A Visual Guide to the Financial Crisis:The Bailout
What do you do if you don’t have the money to pay a debt? If you are like most of us, you borrow. The US Government is no different. In order to pay for the $700 billion bailout, it will have to borrow more money, increasing the national debt. But who will pay for this massive bailout? If you are a US taxpayer, you will.
Here is a visual guide to understanding how the bailout is funded and a couple of financial experts’ take on how it could be funded.
Source:10 Ways to Bail Out Wall Street (and Main Street) Without Soaking Taxpayers in Debt
For more personal finance visualizations see: WallStats.com
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Interesting diagram but I am wondering why the last arrow was left off? What arrow, you ask?
The one where large companies and the wealthy people who fund new ones leave the country to go where tax laws are more favorable. We see it already with where a company incorporates - where tax laws favor it or they are given breaks. Even Obama criticized McCain’s health plan, in one debate, because health care companies would just go where they could get the most profits.
I am not sure why people seem to think that a different standard will emerge if we continue to increase taxes on the wealthy.
Where are they going to go? Mexico? Africa? Canada and Europe already have higher taxes than US. If a wealthy person wants to live in the third world to get a tax break than so be it, no doubt their income was already largely sheltered from the government anyways.
And can we do away with this “the wealthy are themost taxed myth”. Just ask Warren Buffet, his tax rate was %17.7 last year. I was taxed at a higher rate working in a sewing machine factory. Most CEO’s are taxed at a lower rate than their secretaries. So if they want to indulge in some capital flight fantasy, then good riddance, it’s not like they are the ones driving innovation anyways.
David,
Interesting comment on the interesting diagram but I am wondering why you left the VERY last arrow off? What arrow, you ask?
The one where the middle class, which is comprised of the majority of consumers and electoral constituents, and from which those large companies and their wealthy stockholders derive profit, suddenly plunges straight down into the toilet, is no longer able to spend the money those companies need (or–yikes–is unable to repay loans that were designed to default in the first place) in order to continue business operations.
Wouldn’t it be great if supply and demand were the very bottom line, and there was no external practical reality that couldn’t be easily reduced to the terms you are using? Wouldn’t it be awesome if by giving more money to wealthy people, it would just make everyone wealthy? Wouldn’t it be great if whatever sounded good on paper in the nineteenth century would always work in real life, forever?
Man, I wish you were right, because if you were, I would be a millionaire CEO with health insurance and an H2 and so would you and everyone else, and money wouldn’t even be scarce anymore!
The problem is that you’re wrong. Your people had a solid eight years of tax cuts for the wealthy and finance deregulation to work their Reagan/Bushonomic hocus pocus, and all it did was turn the largest surplus any nation has ever known into the largest debt any nation has ever known.
This isn’t The Wealth of Nations, nor is it a game of Monopoly. As a matter of fact, what you and many armchair economists like yourself haven’t realized is…
…This is actually HAPPENING in REAL LIFE, RIGHT NOW, to YOU!
Wow, congratulations, you came up with the novel idea of taking money from the “evil” rich people and corporations.
I’m done with you guys.
I love the “it’s not my money so what do I care? they’re rich, they’ll get over it” mentality. pursuit of profit turns the wheels, don’t punish it. 50% emergency tax? really?
My humble opinion:
It’s the fault of fractional-reserve banking. Banks are allowed to create loans against money they take in as deposits. It encourages credit but creates “artificial” money. The real money is in the bank’s vaults but then loans are created for every 9 out of 10 dollars deposited out of thin air. Banks have been given this right and it’s great for furthering economic growth but since it’s a bubble by nature, there exists a risk of collapse.
I think eliminating fractional-reserve banking is the answer. It would make money much more expensive and commerce would grind to a halt. But, the value of our money would be incredibly stable and bubble-bursting proof. Banks would only be loaning money they had from their profits so they are the only ones who could lose. Peoples’ money would be safely in vaults where, even if the bank fails, the money could be retrieved.
One could only wish that the 3rd part of the diagram could become a reality. This country needs a society driven conscience instead of a profit driven one.
Great analysis, but the solution appears flawed. The rich already carry this country with the taxes they pay. How will continuing to screw them help? Soon we will not have any more rich, either because we have taken all their money or because they have left the country. Why would someone stay in American when they can keep, spend and pass on the money they make in other countries?
And with the number of layoffs, buyouts, bankruptcies, and bailouts happening today, do you really think taxing corporations and industries will fix anything? All you are doing is increasing unemployment. Their fare share comes from employing people who pay income tax.
They wouldn’t leave you ass hat, and if they did, good for them, make sure they couldn’t do business in the states without financial consequences.
Exactly, David.
One of the many ironies this diagram displays is the elimination of overseas tax havens…
…yeahhh.
Needs references.
That is the worst plan ever. You can take your socialist policies and shove it up your ass.
Sheer Lunacy
That kids is what we call socialism. Lets take money from people who work hard to get a good education and make a lot of money and give it to those who sit on their @$$es all day. The whole recession is being blamed on corporations, and yes they do deserve some blame, but the housing meltdown is due to Americans who aren’t fiscally responsible an took out mortgages they cant pay back. One of the biggest sources of revenue on here is to tax corporations more: What happens when you tax a company more? I can tell you one thing for sure, they aren’t going to just eat the cost, they will pass it on to the consumer and the people you thought you were helping will end up paying for it in the end. America was founded and became great on the idea that if you work hard you can make a lot of money and prosper. We hit a rough patch and now everyone wants to take the money from the rich and give it to the poor. Where is the incentive to work hard?????
If you tax the rich they will just up and leave, they have the money to go were they want. Even a modest 3% would make a sizable number move out.
