The recession is over

[m21sniper]

Originally Posted by RWebb

“The recession is over,” Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York, said before the decision. “June was the last month of contraction in the U.S. economy; we think July is already a month of production growth.”

Economists exist to make weathermen look good.

I find his statement laughable.

[red-beard]

Originally Posted by dd74

Now and then I hear some very forward-thinking (forward to the tune of nearly insane) economist say, "Steel. We should produce steel again." Why? Because we can and should, and petrol prices will rise, which will make it harder for Asia to ship its steel to countries outside its region.

Steel is one industry. The automotive industry -- maybe. Textiles: the best clothing I've ever had was American made.

But honestly, it's a pipe dream without a huge pro-American campaign.

Seriously, it is not about the consumers. It is about taxation. Manufacturing first moved from the high tax, high wage states, to non-union, low tax states. Now they can't escape the taxes, they move overseas.

If we eliminate all federal taxes and institute a federal sales tax instead, corporations will flock back to the USA.

[azasadny]

Originally Posted by Leland Pate

We've successfully dismantled the incredible industrial strength this nation once had and sent it abroad. We are now coasting and spending the wealth created by generations gone by. Our economy is based off of flaky accounting practices, exotic banking, and services related crap bought with foreign money. We have no production, no savings, and no reason to even remotely think this is over.

Yep, you've nailed it! This is why I'm pessimistic about our country's future.

[mistertate]

Originally Posted by m21sniper

Economists exist to make weathermen look good.

I find his statement laughable.

Seriously, they should have malpractice for economists.
ddd74 is onto something when he talks about steel and oil prices. When oil skyrockets we're going to have to go back to making all our own stuff.
I wonder if this "recovery" is driven by Cash for Clunkers?

[Christien]

Originally Posted by red-beard

Seriously, it is not about the consumers. It is about taxation. Manufacturing first moved from the high tax, high wage states, to non-union, low tax states. Now they can't escape the taxes, they move overseas.

If we eliminate all federal taxes and institute a federal sales tax instead, corporations will flock back to the USA.

I understand and largely agree with this concept, but if any gov't were to actually put that in place, it would be political suicide. They would NEVER get re-elected, because corporations don't vote, people do, and you'd be moving the tax burden completely onto their shoulders. Even if you could clearly demonstrate how it would be short term pain for long term gain, the vast majority of voters can't see past then end of their next paycheque - there's no way they would buy it and allow it to happen.

The city of Toronto is a good example. Many years ago they increased commercial property taxes significantly, while reducing residential property taxes drastically. We live about 40 miles out of Toronto, in a fairly normally-priced city, real-estate-wise. Our house, worth probably around $300K here would be worth well over $1 million in Toronto, however our property taxes would no be much higher than what we pay here. A $300K residence in Toronto would pay drastically less property tax than we do.

As a result of this taxation setup, many of the large corporate headquarters moved out of downtown Toronto and into the surrounding suburbs, where they found the taxation system to be much more affordable. Toronto then found they weren't bringing in enough "revenue" (I hate when they call tax "revenue") from property taxes and are now trying to lure business back into the core. There are several other reasons why they're in a cash crunch, but this is a big part of it.

[legion]

The tax burden is 100% on the shoulders of people, they just don't realize it. Taxing corporations (who in turn pass the tax on to consumers) is just a way for politicians to hide taxes from people.

Corporations don't pay taxes, people pay taxes.

IMO, shifting the taxes away from corporations would be more honest, as people would quickly see just how much of their money goes to the government. I suspect between federal income taxes, local income taxes, property taxes, sales taxes, and hidden taxes on corporations, most people's tax burdern exceeds 50% of their income.

[bell]

Cash for clunkers is just the tip of the iceberg.....all it's doing is putting people farther in debt.....nothings free, an addition 4500 off a new car is great, but not when the car they bought is 15k more then what they had, still needs paid for.....and who's to say that half the people who bought these cars won't be out of work of receive cuts through the end of the year......

[red-beard]

Originally Posted by legion

The tax burden is 100% on the shoulders of people, they just don't realize it. Taxing corporations (who in turn pass the tax on to consumers) is just a way for politicians to hide taxes from people.

Corporations don't pay taxes, people pay taxes.

IMO, shifting the taxes away from corporations would be more honest, as people would quickly see just how much of their money goes to the government. I suspect between federal income taxes, local income taxes, property taxes, sales taxes, and hidden taxes on corporations, most people's tax burdern exceeds 50% of their income.

All correct, except for one thing: Corporate taxes also reduce the ability of USA manufacturing to compete in the world. Those taxes end up in the price of the product, whether used here or exported.

And products produced in low tax countries, do not pay taxes, except tarrifs, in the US.

