they would also spend most of it in town, and the people they spent it with (stores, restaurants, garages, etc.) would also pay tax on it and spend a good part of it in town. The $100,000 would circulate in the community five or ten times (can’t remember the exact number, but it was impressive) before it finally was dissipated. Apparently the U.S. Congress and the U.S. Military and assorted state governments don’t understand this when they decide to “out-source” services and purchases because it’s “cheaper” to get the goods and services abroad. Please note here that I’m talking about tax money being spent abroad, not individual’s personal money, which is, of course, everyone’s right to spend wherever he or she wants. None of these government entities seem to think about the fact that when tax money is spent to purchase, say airplanes in France rather than in the U.S., the employees in those factories don’t pay any income tax in this country. The same thing happens when Indiana, for example, decides to out-source tax-payer funded accounting jobs to, say, Bangladesh, instead of paying an accounting service in Indiana. No income tax is paid by the employees in Bangladesh. And the money paid out stops circulating in Indiana. Why is this so hard to understand?

   Another thing I learned in Mr. Pickens’ class was that a lot of state and local governments are supported by property tax, and therefore state and local governments work very hard and do many things to attract businesses to their communities and to keep businesses in their communities so that they will keep a strong tax base. For something like thirty years Congress, in its infinite stupidity, gave tax breaks to companies that moved their factories overseas. Didn’t they ever think about the fact that the more jobs they sent overseas, the less income tax they could collect, and the less tax monies they would then have to spend? Oh, but wait — they never learned to restrict their spending to match their income, did they!

   The Allies won World War II because of the U.S. manufacturing capabilities. Yes, Allied troops from all over the world fought bravely in WWII, but the tanks and guns and ships and submarines and airplanes and bullets, etc., that the English and French and Australians and New Zealanders and South Africans and Canadians fought with came primarily from the U.S. So today the U.S. doesn’t even have the capability to manufacture the supplies its own troops need. We don’t just have to import oil, we have to import steel, clothing, bullets, etc. We used to be the world’s strongest industrial country, but now, thanks to our short-sighted Congress, we are rapidly becoming an agricultural nation. Bush’s government tried to hide this fact by re-classifying some jobs in the service industry and making them “manufacturing” jobs. For example, people who work in MacDonald’s and other fast food restaurants now hold manufacturing jobs. Yeah, right. So how many of those Big Macs that they manufacture can we sell abroad to help ease the trade deficit?

   The other thing to remember is that Congress is not the only entity passing federal laws. The government regulatory agencies Congress sets up can also pass regulations, which have the weight of law, but which don’t have to be, well, constitutional. The regulations from all the assorted agencies place such a burden on small businesses, that they drive many of them out of business. I had a friend back when we lived in Missouri who was a cabinet maker. He had way more jobs than he could handle, and so he had to turn many of them down. I asked him why he didn’t just hire someone to help with the “slog” part of the jobs–the part that didn’t require his expert skills, and he said he couldn’t afford to–that if he hired even one employee, his paperwork would increase so much that he would end up losing money. He was a great guy, and a really good cabinet maker, and he could have trained a lot of people to be skilled craftsmen. Instead, we harvest the old-growth forests in the Pacific Northwest, sell the lumber to Japan, China, or wherever, and they send them back to us as kitchen cabinets, chairs, etc.

   About labor unions–keep in mind that the union negotiators don’t necessarily represent the union rank and file any more than our Congressmen represent us taxpayers.

   One of the things I learned the year we lived in Taiwan is that there is always a trade-off. For example, in the U.S. if you want to open a restaurant, you have to pass all sorts of inspections and meet all sorts of regulations. In Taiwan at the time (1977-1978) all you had to do was put a few table and chairs in your front room, stick a sign in your window saying “Restaurant,” and you were in business. The trade-off was that a lot of people might get sick eating in your restaurant. For example, the National Science Agency (rough translation) tested ice cream being sold in Taiwan and found 90% of it contaminated. At the snack bar on the campus in Hsinju where my husband was teaching, they mixed the soft-serve ice cream in a wash tub, using water from a garden hose. [Note: None of the water in Hsinju was safe to drink without boiling.) I’m not sure how often, if ever they disassembled and washed the machine, much less sterilized the equipment. In the United States, soft-serve ice cream machines have to be broken down every day and every piece of them has to be washed with hot soapy water and then sterilized with boiling water. Conscientious restaurants do this on their own; others do it because if they get caught not doing it, they will have to pay a fine.