If you tax the rich they will just up and leave, they have the money to go were they want. Even a modest 3% tax on wealth would make a sizable number move out, and then your back to square one.
I like the first two diagrams - they summarize nicely how bad these government bailouts are. The third one is just bizarre. How does a financial management website advocate taxing wealth? I counted four times where the plan outlined in the third diagram raised taxes not on income or consumption but on saved money.
The “Main Street Bailout” doesn’t go to Main Street - at all. The renewable fuels funding is nothing more than a subsidy for energy companies. The 50B mortgage rescue package will likely be administered by some government entity (and I didn’t see a plan for making those mortages affordable in the first place). And the 20B in state funding won’t go any farther than state capitals.
All this plan does is fund government programs that exist for the sole purpose of giving someone a clear conscience without helping anyone in the process.
Hey David. I say good riddance. Those greedy bastards are the reason we are where we are. There is a difference between “free market” and “greed rules”. If you can’t tell the difference, study recent headlines for awhile.
How about people and/or business do for themselves, fail or succeed on their merits. This is called individual freedom.
Cut all Federal Government 85% and then have Government return to promoting the common welfare instead of providing for the common welfare.
Decisions:
To be wealthy and live in the USA.
To be excessively wealthy and live in a tax sheltered country.
…hmmm
Why should someone be penalized to a greater degee just because they make more money? It could have been a product of luck, it could have been a product of hard work or better education…who knows…but why can’t people be happy for others success (financially speaking). I mean David is right…the purpose of a free market is to spawn the best and the brightest to work hard for their fortunes so the cream rises to the top and we as a country move forward with innovations and leadership. Penalizing the Have’s would simply be the equivalent of brain drain…forcing the best to leave seeking shelter from an overly taxed system. Where would that leave an already struggling economy? It’s up to everyone…rich..poor…worthy and unworthy to do their part.
Flow chart looks great….
David…the argument that wealthy will move to other countries is bogus. They like living here, their families are here, their friends are here, their homes and their long term interests are here……they aren’t going to pack up and go and live along amongst people they have no relation to just because they got taxed a little.
the real problem is education. and the microwave.
@David: I agree with your point to a degree, but the USA provides a secure and stable place for these corporations to do business - not to mention a ready market of willing consumers to sell to. They aren’t just going to leave and go somewhere better, because there isn’t anywhere better…
Certainly, it seems fair that *everyone* should pay something towards any bailout, not just lump the entire burden on the tax paying middle classes - or more accurately, their children and grandchildren.
WOW, you have this all figured out! You are the smartest person in the world. It’s amazing that non of our politicians can figure this out, it’s so simple.
So tell me again why you’re not in public office?
Oh that’s right, it’s because the only people who know how to solve the countries problems are stuck cutting hair, sweeping floors, and writing blogs.
Show me your research and marketing analysis behind your ‘numbers’.
That’s what I thought. You know nothing of money, economy and politics. Stick to your lousy blog. Spewing your opinion to .000001% of the internet population makes you feel empowered.
I agree David. People assume the wealthy will just grin and bear their punishment for the nation’s ridiculous governmental policies and economic illusions. Supporters of all these new taxes should be careful of driving away the source of all this revenue, or those that pay 50% of the country’s taxes will up and leave the party. It throws a wrench in the incentive to earn more.
I have one particular grievance with the “elimination of tax preference for capital gains”. This is described as “taxing wealth and work at the same rate”. Do you understand where people who invest their money get the overwhelming majority of that money? THEY WORK FOR IT!! That’s essentially double taxation on their income already.
First of all we shouldn’t be bailing anyone out. That aside, you mention the playing field… those receiving this bailout money are the ones getting an uneven playing field than the rest of us.
I’m blown away by the line about “A modest 3% [Wealth] surcharge would level the playing field.” You have got to be French. This country is about encouraging those who aren’t wealthy to become wealthy, not punishing the wealthy in order to bail out failures. I’m not wealthy, but I’m trying to be some day. Stop making it harder.
You’re basing this off of the supposition that the bailout *had* to happen. That just isn’t the case. End the bailouts!!! Socializing the losses of large companies is not the way to “fix” the economy. Stealing from the rich to pay for a series of bad decisions by powerful people isn’t much better than stealing from everyone.
@joe blow
The solutions provided come from Chuck Collins, a senior scholar at the Institute for Policy Studies in Washington, DC.
What’s your day job?
Interesting comments here. The chart above is more or less a spoof, or humorous peice, and I see people in here getting angry about it.
I really believe bailouts are a cop-out and a pure example of the greed and corruption of Washington. If I start a business, and run it into the ground, why is it that I don’t get a bailout? Oh wait, because I’m not a multi-billion dollar CEO, that’s why. Only the richest people in america “deserve” the bailouts right? It’s all a huge joke!
@spacejam: It’s not bogus. Look at Jim Rogers. He says publicly that he sees prosperity elsewhere, and he wants his daughters to speak chinese.
…Or, we could just refuse any sort of bail-out. Why should a company or individual that didn’t manage their finances well get a hand-out? They should have to suffer the consequences. Stealing from those that are financially conservative is not a good policy, and it certainly isn’t the American way.
I’m proud that many people here recognize this for what it is: socialism.
David… let them
- ps. stop being so afraid of socialism, and on a site note it is not = to communism.
I think most of the people here are missing something in the discussion of Rich People moving to other countries. Just moving to another country with lower taxes does not mean you no longer have to pay United States Income Taxes. The only way that you can avoid paying those would be to give your US Citizenship. How many of these Rich People would be willing to do that?
Shorter David: “I’m sick, but I can’t take too much medicine, or the bacteria might go infect someone else!”
Why is that last section all about taxing MORE? Maybe we should cut some government spending and find $900B that way.