Zero corporate, income and payroll taxes = lower final price on products, products can compete worldwide

Sales tax on ALL products means that even if you buy a product built in another country, taxes are paid to the US government. Make the playing field level here. Right now it is tipped, the wrong direction. If we make a national sales tax law, the field will be tipped to OUR advantage.

[onewhippedpuppy]

Originally Posted by Porsche-O-Phile

You nailed one of the BIGGEST gorillas in the room that nobody is talking about. There's not much "real" stuff propping up our economy anymore, now that we've successfully "outsourced" (I truly hate that euphemism) all of our manufacturing to China. All we have left is service-type activity which is largely "fluff", largely propped up by governmental regulation and convention - not based in it producing any real value.

In order to REALLY fix our economy permanently - in order to really ensure that we have permanent and sustainable growth - we need to bring back more manufacturing here and produce our own goods. Better still, we need to actually export what we can (agriculture comes to mind).

I blame being undercut by Asia (which is the direct result of our own stupid and short-sighted choices, driven by nothing other than a desire for cheaper, cheaper, cheaper) as the real core "disease" that's rotting our economy from the inside out.

We're doing a wonderful job trying to treat symptoms, but the underlying disease will still remain long after "stimulus" and other prop-ups are gone. And we'll be right back here. Mark my words.

A non-manufacturing economy is unsustainable - pure and simple. You need to produce goods of value (or services of value) to last. Most of what we produce is services, and they don't have much (if any) intrinsic value outside the context of our own particular society, legal system and set of governmental regulatory controls.

Originally Posted by dd74

Now and then I hear some very forward-thinking (forward to the tune of nearly insane) economist say, "Steel. We should produce steel again." Why? Because we can and should, and petrol prices will rise, which will make it harder for Asia to ship its steel to countries outside its region.

Steel is one industry. The automotive industry -- maybe. Textiles: the best clothing I've ever had was American made.

But honestly, it's a pipe dream without a huge pro-American campaign.

Originally Posted by red-beard

Seriously, it is not about the consumers. It is about taxation. Manufacturing first moved from the high tax, high wage states, to non-union, low tax states. Now they can't escape the taxes, they move overseas.

If we eliminate all federal taxes and institute a federal sales tax instead, corporations will flock back to the USA.

Great posts, there's really nothing more to add. Until we have some serious fundamental shifts in our economy and government, I don't see any improvement as anything more than temporary. We've spend the last 50 years building our economy on quicksand, it's only a matter of time. The stimulus billions are only adding to our weight, sinking us quicker and quicker.

I'm all for positive talk, but was informed yesterday that our company would be laying off more employees, rumored to be about 1/3 of engineering. I work in the aircraft industry, one of the few industries that actually contribute to a positive trade balance. So where's our bailout? Oh wait, our government simultaneously hates our industry but is also buying new Gulfstreams for the Senate.

[red-beard]

Boeing needs to go into the road contruction business, so that it can get some of that "recovery" money.

[jyl]

Originally Posted by red-beard

All correct, except for one thing: Corporate taxes also reduce the ability of USA manufacturing to compete in the world. Those taxes end up in the price of the product, whether used here or exported.

And products produced in low tax countries, do not pay taxes, except tarrifs, in the US.

Zero corporate, income and payroll taxes = lower final price on products, products can compete worldwide

Sales tax on ALL products means that even if you buy a product built in another country, taxes are paid to the US government. Make the playing field level here. Right now it is tipped, the wrong direction. If we make a national sales tax law, the field will be tipped to OUR advantage.

All this talk is useless without numbers. Run the numbers. We did, in some of the previous threads on the FAIRTAX proposal. IIRC, a national sales tax would have to be around 40% to be revenue neutral. What would a sales tax of 40% do to consumer demand? Let's see, the average effective federal tax rate is about 20% (that's all federal taxes including SSI I think). So, get 25% more in takehome but pay 40% more for what you buy? Hmm, this rewards people who don't spend much. So, consumer spending will go down a lot. And this helps the economy? Hey, at least those of you working for consumer products companies, and the industrial/materials companies who supply equipment and materials for those companies, will have a lot more free time. You can have a reunion in the unemployment line. Reminisce about how great PPOT was, before PP went under due to huge price increases.

[Leland Pate]

Robert Murphy: Our Alarming Economic Future


Listen to this podcast: http://www.lewrockwell.com/podcast/?p=episode&name=2009-08-12_129_our_alarming_economic_future.mp3

[m21sniper]

Retail sales dip unexpectedly, jobless claims rise

http://news.yahoo.com/s/ap/20090813/ap_on_bi_go_ec_fi/us_economy

Originally Posted by Leland Pate

We've successfully dismantled the incredible industrial strength this nation once had and sent it abroad. We are now coasting and spending the wealth created by generations gone by. Our economy is based off of flaky accounting practices, exotic banking, and services related crap bought with foreign money. We have no production, no savings, and no reason to even remotely think this is over.