   But can’t we find a reasonable medium, between no government regulation and so much regulation it strangles American business?

   In Taiwan there are no zoning laws. I know there are a lot of people in this country who have experience battling with zoning boards, who would cheer at that idea, but the trade-off is that someone can start a factory right next to your expensive house. Or someone can put a junkyard right next to your vacation condo.

   It’s the same way with the unions. Without the unions, management can do whatever they want with their employees, and the individual workers can do nothing to protect themselves. Remember what it was like for coal miners before the unions? Dangerous mines, long hours, payment in company script, which was only redeemable in company stores, and those stores charged way more than regular stores, so that the miners never got out of debt to the company?

   Of course when the unions became too powerful, they caused some companies to go bankrupt. There has to be a balance.

   (I’m on a rant now–sorry, but I can’t stop.)

   Let us look at why so few Americans have health care. Back when Sam Walton was alive, he treated his employees fairly, but when he died, his heirs started squeezing every penny of profit out of the company. And the easiest place to squeeze was the employees. All of a sudden, about 80% of the employees became part-time employees, working only 38 hours per week even after they’d worked 40-hour weeks for years. Why? Because the loophole in the laws Congress passed forcing companies (other than “Mom & Pop” ones) to provide benefits like unemployment insurance, health insurance, life insurance, pensions, etc., only applied to “full-time” employees, i.e. employees working at least a 40-hour week. Apparently the “part-time” loophole was put in so that businesses could still afford to hire students and housewives who were unable to work full-time. What Congress in its infinite stupidity didn’t realize was the tremendous savings that businesses would realize if they changed most of their full-time jobs to part-time jobs. In the space of very few years, other companies grabbed this loophole and downgraded most of their positions from full-time to part-time. My daughter is in her mid-thirties, which is not a good age to be these days. Almost none of her friends hold down full-time jobs. Most of them have 38-hour “part-time” jobs, which don’t pay enough for them to live on. Which means, of course, that they have to get a second part-time job. They can end up working 50-60 hours a week and still have problems because they don’t qualify for unemployment insurance, health insurance, pension plans, etc.
   There is a vast difference between an employee who only wants to work part-time, and an employee who is kept from working full-time in order to deprive him of benefits.
   Please keep this in mind when you talk about the supposed figures of the bottom 50% of the taxpayers in this country paying only 3% of the tax. Who knows? It could actually be that bad now–it could be that 50% of the taxpayers in this country do not have full time jobs anymore, just two or three part time jobs with no benefits.

   Another place where we need a balance is in the rights of the minority versus the rights of the majority. It’s easy to blame a lot of the ills of this country on the fact that minorities now have more rights than they had back when FDR, Truman, and Eisenhower were presidents. Your argument, however, reminds me of a cartoon strip from my college days: One cave man says to another, “I don’t care what you say, Gort. I still say we didn’t have this screwy weather before they invented bows and arrows.”
   “Post hoc ergo propter hoc” has never been valid reasoning, not back when FDR was president and not today when Obama is president.

   

   Charlou

   26 Jul 11 at 8:40 pm
8. A person who is retired and drawing a pension is living off investment proceeds. That doesn’t make a retired school teacher wealthy.

   I don’t have the US figures but when I moved to Australia, the average male income was $AUD5000 a year. $AUD200,000 was 40 years average income and would have been considered wealthy.

   There have been several bouts of inflation since then and the average male income is about $AUD50,000 a year. $AUD200,000 is 4 years average income and would be a successful surgeon or lawyer or accountant. Certainly not wealthy. If you want to tax the wealthy, I’d suggest two new tax brackets. One at $2 million and the other at $100 million.