Sure a few of those loopholes need to be closed but lets get a Lean government first.
@Thats Just Dumb
Wow man, where to start? I wouldn’t call it Socialism to have the wealthy and corporations pay the proper taxes due. It would be socialism if the government out right took them over, or froze all their funds for their personal use…..
Those fiscally irresponsible Americans? Well, when the only loan you can get to purchase that house is a balloon because an artificial and inaccurate system was put in place to rate your credit and limit your options, what choice do you have? I don’t blame the Americans, they chose from among the options they were given by banks out to make a buck. The question you should ask is why they even had that option to pick from to begin with.
I do agree though that the corporations will attempt to pass the buck on to the consumers, but I actually wish that would happen. People might actually buck up and find out they really didn’t need that can of Red Bull, the extra large fries, the GI Joe with the Kung Fu grip, and then free market would take over and prices would eventually reach equilibrium.
I honestly don’t have a clue where the author thinks the money companies will use to pay increased taxes is going to come from. If you accept reduced profits, then the result is a worsening stock price for large companies, which in turn affects the rest of the market. Instead, companies simply trim jobs and cut benefits to employees, as far as that is possible; at that point, they can then take their lumps in the market.
It would be lovely if we could just tax ourselves to prosperity, but it is as simplistic an idea as tax cuts as the only avenue for economic recovery.
But that’s fine, I’m sure you feel better after sticking it to the rich people!
Some interesting points for sure. But a question: wasn’t higher taxes (top rate went to 79%) one of the things that drove the US into the great depression?
I’m certainly no apologist for the wealthy, but why does your plan single out the wealthy and large earners as those who should shoulder the lions share of the burden? 80% of wealthy Americans are single generation, self made….do we really want to stifle that sort of capitalist drive?
I agree with you on the corporate tax points however. Obscene that corporations don’t pay their share.
BTW, Derek you have a great point. But rather than doing away with fractional reserve entirely, what about lowering the leverage (e.g., 4 to 1)?
I agree 100% with david. This is quite possibly the worst/retarded suggestion ever on what the government should do. The rich already pay a ridiculous percentage ( alomost 40 in income taxes alone) of their income in taxes and now you want them to pay a 50% emergency tax??? Idiotic……
Lets see how the filthy rich are made to cough up money which they have inherited over the years, and left the entire state in a mess. In any case middle class has gone broke and does not fit into this revival package!
“joe blow”, “Thats Just Dumb”, “Storm9″, “David”, “Mclusky” and “Robert”,
hummm… from what I’ve seen recently, it’s the RICH who are begging for our tax dollars.
The head of Fannie Mae, Daniel Mudd, reaped a 7 percent rise in pay last year (2007), to $13.4 million, while the company lost money and the country suffered its worst housing crisis in decades. THESE ARE THE PEOPLE THAT NEED TO BE DISGORGED OF THE MONEY THEY STOLE!!!!!!! These CEO’s like Countrywide’s Mozillo are NOT representative of the free hand of capitalism that America is based on. They want the government off their backs when they’re making money, and when they are collapsing, here they come begging. LET THEM FAIL NOW.
What our government is doing right now is CORPORATE SOCIALISM and it is plain for all to see. You idiots criticizing the “theoretical” diagram above, why don’t you speak out against the REAL raping of the american worker and the wealthy americans who earn their money legitimately? Speak out against CORPORATE THIEFS NOW.
Hello? Anyone there?? I didn’t think so…
“That’s Just Dumb” said:
‘The whole recession is being blamed on corporations, and yes they do deserve some blame, but the housing meltdown is due to Americans who aren’t fiscally responsible an took out mortgages they cant pay back.’
I took out a mortgage well within my means, fully capable of affording it, with money to spare.
Then a bunch of rich banks loaned money to people who couldn’t afford the loans, then all the CEOs went to poker games and threw all of those mortgages (the bad ones and the good ones, like mine) into the pot.
Now I have to worry if I’m going to have a job tomorrow because of the recession.
Who’s looking out for those of us who got perfectly reasonable, affordable loans that we were able to pay off just fine until the banks started playing poker games with our houses and the houses of people they shouldn’t have loaned money to?
The error in accepting this as a better source for the bailout is that, in order to that, you must first accept that there needs to be a bailout.
I’m with AJ - refuse the bailout, or more correctly termed, nationalization of private industry.
Stop being afraid of socialism? ha! Well you are right, you should not FEAR anything, including socialism. However, that doesn’t meant you shouldn’t understand it and be able to squash it. Socialism is the death knell of liberty and sovereignty, and by destroying those you also destroy standards of living, entire economies, and even classes of society.
We are certainly on our way! It’s too bad that so many people have to wait until it knocks on their front door before they’ll acknowledge it’s really happening.
Anyone who thinks the rich are taxed at 40% does know anyone who is actually rich. The reality is they barely pay anything in taxes once the accountants are through. That’s how the rich stay rich. While this chart is flawed it does have some strong points. Fairly taxing the wealthy (and I am not talking about some guy making 120K as a low level exec, I am talking about households that bring in over 1 Million a year) is an important step. If they are taxed even near the same rate as the working class, say in the range of 30-40%, then it would just be a level playing field. Consider this: I make 50,000 dollars for my household annually and have to give 20,000 of that to the tax man
My brother makes 1 Million per year and has to give $200,000 then who is hurting more at the end of the day. You all whine about the rich leaving! That is the truly ridiculous thought. They made their wealth here. Do you think they are all just gonna pick up and set up shop somewhere else? Where is this financial Xanadu. Is there a special handshake to get in? No other country in the world, save Luxembourg maybe, provides such reckless tax shelters, and tax cuts the way the US does. Perhaps if you thought outside of your pathetic narrow minded view of the world you would see that the US is on its ass because of the greedy cash grabbing practices of the wealthy few, and they are the only people not actually suffering from the outcome.
