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Political class is and Voodoo Economic Myths – Myth # 1 and # 2
Nazi Joseph Goebbels said that if you tell a lie and repeat several times it will eventually be the truth. So it is with the political and economic behavior and theory. We have been told so many lies so many times by politicians, that the lies become reality in a lot of people minds, preventing them from considering alternative approaches and alternative views of reality. This article will explore two of these myths perpetuated as by the political class. The following information must be viewed with an open mind since the findings are likely to be revealed in conflict with what he was told several and repeatedly by the political class. In other words, do not fall into the trap of Goebbels: the repetition of a lie, so that it becomes true.
However, before the above, we consider the question of why politicians lie about the truth in relation to economic matters. There are some theories, some or all of which is probably true. First, consider a quote from Ivern Ball: "A politician is a person who can make waves and then make him think that he is the only one who save the vessel. "In making the economy and the world seem more complicated than they are, politicians can intervene to take more control of our lives. They want to convince us that it is impossible for us to understand how to fix the economy, we must leave that to the experts, namely the politicians. But I believe that we have experienced over the past two years: the greatest economic crisis since the Great Depression, but nobody in the political class saw the disaster imminent, to hit them flush in the face. If they could not foresee the greatest collapse in recent decades, what makes anyone think they can control the acts of the day-to-day economy? They want all the control, which limits our personal freedom, but none of the knowledge necessary to make any kind of decent work.
By spreading lies about the economy, which can energize your base and demonizing those with a different opinion. This helps to retain the post by the bite of different groups and tribes against each American others about the myths that have nothing to do with reality and nothing to do with the resolution of economic problems facing the country. Playing around myths as "the rich do not pay enough taxes "or" governments can create jobs, "which end up fighting with each other, while the myth makers sit up and get reelection though poorly they perform in office.
Whatever the causes, myths about the political class shares the American economy, restrict freedom, and prevent anyone from determining the root cause of economic problems and prescribe the right medicine. If myths were broken, the political class would losing control over a population that was finally coherent thinking about the reality of our economic situation.
Myth 1 – The Bush Tax Cuts for the rich caused the recession and Our Massive Federal Deficits
Let us first deal with the myth that the so-called "tax cuts for Bush the rich "caused the economic crisis has resulted in huge deficits and they need to be restored in order to get our debt under control. Now, never I voted for Bush, or thought he was a great President. However, this position of the political class is nothing but a myth:
1) The economic crisis began in late 2007. Until this year, the U.S. economy has recovered well from the economic crisis that left over from the Clinton administration, Democrats and the terrorist attacks of 9.11. For most of the Bush presidency, unemployment was between 4% and 6% (a performance that Obama would kill for today) and the country's GDP grew every year during his presidency. Also, remember that starting in 2006, shortly before the start of economic collapse, the Democrats took control of both houses of Congress. They controlled Congress three and a half years and has controlled the White House for the past year and a half with the following results: a severe recession and unemployment hangs around 10%. Thus, there There is reason to believe the myth that the Bush tax cuts caused the economic recession since the economic reality of the numbers of unemployment and GDP, supports the myth.
2) The next component of the myth is that the Bush tax cuts caused huge deficits. While it is true that the largest dollar deficit during the Bush presidency was also the largest deficit in U.S. dollars so far, was only about 3.6% to GDP. When measured this way, Bush's biggest deficit is the third largest deficit of all time. Furthermore, only 3.6% is lighter than most international benchmark of 3% which is generally recognized as the maximum safe amount of deficit spending must come a nation. Obviously, any deficit is bad, but to say that tax cuts Bush resulted in huge deficits is a myth.
And remember, the Democrats controlled both houses of Congress during the last two years of the administration Bush increased the deficit when Bush was paid. If they were so concerned about deficit spending, which could have forced the levels of government spending is reduced and the deficit reduced, since they controlled part of the federal government, where budgets are developed, the Congress. Compare Bush maximum deficit of 3.6% of GDP, the deficit with Obama in 2010 about 10%, three times the amount that must be carried out before a nation begins in earnest towards insolvency. Bush's tax cuts for the rich did not cause huge deficits, huge spending by the political class, both political parties, caused huge deficits.
3) Probably the most unpleasant part of this myth is that by increasing tax rates on the richest Americans for the pre-Bush tax cut levels, the deficit Current high heaven will be solved. This is nothing more than the Democrats demonizing the rich to cover his expenses and his futile attempt to hide most Americans with reality that taxing the rich, on almost any level, is not left out of America's death spiral of increasing government deficit. Do not believe me, let's do the math:
– Obama has said many times that he wants to raise income taxes on families making over $ 250,000 year so it'll give you his word and assume restoration, increased pre-Bush tax cuts start at $ 250,000.
