The United States is in BIG trouble, part 1

The long term financial outlook of the United States is grim.  Each year the annual long term Financial Outlook produced by the Congressional Budget Office is at least a little “grimmer” than it was the year before.

The long term finances of the United States deteriorated somewhat from 2001 - 2007.  The rate of deterioration has escalated since 2007.  The long term financial outlook of the United States is significantly worse today that it was back in 2000.  This is not a political statement, it is a fact.

Back in 2008 I started working on a post similar to this.  I went back and read that research today and it is stunning how much worse things are today than they were just three short years ago.

Worse yet Washington DC seems oblivious to the magnitude of the problem and seems determined to continue to “kick the can down the road.”

This series of posts will analyze the long term fiscal outlook of the United States.

My wife and I have discussed this in detail over the last few years.  To be honest with you we have changed our financial plans and investments due to the grim outlook for the United States.

Mike

R3 Composites coming to Grabil

R3 composites coming to Grabil is great news.  To be honest with you it is some of the best economic news we have had in this area recently.  Basically they have moved into an abandoned facility on Roth Road and plan on spending between 4 and 5 million dollars between now and November.  Better yet they are estimating that they may hire as many as 400 people to work in the plant between now and 2014.  According to the abatement paperwork salaries are expected to be:

  1. One clerical job at $30,000 per year.
  2. $35,000 per year for as many as 376 production workers.
  3. Six maintenance jobs at $60,000 per year.
  4. Fifteen supervisory positions at $65,000 per year.
  5. Two management positions at $200,000 per year.
The only irritating thing is the large amount of “incentives” the State and local Government will grant them if R3 composites fulfills the agreement.  About two million will come from the state and about $800,000 from local government.
As usual these incentives basically forgive future taxes from R3 and shifts those taxes to the rest of us…
Mike Sylvester

Effects of the Bush tax cuts on tax revenues

The Republican Party, conservatives, and most people in favor of smaller government have a common belief about tax cuts; they tend to believe that lowering marginal tax rates will increase revenues.  They feel this way because they think that lowering tax rates will increase the size of the economy and that the increased size of the economy will generate more tax revenues.

Interestingly enough liberals have done many studies that refute this belief.  Conservatives have done similar studies with markedly different results; their studies support their beliefs.  The truth of the matter is these studies have different results because they use different statistics.  Both sides use statistics that support their beliefs.

I have done extensive research on this over the last several years and have always felt that both sides lie; the truth is somewhere in the middle.

I spent some time in the last couple of months analyzing this again.  The Bush tax cuts of 2001 and 2003 were significant tax cuts that lowered tax rates and increased deductions and credits for both companies and individuals.  There were smaller tax cuts implemented in 2009 in order to combat the financial recession.

I analyzed several statistics (all of which I got from the OMB):

  1. Annual GDP, the overall size of the economy
  2. Annual Individual Federal income tax receipts
  3. Annual Corporate Federal income tax receipts
The 2001 and 2003 Bush tax cuts were very large and very significant.  Neither liberals nor conservatives dispute this fact.
If the conservatives were correct in their theories one would expect these tax cuts would cause GDP to increase (Did happen) and would further cause tax receipts to increase (Did NOT happen).
Individual income tax receipts slowly increased from 446 billion in 1999 to 1 trillion in 2000.  They ranged from 7.6% of GDP to 10.2% of GDP; they averaged 8.5% of GDP.
Corporate income tax receipts increased from 103 billion to 207 billion in 1999.  They ranged from 1.6% of GDP to 2.2% of GDP; they averaged 2% of GDP.
From 2001 - 2010 Individual income tax receipts ranged from 794 billion to 1.16 trillion.  They ranged from 6.2% of GDP to 9.7% of GDP; they averaged 7.6% of GDP.  Conclusions from this include:
  1. From 2001 - 2010 GDP grew a total of 48%.  This is a great growth rate.
  2. Federal income tax receipts were LESS than they were in 2000 in SEVEN of the ten following years.
  3. Federal individual tax receipts as a percentage of GDP dropped from an average of 8.5% of GDP to only 7.6% of GDP.
  4. Federal individual tax receipts as a percentage of GDP was lower in EACH of the following ten years than it was in 2000.
The truth of the matter is we cut taxes in a big way, this likely did help the economy grow, unfortunately this caused the government to collect a smaller amount of tax revenue in relation to GDP.
The data for corporate income taxes is similar.
Someone needs to education “conservative” talk radio about this…
Mike

Wordpress Blog question

The comments are no longer displayed on the blog where they used to be.