Yeah ummm, socialism is the right way to go…. errrr ummm WTF!!! Its only a matter of time before Obama and his slew of criminals ruin our great country… As far as the big 3 bailout… We dont want the cars they make so why are they making us pay for them…. The people have spoken we dont want to bail out!!!
PS. The true bail out plan
BAILOUT –> DOES NOT HAPPEN
I like how all the people are arguing for “free market” and liberty and such. Free market does not equal liberty, at all, even in a basic sense. Remember slavery? no? That was free market, it took government intervention to stop that, limiting the plantations which took the same exact (yes exact) stand on limiting free market if you stopped it.
As far as the extra taxes, it would look like *gasp* Reagan (your god for some odd reason) taxes. Bush has destroyed the tax system so the very rich pay almost nothing. For more information on this, check out tax rates for capital gains, or in other words, money you make by just having money, not hard real work.
The rich will not leave the country to some “tax haven”. Even after 3% loss of money, they still have more than they can spend, ever. If they went to these tax haven countries, they would be paying the same amount in the small militias they would have to hire to protect them, as well as being pretty much exiled from the USA.
Almost all of you conservative criers have no civic/economic/governmental knowledge, you have taken basic high school classes and think you know your way around the world but it is like reading the ideas of a 2 year old.
Please look up the definitions of Socialism, Capitalism, Liberty, Free Market before posting again.
I am investing in ” Payless”
@Author of that terrible flow chart: That is one huge chip on your shoulder.
Actually, all the money being paid in the bailout is pointless. Americans are defaulting yes, some of those are going to happen anyway. Some are loosing their jobs and a good mortgage is going to lead to foreclosure just as fast as a bad one. Everywhere I look, I see this company closing this factory and moving it somewhere else - Mexico, China, etc. As long as this continues, we are going to keep falling. The NAFTA style agreements are doing this. In my area, there are 2,000 people at the unemployment office trying to get the 46 jobs available. What are those, SERVICE jobs, you can’t move them to another country. The only way to turn this around, is to stop the bleeding of jobs out of the US. How? The NAFTA style agreements are binding, they can’t be easily undid. We do what they don’t address. WE TAX MONEY LEAVING THIS COUNTRY. 50-90 cents of every dollar will fix most of it, A company wants to hide off-shore, no problem, they will not be making a good profit until they move BACK into the US along with the jobs they moved out. The US Dollar would start increase in value as less of them would make out of this country. CEO xyz wants to hide his income, where, not outside the US.
This will never happen, we have the best government that can be bought. The ones buying the government are the same ones that would lose most by a scheme like this. Get ready for the worst depression there will be. Remember, when the banks can’t take away you property, the government will for unpaid back taxes, that happened in the 30’s the few that remember that time will know what I’m talking about; the rest of us forgot that part of history, and we are about to live it again! Good Luck!
Wow. I typically don’t comment on things such as this but I have to drop my .02 now (which if this guy has his way would be .01).
It never ceases to amaze me how others try to use the arguement that ‘30% of 50,000 is alot worse than 30% of 1,000,000′. Really? Yeah 30% of 50,000 sucks. But then again you chose to get a job that pays a mediocre salary and you lived the ’safe life’. Try going through 10 years of schooling (at 50-60 hours of coursework not the 20 credit hour junk our college students do). Now you owe tens of thousands of dollars of debt (notice not free federal grants) that you have to REPAY (gasp!). Now you are a 30+ year old just entering the job market and your an assistant vice president to a company making maybe 100-200k a year. But your paying that lovely 30% again so really you only make 70-140k a year (to pay off your 100k in debt you still owe). Then some socialist tramples along and says “hey you make more than I do! Give me 1/2 of what you have! Despite the fact that I’m 20 and I have 5 kids from 5 fathers and I’m an alcoholic.”
Come to me when the government takes 1/2 of your HARD EARNED MONEY and gives it to someone else to does 1/2 the work you do. You know that neighbor that you hate that doesn’t mow his lawn? Well now you have to mow it for him because you mow yours so much better than he does.
Now. Do I think the corps deserve a bailout. **** NO! They made their mistakes they should have to deal with it like the rest of everyone. No one comes to my rescue when I make poor decisions. Its business evolution folks.
I got a better idea. Take the 700 billion. Give it BACK to the people. Imagine an economy where every citizen is given the chance to be debt free. That $2,500 i pay in debt every month is going to back into the system. But hey what do I know right?
It’s been said several times already, but I’d like to reiterate the point that this chart is based on the flawed premise that the bailout was even needed. I don’t believe the notion that everything was necessarily caused by “greedy politicians and executives” and can’t really be pinpointed (ever seen that movie “The Cube”?)
Please read an old book called “The Law” by Frederick Bastiat. It’s only about 80 pages and can be found posted free online, try the link on my name. Published in 1850, but meant for today.
Sean, your tax percentages comment is very much flawed. YOU decided to take out those loans and spend the money you didn’t have. You’re saying that you should get a break because you made a poor financial decision? I really can’t take people seriously when they claim they somehow “work harder” than someone else. Get over yourself.
Your last two paragraphs summarize my own thoughts on the matter. Well said.
If I say A & B are similar, and A has property C, so B must have property C.
@Sean
Wow…either you came from money or now that you have money you see the Republican way of it all. I’m not saying by any means that we should be distribute it evenly. But I can assure you that you that those living the “safe life” work just as hard if not harder than you do.
