If we taxed the "Super Rich" at 100% of their income, would that close our budget deficit? An interesting look at those numbers here...

There has been a lot of talk about putting an additional tax on millionaires to increase revenues to the Federal Government.  Let me be more radical. Let's take ALL their taxable income for one year!

Below are data from the IRS (year 2009). Look at the incomes for "$1,000 under $1,500" on down to "$10,000,000 or more". The data are in "thousands", so add 3 zeroes to the end of the numbers to get millions.  The third column shows "Income Tax Paid" and the fourth column shows "After Tax Income (What is left)" for each of the benchmark levels of income. 

In addition to to what they have already paid in the third column, let's go ahead and take the amount in the fourth column too (the amount the rich have left over after paying taxes).

That total is $549,411,208,000 (billions).


Look at the data below, specifically the "Deficit (-) or Surplus (+)" line of numbers. If, in 2009, we took what rich taxpayers already pay in taxes PLUS what they have left over (in others words tax them at 100%), it would still not come close to closing the budget deficit for the fiscal year 2010 (or 2011 or 2012). Add the $549 billion number to the negative number--it becomes LESS negative.

The budget deficit would be very small in 2013, and indeed, it be gone by 2014... BUT that assumes there would be ANY millionaires around anymore to tax.

Far be it from me to defend the rich. Not one and never will be.  My goal here is to show the scale and scope of our budget issues at the Federal level. If taking all money from the rich does not come close to solving the problem, then what IS the problem? (Art--I DO already know the answer :) )

Do the Super Rich need to be subjected to higher taxes? That is a political question. It might make people feel better, but it is not the solution to our long term budget problems.  Can't we have a better class of politicians (Dem/Reps) working on our behalf? Rhetorical question, needs no answer....

A short opinion piece in Newsweek written in 1995 on how implausible it will be for the internet to change much. The perils of trying to predict the future when it comes to technology.

The following is from a Newsweek magazine opinion piece in 1995 on the viability of the intenet--around the time most of my students were one or two years old.  Some of the things he is defending as absolutes have gone by the wayside or soon will be.  Quite amazing how far we have come in a relatively short period of time.

The Internet? Bah! (HT: The Agitator)

""I’m uneasy about this most trendy and oversold community. Visionaries see a future of telecommuting workers, interactive libraries and multimedia classrooms. They speak of electronic town meetings and virtual communities. Commerce and business will shift from offices and malls to networks and modems. And the freedom of digital networks will make government more democratic.
Baloney. Do our computer pundits lack all common sense? The truth in no online database will replace your daily newspaper, no CD-ROM can take the place of a competent teacher and no computer network will change the way government works. . . .

Every voice can be heard cheaply and instantly. The result? Every voice is heard. The cacophany more closely resembles citizens band radio, complete with handles, harrasment, and anonymous threats. When most everyone shouts, few listen. How about electronic publishing? Try reading a book on disc. At best, it’s an unpleasant chore: the myopic glow of a clunky computer replaces the friendly pages of a book. And you can’t tote that laptop to the beach. Yet Nicholas Negroponte, director of the MIT Media Lab, predicts that we’ll soon buy books and newspapers straight over the Intenet. Uh, sure . . .

Then there’s cyberbusiness. We’re promised instant catalog shopping—just point and click for great deals. We’ll order airline tickets over the network, make restaurant reservations and negotiate sales contracts. Stores will become obselete. So how come my local mall does more business in an afternoon than the entire Internet handles in a month? Even if there were a trustworthy way to send money over the Internet—which there isn’t—the network is missing a most essential ingredient of capitalism: salespeople.""

How wrong one person can be!!

Results of a Gallup Poll on how people view their childs school relative to other schools around them.

Is this a case of cognitive dissonance?  People surveyed tend to rate their own childs school highly while the other schools in their area are viewed as a cut below (or many cuts below).  I think it is because we are more aware of what goes on in our schools and tend to take ownership of it because it is more personal.  Or is it simply more of a comfort thing---it HAS to be good/fine/ok because I trust them with my child. 

How can the public simultaneously like their own school, but not have a positive view of everone elses school?  This is similar to our views on politicians---everyone loves their own, but thinks Congress as a whole is broken.  How do we reconcile the two?  Maybe we ARE crazy....

Source: Gallup Poll

As an aside: Why did the percentage of people expressing a positive view of their childs school spike from 2007 to 2008? That is a 58% increase!  It was the first year of the recession.  I cannot think of a good reason, can you?

Fact of the Day---Over 50% of the plastic bottles we "recycle" go to (mostly) China for processing...Think about that when you fill up your little recycling bin...How does THAT help the environment?

Bottle Recycling Plan Is Left at the Curb: For Coke, Supply of Used Plastic From Neighborhood Programs Falls Short as Demand Climbs in China

""A bit more than half of the PET bottles recovered for recycling in the U.S. since 2006 have been shipped to other countries—mostly China, which refashions them into fiber for clothing and furniture. It often costs less to transport PET bales on empty ships returning to China than to transport them across the U.S., according to industry officials.""