   

   jd

   26 Jul 11 at 8:42 pm
9. One more time. Charlou, tax cuts do not lower taxable income. They lower the tax due. If the state wants 2%, 5% or whatever of your Federal taxable income, it matters not a whit to the state revenue that the Federal government raises or lowers its income tax rate.
   As for the wonders of keeping the money at home, should Indiana prevent the import of cars made in Ohio or Michigan? My German ancestors used to have a new set of customs barriers about every ten miles. I never heard it made anybody wealthy except the customs agents.

   

   robert_piepenbrink

   26 Jul 11 at 10:06 pm
10. Oh, dear, Robert. Tax cuts can indeed lower the taxable income if the “tax cuts” are in the form of additional deductions or exemptions.
    Have you actually read the “tax cut” bill passed early in Geo. W. Bush’s first administration? Are you sure that the Bush “tax cuts” were cuts in the rates rather than additional deductions and exemptions? I suggest you check that out, because lowering the upper tax rate from, say, 35% to 30% would have very little effect on the amount of income tax the wealthy actually pay.

    Just an example: When A taxpayer sells stock he has owned for more than 6 months, he fills out the proper forms for profits from the sale of stock, which profits are called “capital gains” (not to be confused with the dividends and interest he got while owning those stocks). Then only half the total of the capital gains counts under “taxable income.” Oddly enough, the rich have more capital gains than the middle class, which means they save a lot more money than ordinary workers do. I believe that this change from paying tax on all capital gains to paying tax on only 50% of capital gains is the main feature of Bush’s “tax cuts” for the rich.

    Some people say, Oh, but a person has already paid income tax on that money so he shouldn’t have to pay twice on the same money. Not so. He paid (or should have paid) income tax on the amount he earned, some of which he saved and then invested. And he had to pay income tax on the distributed dividends or interest. BUT he did not already pay income tax on the profits he made when he sold the stock. So what the government is saying is that if you earn money by your own hard work, you have to pay income tax on all that money. But if you are wealthy and don’t have to work, you just have to pay tax on part of the money your money has been earning for you.

    One thing I would like to make clear. I am not one of the have-nots saying, Let’s take from the rich and give to the poor. My husband and I have always owned stock. From the time we were married, we have lived very frugally, and we have always invested some of our savings in the stock market. Yes, we have made a profit on almost all of the stocks we’ve owned… or maybe we haven’t actually. The problem is that the “profit” we have made when we sold the stocks has often been a paper profit rather than a real profit because of inflation. If, for example, we bought stock for $5,000 and sold it 30 years later for $10,000 that would be a paper profit of 100%. But if the dollar has declined in value over the course of those 30 years and now is worth only one fourth as much as it did when we bought the stock, then we have actually lost money. But we still have to pay tax on the paper profit. Sure, it’s only the tax on capital gains, but still sometimes we end up paying a tax on what was an actual loss.

    On the other hand, a trader who only hangs onto his stock for the six months necessary for it to count as capital gains doesn’t usually have to worry about what inflation has done to the money he invested six months earlier because (knock on wood) the inflation rate in the U.S. has usually been negligible over that short a time period.

    As I see it, the only fair thing to do is to eliminate the distinction between “regular” income and capital gains, BUT to have a set formula based on past inflation so that the purchase price of stocks (or land or a house or anything bought and resold) is adjusted for the rate of inflation during the time the stocks (or whatever) were owned. This would not be difficult to do. There could be a simple chart, for example: “If you purchased (whatever) in 1969, multiple the purchase price by (set number) and enter that adjusted purchase price on line…” For each year, going back a hundred years (that should be long enough) there would be a set number (based on what the dollar was worth in that year) to multiply the purchase price by. Nothing to it. Everything fair.

    Do you honestly think that if the uppermost tax rate is, say, 30%, that the richest people in this country (richest being defined as the people with the highest income rather than with the highest accumulated wealth) actually pay 30% of their income? The problem is that there are so many loopholes (designed by the tax lawyers of the rich, lobbied for by the lobbyists of the rich, and enacted into law by the Congressmen who want to get campaign donations from the rich) that the rich can reduce their taxable income from, say, 10 million dollars down to say, 10 thousand dollars. Sorry, I’m not really exaggerating here. There are tax loopholes in the tax code that apply to a very, very, small — extremely small — number of people. I have seen examples, years ago, of loopholes that fewer than 100 people could qualify for. And trust me on this, tax loopholes never go away–Congress just keeps adding new ones.

