Dear President Obama

Dear President Obama,
You need to take a lesson from Ross Perot and make up some simple charts to help us understand government economics.
1. Budgets are balanced by taking in more money and/or spending less.
2. Your government gets money by taxing income so there are two ways to increase revenue, raise taxes and/or raise income. Let’s look at the two ends of the spectrum super rich and those near or below the poverty level.
3. Last year the median income for the top executives of the top 200 corporations was $10.8 million. There is only so much these people can spend even if they eat in the fanciest restaurants, buy yachts and cars and extra houses. They invest the rest. Investment in businesses that create jobs is a good thing. The stock market is getting closer to the record highs before the recession so you would think there would be more jobs. That hasn’t happened. Clearly taking money away from the super rich is not going to hurt job growth. We should raise their taxes.
4. Those near or below the poverty level will spend any money they can get their hands on for necessities like food and shelter. Cynics might say they will spend it on frivolous things like flat screen televisions but whatever they spend it on, it becomes income for someone else and that income is taxed. Let’s say they bought the TV, the people who sold the TV got money, the people who stored the TV got money, the people who imported the TV (this would be an even better example if the TV were made in the USA) got money and all of those people had income on which they paid taxes thus more money came into the government helping keep our national debt from getting even larger.
5. Did the stimulus package work? Absolutely. Without it unemployment would have gone over 10% and we would have gone into a depression. While it wasn’t enough to bring down the unemployment figure, it did keep it from getting much worse.
6. We would all like to see the federal government spend less BUT we need to be careful we don’t make the recession worse by taking money out of the economy where people will spend it. When we take jobs away from teachers, firefighters, police, and others employed by our towns, states and the federal government we are adding to the unemployment problem. When we take money out of the hands of people who will spend it because they need to in order to live we are also decreasing tax revenue.
These are simple facts, Mr. President. Explain them to the people. Maybe even Congress will understand. My senators, even though they are moderate republicans, won’t listen to us. If we are going to vote reasonable people into office, we need your help, dare I say leadership?

Wall Street Bonuses

“What to do about those gross Wall Street bonuses?” politicians, “experts” and pundits bewail. They debate how best to regulate such things. Please. The answer is simple. Bring back the 91% income tax bracket.

Those of us who remember the 50s do so with fondness. It wasn’t all “Life with Father”, “Leave it to Beaver” and “Ozzy and Harriet” but it was a time when most mothers concentrated on the most important jobs like raising a family and managing a household. She was able to do that because one income supported the American Dream. Why did employers pay better then? One answer might be that there was little incentive to make gobs of money as the highest tax bracket was 91%. In 1954 income below $75,000 (today’s dollars) was taxed at 20%. Someone earning $1 million (today’s dollars) was in the 62% tax bracket. Anyone earning over $7.5 million paid 91% of every dollar over that amount in taxes.

Consider the fights between millionaire sports stars and millionaire sports team owners over multimillion dollar contracts. They are fighting over figures because in actual money it is too much for any individual to spend reasonably. I would put a cap on individual income. If you make over $2 million a year, you have to either give it away or give it to the IRS. Now the choice is either to make less than $2 million or to give it away which is a good motive, rather than greed, for making money. The sports stars will be easier to negotiate with. The team owners will either be generous to charities or, more likely, they will pay their employees more and charge less for tickets.

The 1954 tax brackets were essentially the same from 1951 through 1963. Want to guess what years the highest tax bracket was lowest? Other than the first three years of income tax in the US the lowest high tax bracket was 24%. Come on, guess the year. It was the year when greed ran amok. That it! 1929! The rate was 25% for the four years leading up to the Great Depression.

One more question in this quiz. When was the second lowest? It was, thanks to President Reagan, 1988-90 and has remained low ushering in the Great Recession.

I’m not talking about wealth redistribution. I’m talking about people making more money than they know what to do with and in the process bringing down a society that would be much better off if families could pursue the American Dream on the income of one wage-earner. I’m really just talking about family values as opposed to greed rules.