From everything I’ve saw the only thing that separates me (college degree) from you (Dr. I’m guessing) is a few years of memorization in medical school and pure arrogance. Now if you’ll excuse me I’m going to go shell out thousands of dollars of free federal grants to undeserving people who only go to school, work a job or two and then try to find time to study and sleep somewhere in there.
I hate rich people to. I hate how they provide me all these jobs. I hate how they are rich. I just hate them! Tax the hell out of them. I can’t stand how they worked so hard to get that money. I hate how my fat buy and lazy attitude can’t be that. I can’t wait til they aren’t rich anymore so i have an opportunity to create jobs. Taxing rich people, really motivates me to become richer!
As a matter of fact let’s put heavy weights on the basketball all stars so that the fat, lazy, untalented basketball players can keep up.
And then we can take the good players off of your championship team and redistribute them to other teams, because these other teams have to work twice as hard to be as good as the best team
Keeping things even and fair will motivate everyone to be their best.
A Bailout still doesn’t guarantee a top economy again, are economy is ruined we have to re-structure are economy about 60% of our economy was based on spending and loaning money, not making money. Saying taxing corporations, you must only tax corporations that are clearly making profit and gains, but if you were to tax them to much they begin to loss capital and no longer can make gains. Their is many more ways we can save money during this crisis, cut government spending, government pensions etc. You cannot save an economy on borrowing money it wont work, that is what got us in this mess. You cannot start to rape the rich on taxes etc. They made that money and to tax 50% of it, why should they just have to get taxed to the sky over it. Management of companies need to much stricter, and who ever is controlling companies whether it be investors the board they need to control the company better.
Everyone’s saying we MUST bailout these banks, but must we? Maybe I’m naive, but maybe someone can tell me - WHERE IS THE MONEY. Money is like matter or energy- its never truly gained or lost it just circulates. If I took a loan for $1million to buy a house, I give that $1million to the seller - even if I default on that loan, that seller still has that $1million. What does that seller do with $1million? He probably puts it in a bank - the same banks that we’re now bailing out!!! So for every dollar that is loaned from one bank, - another bank benefits greatly, so I ask again - WHERE IS THE MONEY!!!
I love all the comment immediately posted “TAX THE RICH HOW DARE YOU, All you scum sucking middle class people need to pull your share”, You people are the most full of shit hypocrites… Claiming that the middle class isn’t pulling their weight in America is down right ignorant and only proves changes like this need to happen.
THIS PLAN TAXES THE RICHEST %3 BECAUSE THEY SCREWED UP, all the people saying I make 100-200K a year and this will screw me need to learn to read, your being screwed too you just make enough money so your can shove your head up your own rectum and blame everyone else. The bottom 3rd of this chart is ALL, 100% of it, loopholes that the super rich use that none of the other tax brackets can use even if they were bad people like them, and people have the audacity to say “Well my dad is good friends with the CEO and paid for me to pass college so now I’m worth 100million dollars i shouldn’t have to pay taxes like the all the pieces of shit that make me all that money”. What? They used their power to play with your money, your chances of getting a home, paid the government to ignore it and make it easier to do, exploited the stupid with loans that the government should have made never able to exist, and when it all came crashing down just took YOUR (To all the they greedy 100k to 300kers that’s more your money than any ones) money and called it even…
And all this OMFG TAXING RICH PEOPLE WILL MAKE THEM LEAVE!!! Where are they going to go? What magical place exists where they pay less taxes than the US and has any chance of generating the money from a business that America does? Do you have to wait for a magic fairy to sprinkle rich people fairy dust so you can fly away to nevernever tax land? If someone takes their wealth and business some where else, forbid them from doing business in the USA see how quickly they flee the US… As a matter of fact I dare you to leave, I would love to have a piece of that sweet corporate monopoly you’ll behind….
2 Things:
1. Yes, the rich WILL leave, ask the UK how many of their billionaires are actual UK citizens - they’re all citizens of Monaco or the Virgin Islands (Richard Branson for example). Ireland now has a lower tax rate and is looking pretty good, as do all the Caribbean countries - doesn’t sound like a bad life while visiting the relatives for up to 1/2 the year in the US.
2. The most ridiculous thing is the “2/3 of corporations don’t pay taxes stupidity”. Totally bypassing the argument that corporations never pay taxes (they only pass it on to employees or consumers), 98% of corporations in this country are small, very small, (most have fewer than 20 employees, 98% have fewer than 500) - that’s why the IRS has what are called “S-corporations” - s means small and they don’t pay taxes because the income is taken and taxed at the personal rate - so it’s taxed nonetheless.
This is amateur-level thinking.
Give up them chickens and silver sets when we are still asking nicely!
There’s gonna be a whole new set of rules when anarchy breaks out.
@jared
Jared lets make your basketball example a little more on point.
Lets take all the best players in basketball and drug test them, oh shit the top 10% of them have more horse steroids in them than a veterinarians office, lets check their finical records oh shit! they’ve been paying the refs to not call fouls on them!
Jared’s answer?
You can’t penalize them that would not be fair and would ruin the game!
Your either willfully ignorant or manipulatively subversive… Taking these players off their teams is what keeps the game fair and gives people the belief they have a chance of reaching the top. Coddling the ultra rich tax cheats/loan sharks/blatantly irresponsible inspires no one to reach the top except more con-artists and affluent crooks.
This is socialism and punishes the wealthy why rewarding Six Pack Joe for being mediocre all his life.
I agree that the richer should pay more taxes, as with the progressive tax system that already exists. if ppl like warren buffet pays only 17 percent there should be a correction in that…
but otherwise the rich neednt be used to bailout the situtation here. why do we need a main street bailout? why do we need to bailout the people who bought houses they couldnt afford? why dont they rent like the rest of us who save till we can actually afford to buy a house.