    If I’m reading the rest of your posting correctly, you are in favor of having American tax money be spent overseas for goods and services that are available in this country. And you’re in favor of giving corporations tax breaks to close their factories in the U.S. and open new factories in other countries. And this is all because there used to be too many customs barriers between the German states…?

    Just how many other countries do you think are out there (other than the U.S.) who do this kind of thing? And how long do you think the U.S. can continue to do this kind of thing before we run out of money? I don’t see that this kind of financial stupidity has anything to do with how quickly Congress can pass legislation or how many minorities want equal rights.

    I cannot find anything in any of my postings that could be construed as recommending that we erect trade barriers between states in the U.S., nor can I even find anything I’ve said that even hints that I think we should have trade barriers at the borders of the United States.
    To my way of thinking there is a HUGE difference between saying we should spend tax money within the United States and saying we should enact trade barriers.

    On the other hand, I can do a pretty good rant about how other countries’ trade barriers are hurting not only the U.S. economy but also the worldwide economy. But I’ll save that rant for another day.

    P.S. My definition of “rich” is anyone who can walk into a bookstore anytime, anyplace, and buy any book(s) he or she wants. I have never been that rich.

    

    Charlou

    27 Jul 11 at 12:57 am
11. Charlou

    “P.S. My definition of “rich” is anyone who can walk into a bookstore anytime, anyplace, and buy any book(s) he or she wants. I have never been that rich.”

    Seriously? I can do that any time I like, and our family gross income is well south of $AU60,000 a year – all sources. That’s barely working class here where I live in the Australian Capital Territory, and considerably lower than any working class family would need to earn and/or receive in government benefits to afford to live in any but the most impoverished and socially dysfunctional suburbs of any mainland capital city in Australia – and in most of the larger rural communities.

    Your definition is unrealistic. It is, at most, a definition of “comfortably off”, ie someone with some discretionary financial resources. In this country, most family farmers would be considered poor on the discretionary financial resources criterion. Yet the media, and most leftist politicians, delight in demonising them as “rich” which, in terms of the sale value of their assets alone, most undoubtedly are, at least some of the time. But most struggle to pay for their groceries for most of the time.

    Any rants you might have about the US spending your tax money overseas, or about other countries’ trade barriers would be unlikely to impress the several non-Americans here. The US has trade barriers every bit as unreasonable as any other nation and is in no position to claim any moral high ground here.

    On spending your tax money overseas, whether for goods available locally or for anything else, there are good reasons why American companies do as they do. As just one example, the US depends on foreign military sales to offset a large slice of its own defence industry expenditure. In their own turn, countries such as Australia demand, and get, offsets of one sort or another from the US or other nations from which it buys defence materiel. For many years, and perhaps to this date, various Australian aircraft factories produced significant assemblies, eg tails and wings, for Boeing. This sort of thing has nothing whatsoever to do with Boeing seeking a cheaper workforce to deprive American workers of their jobs. By such offset arrangements, Boeing is able to actually preserve and enhance the job security of its American workforce. Without such offsets, the Australian government (and others) would take its business elsewhere and there would be less work for Boeing (or whomever), and layoffs would be inevitable.

    I think the left/right, higher/lower taxes argument is futile. Neither one is likely to make any significant difference to the US’s (or anyone else’s) economic problems without the simultaneous and radical slashing of government expenditure, something that is very difficult to achieve in any democracy. It becomes virtually impossible in our western nations where so many voters (including our enormously bloated bureaucracies) have increasingly become dependant on governments for their very livelihood.