What he said.

[Leland Pate]

The Recession is over.

Almost as dumb as saying:

[74-911]

Originally Posted by jyl

All this talk is useless without numbers. Run the numbers. We did, in some of the previous threads on the FAIRTAX proposal. IIRC, a national sales tax would have to be around 40% to be revenue neutral. What would a sales tax of 40% do to consumer demand? Let's see, the average effective federal tax rate is about 20% (that's all federal taxes including SSI I think). So, get 25% more in takehome but pay 40% more for what you buy? Hmm, this rewards people who don't spend much. So, consumer spending will go down a lot. And this helps the economy? Hey, at least those of you working for consumer products companies, and the industrial/materials companies who supply equipment and materials for those companies, will have a lot more free time. You can have a reunion in the unemployment line. Reminisce about how great PPOT was, before PP went under due to huge price increases.

and if anyone thinks the current effort to reform health care has people upset, wait til you try to reform the tax code per the above suggestion. Per the numbers JYL shows, that would absolutely kill the economy and all those in the lower economic strata would be devastated. The sales tax is absolutely the most regressive tax there is.

[m21sniper]

This assumes Jyl's numbers are actually correct.

[Rick Lee]

Originally Posted by Leland Pate

The Recession is over.

Almost as dumb as saying:

The difference is that Obama can get away with saying it. He could land on the carrier with the same sign in the background and he'd not be criticized one iota for it.

[legion]

Yep, the recession is over....

http://news.yahoo.com/s/ap/20090813/ap_on_bi_ge/us_economy

Retail sales dip unexpectedly, jobless claims rise

WASHINGTON – Retail sales disappointed in July and the number of newly laid-off workers filing claims for unemployment benefits rose unexpectedly last week. The latest government reports reinforced concerns about how quickly consumers will be able to contribute to a broad economic recovery.

"There is really no positive spin to put on these numbers," Jennifer Lee, an economist with BMO Capital Markets, wrote in a research note. "The U.S. consumer remains very weak. The jobs situation, while slowly improving, is still dismal."

How are we supposed to have an increase in GDP if no one is spending and unemployment is rising? (The definition of a recession is two or more consecutive quarters of contraction in GDP. Therefore, a recession ends when growth in GDP resumes.)

[jyl]

I was interested in whether FAIRTAX would benefit me personally, so gathered some data and ran some numbers on what FAIRTAX rate would have to be, to be revenue-neutral while eliminating all individual income tax, all corporate tax, and all social insurance tax.

If all consumer spending was subject to FAIRTAX (no exclusions), the FAIRTAX rate would have to be well over 40% to be revenue-neutral (to get the boxed total in row FAIRTAX Revenue to equal the boxed total in TOTALFEDERAL Revenue).

At that point, the bottom four quintiles of US household income would be in deficit, spending $10K to $19K/yr more than their income (even with all other taxes being zero). Compare row Savings(Deficit) to row Savings(Deficit)InclFAIRTAX. You would have to be in the top quintile (average or median pretax income $158K/yr) to still be in the black, and even then you would be worse off than before (savings falls from $28K to $19K/yr).

Now, I think the very highest income-earners would be much better off under FAIRTAX (like, those earning $500K/yr and up) but I don't have that data.

Obviously, people cannot indefinitely spend so much more than their income, so the result is that people would be forced to buy a lot less goods and services, i.e. cut their standard of living. The other result is that there would be an explosion of tax evasion - barter and black market economy.

The FAIRTAX boosters' response will be that eliminating all corporate taxes will allow companies to reduce prices enough to offset the >40% FAIRTAX sales tax. Sorry - not possible - compare total CORPORATETAX Revenue to total FAIRTAX Revenue.

The other response will be that eliminating all individual income and payroll taxes will allow companies to reduce prices enough to offset the FAIRTAX. Think about it - that means that total PretaxIncome has to be reduced by over one-third - compare total PretaxIncome to total FAIRTAX Revenue. No help to households' deficit.

After looking at this, I suspect there are some rich people quietly bankrolling the FAIRTAX proposal, for their own hidden agendas, and the non-rich FAIRTAX supporters are being suckered bigtime. Things are not always what they seem, folks.

[jyl]

Here is the last data source that got cut off
http://www.urban.org/publications/1001091.html

Sorry the Excel screenshot is small. I'm frustrated, used to be able to post screenshots no problem, now I seem to have lost the knack.