Notice is says it "costs less"..I am guessing they are only counting direct, accounting costs.  How about the cost of the pollution and non-renewable resources consumed in transporting the plastic to China AND BACK! Should we just bury it in the ground and be done with it??

This graphic below was a part of the article. I was somewhat surprised to see how much recycling of plastic bottles is actually done compared to the number of plastic bottles produced, roughly a 1 to 4 ratio.

Source: Wall Street Journal

Nice graphs/charts showing the relationship between food prices and social unrest. Invariably it is the consequence of bad economic policy...

I often tell students the genesis of many/most incidences of civil unrest are for economic reasons, not  for "freedom" or "liberty"---these attributes usually come along later. The graph below shows the correlation between the spike in food prices and riots in various countries. The relationship is pretty strong wouldn't you say? The second chart shows why.

Source: Conversable Economist

In all poor and developing countries food is a much larger percentage of a families budget. They are more sensitive to changes in food prices and it can plunge people into crisis relatively quickly.

SOURCE: CIVIL EATS

Economics is about the allocation of scarce resources to meet needs and wants. If basic needs are not met by the powers that be, then they can expect social problems and unrest. 

A nice graphic showing the perils of making only the minimun payment on your credit card. DO NOT fall into this trap. It will be the most expensive mistake of your life...

If you purchase something on a credit card, here is, literally, a graphic reminder of the importance of paying MORE than the minimum required. Paying the minimum is a fools game. I don't have to tell you who the fool is...

Source: Visualizing Economics

More evidence that the good ol' days were not so great. The earninig power of the minimum wage in 1952 and Today...When would YOU have preferred to live?

With much hostility lately towards Capitalism and Free Markets in general (with justification) it is sometimes difficult to see the forest for the trees.  It has been the greatest force in history towards advancing the standards of living for a vast majority of the worlds people.  The good ol' days were not so great...I know this because I was there...

This is also a good lessson in purchasing power.  Money has value because of what it can purchase.  It is not how much you have, but what you can get in exchange for it. The choices today are amazing.

The following, in its entirety, is from Carpe Diem:

""To demonstrate how free market capitalism generates increased prosperity over time for average (or even low-income) Americans, economist W. Michael Cox of the Dallas Federal Reserve has compared the purchases at different points in time from the income earned by high school graduates or entering college freshmen working at a full-time, minimum-wage summer job (ignoring taxes). Here's a summary of his article "Capitalism's Many Benefits Create 'Luckiest Generation,'" which appeared in Investor's Business Daily in October 2000.  Several years ago, I presented an updated comparison of the purchases from summers jobs in 1949 and 2009 in this CD post. Here's another update:

In 1952, the minimum wage was $0.75 per hour (equivalent to $6.39 in today's dollars), and a full-time summer job at 40 hours per week for 12 weeks would have generated $360 in total summer earnings (ignoring taxes). Using retail prices from a 1952 Sears Christmas Catalog, I found that a teenager then would have only been able to purchase the following 3 items with his or her entire pre-tax summer earnings of $360 working at the minimum wage (with $15 borrowed from the parents to cover the full $375 cost):

Source: Carpe Diem

Now compare that that to the items in the table below that could be purchased by a teenager or college student this year with his or her summer earnings of $3,480 (ignoring taxes) at the current minimum wage of $7.25 per hour:

Source: Carpe Diem

According to Cox: "Add it all up. When it comes to their economic prospects, today’s young Americans are the Luckiest Generation in history—at least until their children grow up and forge an even luckier one. And even if real wages are flat, the explosion of new products over time at lower and lower prices translates into a rising standard of living for all income groups, even minimum wage workers." 

MP: Teenagers today can afford products today like laptop or notebook computers, Kindles, digital cameras, GPS systems, iPads, iPhones, and iPods that even a billionaire couldn't have purchased 20 years ago.  The comparison above illustrates that we've made a lot economic progress over the last 60 years since 1952 that has increased our national prosperity - and that's happened in spite of ten recessions, the stagflation of the 1970s with 18.5% mortgage rates and a 20% prime rate, the S&L crisis with almost 3,000 bank failures, several major stock market corrections, the Great Recession, etc. 

Even though the economy is still struggling to recover from the 2008-2009 recession, and we've had sub-par economic growth and sluggish job creation this year, economic progress and a rising standard of living will continue to move forward.  The economic challenges of the past haven't stopped innovation and prosperity in the long run, and the current challenges might slow progress in the short run, but won't in the long run.  Just like today's teenagers are infinitely more abundant than their counterparts in 1952 and can afford items not available to billionaires of past eras, the teenagers in 2070 will be infinitely more abundant than today's teens and will be able to afford products that today's billionaires can't even imagine, much less afford.  ""