    

    Mique

    27 Jul 11 at 3:56 am
12. See, the problem there is the speed with which I read books. Yes, I could go into a bookstore and buy a book, but that book would only last me part of a day. So what would I read tomorrow? And the day after tomorrow? The only way I can afford to read is by shopping extensively in thrift stores and by going to used book stores. Full price books new in a bookstore? Maybe five or six books per year.
    Sure, there are always libraries… except that too many of the libraries here in the States have jumped on the same bandwagon the big chain bookstores, grocery stores, and discount stores have been on for the last twenty years. Most libraries spend a lot of money to buy multiple copies of the “best sellers,” and they spend almost no money to buy the mid-list books, which frequently are better written.
    I put “best sellers” in quotation marks because publishers pay to have their books put on the “best sellers” racks as soon as they come out, i.e. before the book has sold even a single copy much less become a real best seller. If you’re lucky, they don’t do that kind of thing in Australia, but they definitely do that here. I’m not paranoid. I’m a published author, although I haven’t written anything in the last nearly twenty years, and I got my information from (a) my editor, (b) my agent, (c) other published authors, and (d) other editors at writers’ conferences.

    I read primarily mysteries. Last year I spent a month in Fairfax Co., Virginia. I couldn’t bring enough books on the airplane to keep me in reading material for a month, so I used a relative’s library card. Not much help. 95% of the books on the mystery shelves were published in the last five years (except for a very few classics like Agatha Christie). In addition, most of those mysteries were the “high demand” books, i.e. the books written in 6th grade English or maybe 8th grade English. Not books written in college English. Not books that require any effort to read or much in the way of cultural literacy to understand. In other words, not books that I am able to read.

    I am sure that other people have their own criteria for what it means to be rich. For one person it may mean being able to buy a new car every year instead of driving a clunker. For another it might mean being able to go on a fabulous vacation every year. For many it means I’m sure it means being able to pay every bill every month.

    I guess what I’m saying is that “rich” is more a state of mind than a dollar amount. The classic definition is: “Rich is spending a dollar less than you earn; poor is spending a dollar more than you earn.”

    Actually, my definition of rich has changed in the last year. My daughter gave me a Kindle for Christmas. I love it. I can read for hours without my fingers and hands becoming too painful. My current definition of “rich” is having enough money to buy e-books to replace all the mysteries and other novels on my bookshelves. Unfortunately, I can’t buy e-books in thrift stores and used book stores, so that’s never going to happen.

    

    Charlou

    27 Jul 11 at 10:45 am
13. Yes, I know how international trade works. The point I am trying to make is that the U.S. has put itself in the position of no longer producing enough items to sell on the international market to get the foreign credit it needs to pay for everything it is buying. We have been running a gigantic trade deficit for years, and every time a factory is moved from the U.S. to overseas, the situation gets worse.

    Yes, factories will move overseas to find sources of cheap labor. But does that mean the government should give tax breaks to companies that close their factories here?

    You say you have companies there in Australia that produce parts for Boeing. Suppose the Australian government gave those companies tax breaks if they would close all their factories in Australia and build new factories in, say, Malaysia? Would you find this upsetting? Would you think this a stupid thing for your government to do?

    Australia is not primarily a manufacturing country. It gets most of its foreign credits by the sale of agricultural products and natural resources. It’s economy is healthy (so far as I know) because its population is small and its natural resources are good. Suppose its population increased by ten fold? Or twenty fold? Or a hundred fold? And suppose it remained dependent on agricultural products and natural resources? What do you think that would do to your economy?

    As recently as World War II America was a strong industrial nation. It is that no longer. We used to export steel. We now import over 80% of our steel. We used to export more manufactured goods than we imported. We now import way more manufactured goods than we export.

    In World War II the U.S. led the world in tool-and-die capabilities. What is that? Tool and die companies manufacture the machines that are used in other factories. In the last 60 years, almost all the tool-and-die companies in the U.S. have gone out of business, which means that not only have thousands of factories been moved overseas, but we no longer have the capability of making the machines we would need if we wanted to build new factories.

    Let’s look at it another way.

    Some countries, like Saudi Arabia, derive most of their wealth from exporting their natural resources (petroleum, in the case of Saudi Arabia). Those natural resources are finite. They will not last forever. The end is in sight. When the Saudis run out of oil, their economy is going to collapse unless they have made investments in some kind of manufacturing that will generate the income to replace their income from petroleum. They are trying to do this now, but so far not on the scale they need to be doing it.