Does anyone know how I can fix that?

Mike

Debt ceiling theatrics, part 3

The debt ceiling theatrics in DC would be comical if they were not so serious…

It is hard to believe how idiotic Republicans AND Democrats are behaving.  The US is on an unsustainable path as far as our National debt goes and the idiots in DC are posturing for the 2012 election rather than doing their jobs.

Unless you are a partisan hack you should realize:

  1. Each party accumulated AT LEAST 40% of our current national debt
At this point I am going to hope most of these idiots are voted out of office the next time they are up for re-election.
Mike

Debt ceiling theatrics, part 2

Well it is July 20th and we are less than two weeks from a default of the Federal Government.

I am going to discuss the performance of the three main players:

First is President Obama.  He has shown no leadership on this issue and has NOT proposed a formal plan. Instead he has spent his time bashing the plan of the House Republicans.  His performance has been dismal.

Next is the Democratic Senate.  They have completely ignored their responsibilities and instead are wasting time and naming Post Offices.  The Democratic Senate has not even proposed a budget in the last 800 days. Yesterday “the Gang of Six” did release a vague and undefined plan.  There is no way this plan can pass the Senate in time.  Their performance has been dismal.

The House Republicans have dragged their feet for too long.  They did vote on a long term plan a couple of months ago (The Ryan plan) and they should get credit for that.  They just passed a cut, cap, and balance act that I will need to analyze further.  I do like the idea of cut, cap, and balance.  The “devil is in the details” and I will read through this legislation and let you know what I think.  The Republican House should have passed the cut, cap, and balance legislation two months ago.  The House Republicans have done better then the Senate Democrats and President Obama.  That being said they should be willing to compromise and stop acting like it is “their way or the highway” because that is wrong.

Mike Sylvester

The truth about corporate income taxes

In an earlier post we started discussing corporate income taxes down in the comment section.  The Federal income tax system for both individuals and corporations is completely broken.  As the readers of this blog know I support abolishing all income taxes and instead using a National Sales Tax.  That being said; our current members of Congress will not abolish the current system because they use it to help their re-election chances.

My main problems with our current corporate income tax structure are:

  1. It is far too complicated; in fact it is so complicated that hundreds of thousands of lawyers and accountants are necessary.  It is almost impossible for a small business to file their own corporate tax returns.  Please realize that I am a Partner in a firm that handles corporate income taxes for over one hundred local businesses.  I am very familiar with this topic.   I make my living by helping local businesses comply with the current tax laws.
  2. It puts US companies at a disadvantage against their foreign competitors.  This has helped move millions of jobs overseas.
  3. Members of Congress help choose winners and losers by giving tax credits to certain industries and not other industries.
Read more

Debt ceiling theatrics in Washington DC

The debt ceiling negotiations in Washington DC are nothing other than political theatre and both major political parties should be absolutely ashamed of themselves.

We need to throw the vast majority of these bums out of office.

I am actually more upset with the Republicans than I am the Democrats believe it or not…

Mike

Home Loans have insanely low interest rates

I am extremely concerned about the US economy and the world economy.  The United Sates, Japan, and Western Europe are built on a mountain of debt.  Eventually all of this debt will have to be paid back with interest…

I personally think the best way to prepare for the future is to minimize your personal debt.  Once your personal debt is paid off then you will be able to better deal with the future economic hardships that are coming.

My house is likely worth $200,000.  We currently owe about $150,000.  We are in the process of refinancing the house into a 30 year loan adjustable loan.

I HATE adjustable loans. This loan is a 2.99% loan for five years and then it balloons.  It has no prepayment penalties which is critical for us.  We will pay that loan off entirely within five years so it never balloons.

I never thought it would be possible to finance my house on a 2.99% loan.

I never would have believed that I would choose to take out an adjustable loan on my house; I always thought they were STUPID.

My wife and I have changed our financial plans and we are going to stop saving money entirely (accept for retirement).  I currently think my wife and I will be debt free in almost exactly three years from today.  I hope to be debt free the day I turn 47…

I seriously hope EVERYONE who reads this blog decides to minimize and pay off their debt.  The idiots in Washington DC (BOTH major Parties) have no idea what they are doing and a large financial crisis is inevitable.  You need to protect yourself and your family because the idiots in our Government just keep kicking the can down the road.

Mike

National Education Association

The NEA has already endorsed President Obama for his 2012 re-election campaign.

The NEA is the largest labor union in the US and has 3.2 million members.

Without even knowing who will oppose President Obama the NEA has already endorsed the Democrat in this race…

Wow.

Mike Sylvester

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