We should let them all get evicted and rent, let home prices go down. let them sell of their big screen tvs and their new cars bought on home equity and make all those affordable for the rest of us hard working people who live within our means.
It’s idiocy to seek wealth anyway. These ‘rich’ people own things because they say they do. Drop us off in the fucking woods, and we’ll see how long their little green pieces of paper keep them well fed and warm, and safe from predators without idiots selling themselves for useless trash. People are fools as long as they forget life isn’t about amassing wealth and power. The solution presented is viable, shit, I already work for charity and try to make things right as it is, I would take all those hits if I could. But I am not wealthy; I don’t believe in exploiting idiots. In any case, the people with the money are the ones who make the rules. Who is going to tell them otherwise?
Very interesting post. Now that the recession is finally ‘official,’ unemployment applications hit a high this week, and stores are being hit hard by non-sales, it’s time for the government to act.
Hopefully the right plan goes into place and something actually improves in the upcoming year.
dan,
Graduation Stoles
Middle class - what middle class if you work for a living you are working class. I’m not after taking the money off people who work and earned it I want to destroy the system that keeps that money after that guy dies. If you die and haven’t spent it tough it goes back into society. 100% inheritance tax - each generation starts over no leg ups, just a fair competitive struggle.
One life each - you have no more right to an easy ride than anyone else.
It never fails to astonish me how successful the American system has been at turning its citizens in feed for its Morlock overlords.
Billionaires while people starve, seriously wtf.
Couldn’t agree more. Two member of the same family presidents of the US. You tell me the last guy got there on merit. Eat the rich
I would like to point out, that the blue section is taxation over a one year period to raise enough money to pay for the bailout. It is not decent into Karl Marx’s id.
We’re all in the same boat kiddos..Too late for the blame game..Abandon ship!!
I am for higher taxes to pay off the deficit, but the government size is just out of control. Decrease the size of government, cut back some of the junk programs and everyone wins.
Gosh, I like socialism….
Countries like Norway and the Netherlands, largely socialist, with much higher taxes than ours, have the highest standard of living in the world by quite a few metrics. And more personal freedom.
Not that the above proposal is anything like socialism… I only wish it were.
@Damian - how exactly would imposing restrictions and taxes on people create any form conscience? The government can NEVER generate ethical actions from its citizens when it demands money through taxation, nor does it develop its own conscience. My decision to give must be my own in order for it to be ethical - me paying the government money so that a certain % of it can be passed onto “doing good” is not an ethical action on either my part or the part of the government. You can make any argument you want as to why people or the environment needs assistance, however, making it mandatory that everyone pay into such actions takes away any moral value of “doing good or bad”.
Yes, I’m sure if you tax the rich, they will refuse to make money in protest.
Gawd, you people are so brainwashed its ridiculous. You will never be rich, you will never have money, you will die poor or middle class, so stop defending the crimes of the wealthy. You aren’t in their tent, you aren’t part of their club.
Jeez people, the rich do pay more in taxes already - its called the upper tax bracket.
Anyway, its better to keep taxes low as this puts more money in consumers pockets, which leads to more consumer spending and more taxable events. It’s only slightly counter-intuitive.
Doesn’t the thought of getting rich one day motivate the middle-classes to stay in their crappy corporate jobs? Or does that trick only work on me?
For people (not corporate entities) a flat tax combined with value-added-tax for sales seems to combine the best of both worlds. This way, each person pays into the system to cover shared services provided by state and federal governments and then they pay when they consumer goods. Ta-da.
Bring on the flames, I don’t care. I’m never reading this page again.
Okay, one more thing - the rich do pay taxes. Loop holes do not get them out of their obligations contrary to popular belief. I have it on very good authority, my wife is a financial adviser. Stop spreading that rumor.
The rich do pay taxes. Loop holes do not get them out of their obligations contrary to popular belief. I have it on very good authority, my wife is a financial adviser. Stop spreading that rumor.
Yes, people reduce their taxes through right-offs. This is legal because they are exhibiting economic behavior the government (who we elect) wants to encourage. Generally (in the broadest of terms) this means they are contributing to economic growth.
Jess: Where can they go? They can go to Singapore, Dubai, the Netherlands Antilles, or various other tax havens that are not in under-developed places. That’s where the nexus can go, and then they can operate anywhere in the world and pay far less tax because their nexus is in another location.
After hearing that the UAW has given back on 2005 and 2005
how is it that they still pay their workers 11 billion a year more than the
foreign auto workers
figure a $25 dollar difference from $48 to $73 per hour including benefits and retirement funding
Multiply that times the 230, 000 still working for GM Ford and Chrysler
and it comes to $11 Billion a year which by the way is way bigger than the
aggregate $100 million the executives get beforethey begin to work for $1 per year.
and which by the way $73 per hour translates into into over $140000 per year per
employee .I know each working employee does not get that much but
it shows the untenable situationthe detroit automakers are in unless they break the
union contracts
Please cut and paste this and send to as many friends as you can
Thanks, Errol
to those crybabies whining about their student loans .
If they did not have their education they would not be able to make at least double
what only a high school job would pay.
Pay the loan back out of your extra earnings ,DUH
If you are not making the extra wages then all I can say is what waste of a good education. you probably are not smart enough to go to college in the first place
Errol
The wealthy pay most of the taxes, so it should be no surprised that they get a larger percentage of the tax cut total back! It is only fair.
——
Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that’s what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. ‘Since you are all such good customers, he said, ‘I’m going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80.
The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share?’ They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.
And so:
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.
‘I only got a dollar out of the $20,’declared the sixth man. He pointed to the tenth man,’ but he got $10!’