    The U.S. economy is now a house of cards. We import far more than we export. Where do we get the money to do that? We are selling off land, factories, houses, apartment buildings, hotels, business, etc., to foreign investors. How long can we keep doing this before we run out of pieces of the U.S. to sell? And of course, we are selling government bonds, which is another way of saying we are borrowing the money we need to pay for the products we import.

    Suppose you inherit a million dollars (Australian or American, it doesn’t matter). Now that million dollars, properly invested, will generate income for you. Let’s suppose that you also have a job where you earn enough money to live on. Now let’s suppose that you quit your job (that’s the equivalent of the U.S. exporting its factories). Let’s suppose also that instead of living on your interest income from the million dollars, you keep on spending an amount equal to the interest plus the amount you used to earn from your job. In other words, you spend not only your income but also your principle. And suppose you start selling off your car, your books, your washing machine, your house, anything and everything you own that you can sell, just so that you can go on spending and spending and spending as if there is no tomorrow? And suppose you buy a lot on credit, and your credit card debt just keeps getting bigger and bigger?

    That’s exactly what the U.S. is doing. The end is in sight, and it’s not going to be pretty. And when the U.S. economy goes down, it’s going to drag a lot of other countries’ economies down with it. We are looking at a coming worldwide depression that will make the depression of the 1930s seem mild.

    How can the U.S. economy NOT collapse? We have been spending our principle for decades. We have been selling off everything we own to keep the party going. We have been borrowing money from anyone who will loan it to us, despite the fact that we are a truly terrible credit risk.

    What’s really stupid is that we are spending so much to import things we don’t actually need, like clothes. I have lived in 5 foreign countries, and traveled in too many to count. Everywhere I’ve gone, the closets have been small because people have limited amounts of clothing. They buy their clothing based on what they need, and they wear it at least until it starts to show signs of wear. Sometimes they even (gasp!) mend it and keep wearing it. But in the U.S.? Here we have walk-in closets jammed with virtually new clothing, and we throw away (or donate) clothing we’ve worn only a couple of times so that we can buy more clothing, which we will also wear only a time or two before we discard it. Why? It makes no sense.

    Have you heard of black lung disease? It is caused by coal dust in mines. There is also white lung disease, caused by the cotton dust in factories that make cotton fabric. So our insatiable “need” to keep buying more and more clothes is causing illness and death from white lung disease around the world. And land that could be growing food for the native populations is instead growing cotton for the companies owned by the rich few, which means people are also starving to death around the world in order to keep us supplied with more and more clothing that we don’t need. And this is just one example of many.

    Where does it stop?

    Some people use the argument that, “Oh, people have been crying doom and gloom for decades and everything just keeps going along just fine.” That argument is essentially, “Nothing bad has happened yet so that proves nothing bad will ever happen.” Major fallacy. Right up there with, “Oh, real estate values have always gone up, which means they will always keep going up” or “Oh, this stock has always gone up so it will never go down.”

    I have four grandchildren. The coming worldwide collapse is going to happen in their lifetime. I do not see any way to protect them when the whole system falls apart.

    Can the U.S. continue to grow enough food to feed its people? Not if it can’t pay for the petroleum it needs to keep its agricultural industry functioning. Cut off our petroleum imports and we will starve. Stockpile food? Think there won’t be food riots? How do we keep others from taking that stockpiled food away from us? Buy more guns than our neighbors have? And develop the ability to kill them before they kill us?

    You’ve got it pretty good there in Australia. Even if the world economy tanks, you can probably still feed a lot of your people. Not all, but a lot. Of course if your supply of petroleum is cut off, you may have a problem transporting the sheep and cattle from the outback to the cities. And you’d probably all have to migrate to the northern parts of your country where the winters wouldn’t kill you. But at least you’ve got a better chance of maintaining some level of civilization.

    The U.S. economy is a train wreck that is going to happen. And all our Congressmen care about is reelection.

