The Stimulus Package

[Bond]

Originally Posted by TheGame

I accept the numbers, but I also understand that the country is going deeper and deeper into debt.. even before the bailouts were taken into consideration. Since taxes are continuiously lowered, the only conclusions I can come to is either 1) The economy how it is now, and how it was, simply does not work. There's no escaping the end fate of everything crashing down regardless of what we do. Capatilism fails. Or 2) The government over time has been using the wrong strategy when it comes to generating revenue, which for at least the last 30+ years, the main strategy has been tax cuts.

I'm afraid neither of those conclusions are very accurate. To the first, the basics of our economy and capitalism work very well. For example, look at our wealth creation over the course of our country's brief history: it has been the greatest and the fastest the world has ever known. To the second, again, as I have said before, the problem is government spending above and beyond revenue intake. The problem is not the amount of revenue intake, the problem is excess spending.

The two main causes of the financial collapse were: excessive toxic loans (which destroy a bank's balance sheet) and over reliance on outdated risk management software.

The main cause of our enormous debt is excessive spending.

The thing that disturbs me about the bailout packages, in a system that's supposed to be capitalism, is that in order for it to work properly the companies need to have the countrie's best interest at heart and not just their own. Which I don't think they have, and the government is giving them little incentive to do so.

Not really... in order for the current bailout system to work, the banks must raise their value back up to where the government purchased them (as the government purchased the banks at a premium) or above. So the banks simply need to do what any company is meant to do: return profits to shareholders (in this case, the government).

[TheGame]

Bond, I disagree with everything you just said. If the economy is going so great here, why do we owe money.. and more importantly why are we even borrowing money from other countries? (<< You could ignore the rest of this post if you want, the only thing I want is a clear answer to this question )

And no, this isn't an issue that just started 4-6 months ago. Its been like this.

And no again, I made no reference to banks to why I think the bailouts are bad. I'm more focused on the buisnesses that are taking them which are by a LONG shot not all banks. These companies are in it to make as much money as possible, as my Ford example showed, they're willing to lie and say things are going bad to get more free handouts from the government, but when they'd personally have to take a pay cut their whole story changed.

Companies are also trying to find loop holes and make up incentives for their leaders without calling it bonuses.

Like I said once again, I refuse to take middle ground. Either the strategy we have isn't working and something major needs to change, or the american capitalism project is failing.

[Professor S]

Game, the reason why we are in debt is the same reason a family can be in debt: They spend more than they take in and live above their means.

I'm having a hard time understanding why people seem to be confused regarding how our country makes money, especially after seeing those charts Bond posted.

Government revenue is related to the nations GDP, not how it taxes it's people. As the charts show, increasing taxes on the rich does NOTHING to increase tax revenues. Instead, a government that does more to increase GDP increases its tax revenues. Progressive taxes have nothing to do with it.

Increase GDP = Increased revenue. Decreased GDP = Decreased revenues.

So a government should do more to increase GDP as a means to increase its revenue. I fail to see how punishing businesses that make over $250,000 a year, reducing tax exempt charitable donations and raising capital gains taxes accomplishes this goal.

And to say that capitalism has failed, or even to call it a project, is myopic thinking. Capitalism is what is the NORM, not the experitment, and it has been the norm since man first began bartering beads for animal pelts. Socialism is the experiment and it's the experiment that has FAILED every time it's been attempted from the USSR to FDR to LBJ to Castro's Cuba. European nations that have socialist constructs live with normal unemployment rates raging from 9-13%.

I can see where you're coming from, but I also believe you're letting the myth of "perfect" get in the way of the achieveable "good". Is capitalism perfect? No, but to this point in history it's the only system that has been proven to actually work on a large scale. There have always been crashes and recessions, but they've also always been followed by priods of growth that far exceeded the previous crisis.

http://futurist.typepad.com/my_weblo...ock_marke.html

IMO, recessions are overall necessary for continued growth. Like any environment, homeostasis is achieved by the ability of an environement to weed itself. Organisms that are sick or weak will be consumed during this process, but in the end the best run and most healthy organisms live and prosper. When this is allowed to happen, we go through terrible pain, but in the end always end up back on track and pushing to new heights.

The problem comes when natural selection is interfered with, and the entire process is extended through interference. Sick companies are not being allowed to die or be consumed by healthy ones, nor are they being forced to fundamentally heal themseves by changing the nature of their business. They are simply on life support hoping their cancer will just go away.

IMO, if we want to see the quickest recovery possible, the government needs to clearly state when they will NOT provide assistance or bailouts, so that these companies can feel comfortable in making moves confident that the government will not step in change their business environment. Billion of private dollars will need to be risked tfor companies to recover, but I can't see these companies taking that risk not knowing the totality of what the government will and will not do.