‘Yeah, that’s right,’ exclaimed the fifth man. ‘I only saved a dollar, too. It’s unfair that he got ten times more than I!’
‘That’s true!!’ shouted the seventh man. ‘Why should he get $10 back when I got only two? The wealthy get all the breaks!’
‘Wait a minute,’ yelled the first four men in unison. ‘We didn’t get anything at all. The system exploits the poor!’
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!
And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.
David R. Kamerschen, Ph.D.
Professor of Economics, University of Georgia
Or…..we could just implement the FAIR TAX to get us out of this whole mess.
http://www.fairtax.org
Check it out. It makes sense.
That is the crappiest thing I have ever seen. Everyone wants to ignore the fact that all the problems of the current economy are predicted by the various free market systems. Everything that is happening in this crisis is a result of over-taxation and over-regulation which creates government favoritism towards certain businesses. So you propose that the means to fix it is more taxes and regulations so that the old favorite businesses fail and new ones can start the cycle all over again. That’s pure genius. What should it be this time? Green energy businesses? Bio-tech? Mind-altering drugs dispensers?
At the end of the day everyone is out for their own best interests. If your best interest is to give all your money to charity, then that is your business. I don’t work hard in my job so that my neighbour can eat before me. If I want to share my EARNINGS then that is my choice, but I should not be forced to do so. In the end it makes us all poorer. Russia realized it, China realized it (to a lesser degree), the European countries realized it at the turn of the 19th century. Let’s stop thinking that interventionist actions are the solution to interventionist-created problems.
Repeat after me:
I, state your name, do solemnly swear that upon receipt of dictator-for-life powers I shall be only the most benevolentest dictator possible.
Nice way to steal an extra $200 billion in the bargain for your own pet causes.
This is so dumb. People are so caught up on taxing people who profit. Get over it our economic system is capitalism!
However, I agree that the bailout is stupid. Any time the government gets its hands in something it usually screws it up even more.
If your goal is to actually help our economy then passing the Fair Tax would be a great start. I’ll leave it up to the reader to figure out why. One initial benefit would be ~300 billion in savings just because we don’t have to comply with the stupid current tax code.
One last poke at people who think it is a good idea for corporations to pay taxes: stop voting! You are an idiot and don’t need to participate in making this country better.
@rich hypocrites:
You’re exactly right. With regard to all these people making around $100-200K a year bitching about how it’s bad if we tax the rich have been convinced BY the super rich that they’re ONE OF THEM when in reality they’re in the same freaking raft the rest of us are in.
Sounds like a good plan.
What will you need to do to have
law makers see it.
thanks from tony
I’m all for the fair tax……….forget this crap
Most of you “don’t tax the rich” drones are missing the point.
1 - nobody posting or reading this article is remotely close to being wealthy enough to really know how the very wealthy think
2 - nobody reading or posting here has a prayer of making that kind of money. Get over it - you’re not going to have that kind of money. Ever. Get used to it. Protecting the super-wealthy isn’t going to help you either.
3 - to tell us what “wealthy people will do” is plain fricking stupid, because you DON’T KNOW WHAT THEY WILL DO. Helloooooo? How can you even guess what they will do? You have NO IDEA; chances are that you’re living just within your means, or are sinking. How can you know how people think when they are 100% certain that availability of money will never even be even a factor in their quality of life, when you’ve never been in that situation?
4 - “Socialism” ? Don’t be stupid. That’s a knee-jerk rich-dude talking point. Want to see “socialism”? Look at how the ultra-wealthy have parroted for years “the free-market will take care of everything”. Look how quickly they hit the bricks to D.C. asking for help. Where are the investment banks now? Poof! Up in smoke. Seems the market is not so smart after all.
5 - wait for this to really penetrate and play out: do a Google search for : Madoff 50bn. See how some guy has defrauded BIG money from individual investors. Watch some super-wealthy people now call for government help.
Craig Matthew - go for it - you’ve hit the nail on the head.
Many Americans actually believe (BWAHAHAHAHAHAHAH) that they will soon be “somewhat or substantially wealthy” as a result of their efforts or investment (from a survey back in 2005 - sorry, cant find reference). They won’t be, and they aren’t.
Wake up and smell the coffee - I’m hosed, you’re hosed. Protecting the wealthy by telling us not to raise taxes is stupid. Protecting super-wealth of others is a GOP shill. You know nothing about super-wealthy. I know nothing too, but I know it. Y’all need to learn that too.
Helloooooo “dw” - you mindless drone. Kamerschen never wrote that. He denies all knowledge of it and has no comment on the “drinking economics example” drivel. Idiot. You’re not smart enough to verify a simple talking point. Really think the wealthy want YOU in their corner? Moron. Learn how to use “the Google” and the intertubes. You can take Google lessons with your hero McCain. Then you can hunt moose with Sarah. Jeez - how stupid can you get?
see http://davidk.myweb.uga.edu/
“. . . . Contrary to Internet folklore, Dr. Kamerschen is NOT the author of “Tax Cuts: A Simple Lesson in Economics” or “Bar Stool Economics” or anything similar to that. Additionally, he does NOT know who wrote it and he has no opinion on its merits.”
http://davidk.myweb.uga.edu/
Errol,
have you ever been out of the US? Have you seen how cheap it is to live in some places?
Still with me? Good. Next : can an American auto-worker buy a meal for his family for 50 cents? No. With me still?
Next : how can we transport the food from Indonesia to Detroit? Don’t think we can. So, now you have it (if you can actually read, that is) : we pay them more because IT IS MORE EXPENSIVE TO LIVE HERE.
Yeah, yeah I know your response to that. “Move the auto manufacturers to Indonesia etc.”; America will be a “service economy” . . . .?