    

    Charlou

    27 Jul 11 at 11:29 am
14. “I guess what I’m saying is that “rich” is more a state of mind than a dollar amount.”

    Well, yes, if you’re talking about states of mind. If you’re discussing tax codes, taxation rates, etc. for difference social classes, ‘rich’ is a number; an amount of money. How much money and in what form (salary, income from investments, actual cash…) can be discussed but should be decided, otherwise you’re going to be comparing apples to oranges.

    

    Cheryl

    27 Jul 11 at 12:54 pm
15. Why is it that people are ignoring the meat of what I wrote and focusing on one little bit of fluff I put at the end… in a P.S., no less.

    Did you all think I seriously meant that people everywhere should judge their income levels on whether or not they can buy any book they want? Yes, that is actually the standard I have been using FOR ME for the last 50 years: I know I will be rich when I can walk into any bookstore and buy any book I want. The problem is that I want to buy ten books or twenty books or thirty books, and I can only buy one or two. I have never been able to buy any book I want.

    Come on, guys! Let’s lighten up a bit here. Charlou said something less than earth-shaking so let’s all jump on her about something she said of a less than serious nature and ignore everything else she said that was of a serious nature.

    Is this one of the unwritten rules for this blog?

    It’s okay to rant, but it’s not okay to say something frivolous at the end of a rant?

    Is there some code word one needs to employ to indicate that one is switching from serious to less than serious? WARNING: This person is now switching from being serious to being less than serious?

    In my last posting about “rich means being able to buy all the books I want” I didn’t even say a thing about tax codes or different types of income. I deliberately split what I had to say into two different postings so people wouldn’t get confused, and yet the next person posting acted as if I were intermingling buying books and tax codes. So why are people acting as if I were merging the two and saying tax codes don’t matter as long as people who are struggling to make ends meet can buy books?

    Looking at my last posting about how to define rich, isn’t what I said about “rich” being a state of mind valid? Aren’t there people out there who earn double what you’re making, and yet they don’t think they’re rich because someone else is making double what they’re making?

    When I was growing up, my father was a college professor, which was not a well-paying occupation in the 40s and 50s. My parents made the choice to have five children, which meant we canned all the fruit we ate, my mother baked all the bread we ate, we had a garden and raised a lot of the food we ate, my mother made all the clothes we wore except for my father’s suits (yes, she made my brother’s suits, my father’s dress shirts, our pajamas, our underwear, etc.) and my mother told me that twice when I was growing up they ran out of money before the end of the month and didn’t even have enough to buy milk.

    My mother-in-law, who had a weekly cleaning lady most of her married life, told me once how tough things were when she was raising her two kids. “Just when I had enough money to buy a new couch, then Tommy would need a new trumpet or Cynthia would need a new formal.”

    Apples and oranges? You bet.

    Is there another rule on this blog that says if Person A brings up the subject of “rich” in terms of economy, then all people posting thereafter have to limit the discussion of “rich” to what it means economically?

    Do we need more warnings? WARNING: Instead of commenting on Person A’s remark about what “rich” means in terms of economy, I am now going to discuss what “rich” means psychologically… or historically or philosophically or metaphysically or whatever.

    Can’t we just go along merrily digressing — “Person A mentioned apples, so I am going to talk a little bit about oranges, which are fruit like apples.” And then Person C can digress a bit more and talk about Jack-o-lanterns, because they are round and orange like oranges. And then Person D can talk about Christmas celebrations because after all, Jack-o-lanterns are part of Halloween celebrations so that gives Person D the right to give their opinion of how we over-do at Christmas time. And then Jane posts another blog and the process starts all over again.

    

    Charlou

    27 Jul 11 at 1:43 pm
16. Some of us like posting ‘fluff’ and digressions – not to mention that we, well, I don’t always feel like getting into a debate on US taxation systems and trade policies.

    

    Cheryl

    27 Jul 11 at 2:39 pm
17. Wisconsin State Employee here. Yes, Governor Scott Walker had his way with us. It won’t show up in our paychecks until August, due to a delay from an unsuccessful court challenge.

    In the end, it seemed to be more about destroying unions than about making financial adjustments.

    

    nkateb

    27 Jul 11 at 9:45 pm

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