– The highest tax rate marginally reduced by the Bush administration was 3.6% (from 38.6% to 35%), so let's give Obama the benefit of the doubt and assume he will raise the greatest tax rate of 4%.
– According to the IRS, the number of taxpayers in the highest Adjusted Gross bands for 2008 (latest available data) are:
$ 200,000 – $ 500,000: 3,476,747 taxpayers (2,897,290 Adjusted)
$ 500,000 – $ 1,000,000: 577,618
$ 1,000,000 – $ 1,500,000: 140,635
1500000 $ – $ 2,000,000: 59,460
$ 2,000,000 – $ 5,000,000: 86,329
$ 5000000 – $ 10,000,000: 21,390
$ 10 million + – 13,480
– The lower band was reduced by over one-sixth, to withdraw the number of people earning less than $ 250,000 since it would not be affected by Obama's promise, or that is, raise taxes only for those earning more than $ 250,000 per year. Probably more than it should have been removed, it is likely that there are many more people in the $ 200,000 – $ 250,000 range than the $ 450,000 – $ 500,000 range, but the calculations assumed a uniform distribution across the entire $ 200,000 – the range of U.S. $ 500,000. This uniform distribution assumption gives all benefits to the myth.
– While a more accurate estimate would have been to have access to data gross income tax, we can obtain a realistic estimate, and a statistically valid estimate, assuming that people in the bands above earned, on average, the midpoint each interval. For example, for the calculations, it was assumed that 86,329 taxpayers in the $ 2,000,000 – $ 5,000,000 range each won $ 3,500,000, the point average range.
– The only outstanding revenue estimate is the average income of those who make over 10 million dollars, since they do not have enough information from the IRS to make a workable budget. So lets started with an estimate of $ 30,000,000 and then change it as a variable (see below).
– After making these assumptions, and run them through a spreadsheet, you estimate that the desire for Obama to tax rich will result in an additional $ 68.7 billion in tax revenue for the government. Since the budget deficit of Obama in 2010 is about $ 1.4 trillion, restoring the Bush tax cuts of 4% will pay only about 4.9% a year of budget deficits Obama. Thus the myth of taxing the rich is almost as effective as a belch in a hurricane, it will not come close to offsetting the huge costs and waste policy class. It will only help to divide America through lines of income or tribes.
– But wait you might say. Those earning more than $ 10 million per year can be taken closer to 50,000 thousand dollars a year. Ok, plug it with the sheet and you see that the rich pay only 5.7% of the over Obama. If you truly want to be ridiculous and have income average of 100 million U.S. dollars per million years you see that ridiculous number still only worth 7.6% of the over Obama.
Remember, at $ 30,000,000 per year for the wealthy, the estimate of 4.9% is only a percentage of the deficit, not the total federal budget. It would be less than 2% of budget federal total.
So the myth destroyed: stick it to the richest Americans but not significantly the healing of control spending by politicians. He just postpones the inevitable insolvency of the country, insisting, incorrectly, that the rich can pay their "fair share" and economic miracles will happen. Now, if you believe that the rich do not pay enough taxes, which is certainly their right. But please do not perpetuate the myth that this action will cure the national debt that is a myth and the numbers prove it.
Forget the myths for a second and consider a real situation of the economy. I have a friend who operates his own financial services business and has done so for decades. He sells and administers policies for health and life insurance and is also a licensed broker mutual funds and other investments. He works very, very difficult, probably putting in more than 60 hours per week building your business. I do not I remember the last time you took a vacation from truth. So, I do not begrudge him whatever he earns from his hard working style.
However, in anticipation Obama's economic policies, when he was elected, this friend began to make some spending cuts. Its output is a recreation to spend time fishing on your boat and keep a small vacation home on the coast of New Jersey. Instead of sacrificing part of his life to pay higher taxes from Obama, he decided to fire the housekeeper many years and he and his wife have big cut in the amount of money spent on restaurant meals. Thus, as a result of this tax the rich myth, here is a real example of how this myth is worsening the unemployment rate in the domestic industries and restaurant with a minimal impact in reducing budget deficits Obama. This type of behavior and reality never seems to enter into economic myths of the political class.
Combine these numbers based in reality with the recent Nancy Pelosi absurd public service where she said that high unemployment is the best way to generate jobs, and you see how inadequate the political class is a perspective of economic reality. Their myths divide the country worsen our economic condition, ignore decisions of real economic life of individuals and companies, and restrict our individual freedom, without solving any problem. Certainly not a good economic deal for America
Myth 2 – Security Social is the best approach retirement for all Americans
Let's move on to another class of long-standing policy and major economic myth, namely that the Social Security system is a major financial plan for the Americans and the investment of our Social Security taxes in the stock market is an idea stupid. By keeping this myth alive, the political class can continue to plunder our wages and maintain tight control over our retirement income, limiting the freedom of every American.
However, if you look at your individual situation, you'll likely find the same results I found. I took all my Social Security history, as provided by the Social Security Administration, and developed a simple economic model to estimate what happened to my retirement savings if I had been in control of my life time payment history of Social Security and not the government. My guesses in the model are quite simple:
– I calculated that I paid into the system each year since the first year that I started earning a salary and then folded it in account for the same amount that my employers paid into the system on my behalf.
– I assumed that I saved the entire sum in a non-taxable account, IRA-type since the beginning.
– I assumed that was my salary account and invest them in an S & P stock index mutual fund that earned exactly the returns of the S & P over the last four decades or horror of horrors, I invested in the stock market.
– I assumed that I saved in the S & P fund until I was 56 years (2009) and then converted the accumulated funds in a conservative bond fund gained 4% a year, a standard measure to do more conservative as you approach retirement.
– While I was taking money from the account, I took the rest to the account continue to win conservative 4% per annum until there was money left in your account.
– The Social Security Administration estimates that I would receive about $ 1,300 per month or $ 15,600 per year if I retired at age 62.
– I thought I would start withdrawing money from my account theoretical age of 62.
The output of the model is very interesting. By ignoring the myth of the political class to invest my Social Security earnings in the stock market is an economic death sentence, the my simple model shows that, following the path of investment above, I would be able to withdraw $ 31,200 per year, every year, from 62 years until I was 102 years age. So, I could have doubled that Social Security pay me if the political class would allow me to control my own retirement plan from the beginning. Though my savings reform would be implemented when I was 103 years, it was a chance I'd be willing to take.
Another run of the model assumes that I withdraw $ 39,000 per year from this theoretical reform bill, or two and a half times what the government will pay me in retirement. In this case, I broke when I am 87 years old. I bit more risky, but most other economies can make a difference if I lived beyond 88 years (personal savings, home equity, 401k plans, IRA other plans, etc..) Up to 88 years, and have twice more money than what the government will pay.
So the myth that Social Security investment in the stock market, the option that loves to demonize the political class, is a fraud and a lie, at least for me. Since I consider my self fairly typical middle class, I would bet similar results could occur to most Americans. Not only did I have more wealth at retirement, wealth would be under my control, and my bills. I would not be subject to the whims and actions of politicians manipulating the rules and payments system. It's called freedom and the political class hates it when people have the control of its destiny staff.
But can anyone say that they are investing in an index fund shares as too risky for them. Let's give them control of their money, but investing in a year T-Bills and see what happens. Reconfigured the model to include the annual payment of one year T-Bill, in the last four decades, rather than the results the S & P history. The model addresses the calculation and easily shows that if I had been able to keep all my Social Security income in one account T-Bill years, and left the other assumptions the same as above, I could withdraw $ 20,800 per year, or 33% more than that Social Security will pay me until I had 95 years old. I could withdraw $ 23,400 or 50% more than Social Security will pay me until I was 88. I could use other savings to cover my expenses if I lived out 88 years of age. Again, I would control my salary into my account, and would get much more than what the government will pay me with it's ongoing system.
The other good thing about this approach is that in both cases, S & P or T-Bills, if I die before I use my funds, I can designate where the remaining funds go to (for example, the heirs, charities, etc.), since the remaining funds are in my account, the government does not grab them. In other words, I have the freedom to move for my salary to go to, and not some government agencies abyss.
Unfortunately, the government and political class never gave me these options. They forced me to deliver my winnings and earnings from my employer in my name, a government program that is rapidly approaching insolvency. In the process, they narrowed the choices of lifestyle that I have been able to do in retirement, they control my retirement income, they pay me less than I would have received had he kept my paycheck, and they control my salary, even after I died.
While we can now consider the myth destroyed, and control of our revenues from Social Security for our own investment in both the stock market and / or T-Bills would have been much better option than participate in the Social Security program, the truth is we can not go back. We need to fix what is causing the current system lurch toward insolvency, in order to preserve even the smallest amounts promised by the current Social Security system. Since the current system stabilized, we can only hope that examines how the above can be deployed and implemented to restore control over the lives of Americans and their pensions for themselves and break the contract with the political class that has enslaved and worsened life of economic reform of most Americans for decades.
About the Author
Our New book, “Love My Country, Loathe My Government – Fifty First Steps To Restoring Our Freedom and Destroying The American Political Class” is now available at www.loathemygovernment.com and online at Amazon and Barnes & Noble. You can also visit our blog at www.loathemygovernment.blogspot.com for our daily dialog on freedom in America.