Puh.Lease. Tried that - how do you think we got into this mess? You can’t move all the “low skill” jobs offshore and keep the “smart jobs” here. A country operates on all kinds of effort. Garbage has to be collected, pipes welded, cars made, hearts transplanted, clothes made. Only idiots believe you can raise a country’s standards by cherry-picking economy sectors.
Don’t confuse your addled brain with the real thing. Your grasp of these things is limited and childish. You need to read a few books and live a little bit of life and see that just repeating what the zombies on TV say is really just silly.
@Paul: I don’t know if you’re just overly pessimistic or an idiot.
What don’t you understand? When people are given the chance to take advantage of something, they usually do. Corporate America has taken advantage of all the loopholes and this recession is the result of it.
Lots of diverse thoughts here, but fear not hear this:
Free markets equal freedom i.e. like in nature red in tooth and claw, but as most biologist know free nature is actuall an ever ending race between host and parasite. You can actually argue that a predator is a somewhat intelligent parasite i.e. that a parasite must not be too successful else it would run out of hosts and eliminate itself in the bargain. Like wise the financial system given its free head evolved into a host parasite system wherein the parasites were so successful they topped the host.
Regarding governmental printing of money: this has always been the case and should be e.g. back in the last century lets say 1908 USA population was much smaller than now lets say for arguments sake 150 million now its around 300 million, so there are more houses too, people own more things such as TV’s cars playstations. If no money was printed to “inflate” the economy how would prices be reflected? as there are more people and goods in circulation the intrinsic value of money would need to rise, clearly an untenable situation. Hence the absolute requirement to print more money and inflate the economy. The key point being that this inflation should keep just ahead of the pace of creation of real wealth such as houses and goods. The trouble is that the printing of money at this juncture has little to do with above rather the reverse but it should still work as long as people believe it with the cost that future generations may have to be happy for a while with reduced or non-increasing standard of living.
A small note to those that think living is cheaper in some countries rather than the USA. Aside from the fact that it is only in relation to the USA that this hold true. If you were a native denizen of those countries you would not say they are cheap, most likely you would complain like your compatriots. You must also consider the facilities there or rather more accurately the lack thereof. Could a USA citizen really banish themselves to such places. If not Bermuda would get even more expensive to such a point that the good ‘ole USA would be cheaper.
Just some thoughts from an illeterate observer of the world.
The super rich WORK for their wealth?
Oh please.
Everyone is talking about how the “anti tax drones” want to protect the wealthy. It isn’t about protecting the wealthy - it is about preventing the precedent of infringement on the free markets. It is about incentives.
And you’re right, I can play the economic lottery and my expected returns are far lower than the “super wealthy” status. But the fact of the matter is, greed won’t stop incenting me from trying to develop, innovate and entrepreneur my way to the top.
Of course there are other motivations in the world apart from greed - and they are becoming more and more apparent with the concept of things like “social enterprise.” Great - pursue that if you wish. Just don’t dare hinder the economic actions of anyone else and claim in your arrogance that you know better how to distribute economic resources in this world. Frankly, economic actors aren’t the most efficient at distributing resources either - but here is the crucial point - in the long run, they are more efficient than centralized institutions that claim omnipotence.
Sure, the some institutions with great restrictions and checks on their power might be nice to smooth out the most severe of market failures - but we see how successfully that is happening with the entire bailout debacle. Wake me up when liquidity thaws.
To all you trickle-down economists out there: You were wrong. “Profit” does not turn the wheels after all. It’s production that turns the wheels. I hope you all move to Mexico so you can realize your fantasy of corporate rule. In the meanwhile, WE (the middle class), will be taking back our economy and fixing it.
Great diagram,will see is this plan working
You rich elite worshipers forget one thing: You seem to believe your own lies when you say “The Rich” will just take their act elsewhere.
First: They have nowhere to go. Notice the “British Invasion” of music talent. We are the last country the rich elite can get away with their cr-p. Well, except for really failed countries where they live like kings, Louis XIV, rather as the dictatorships change monthly and the populace is not so much into revolution as cannibalism.
Second: They don’t earn their money. They either have it already or they are “Pigs that devour usury”. They don’t work for money, they buy and sell the labors of others. They don’t invent or innovate, they buy patents third hand and then have a lawyer use them to lawsuit blackmail actual producers for money. They move jobs overseas, and often that ends up costing more, but they bray to the government for our tax money to bail them out so they make a profit even when they wreck themselves with stupidity and indulgence.
End their “Free Ride” there will be plenty of inventors, entrepreneurs, innovators who’ve been held down by them eager to take their places and somehow I think they’ll be grateful, not hateful about paying “Their fair share” or more. Really, give me a million a year income, tax 60% of that I’m earning 400k a year, I think I’ll survive somehow. And if I’m concerned I’ll use “tax deductible” issues, not to get out of it, but to make sure most of my tax money goes to good ideas, like social programs.
There should be a giant black hole at the bottom of the diagram. Great work. Just my 2c. Cheers, Jem
http://www.pierretristam.com/Bobst/07/wf010507.htm
don’t be so afraid of socialism:D
I say we do away with income tax and down size the government. They are worthless!
1.) Why do the big three need a bailout if they produce tangible goods? obviously they are financially failed not economically failed. Therefore, need to file chapter 11 not recieve a bailout. Why do they also think it’s the taxpayers duty to bailout private companies monoplized by unions with democrat ties and affected by big government regulations? What about the employees from other companies who are failing but aren’t being saved by big government bailouts? (eg. Detroit free press, Tribune Co, NYT, Circuit City. etc…)
2.) I see no good reason to trust the same rationale that was behind bailing out the big banks. That $700 Billion TRAP was designed only to assist banks, however now insurance companies and even credit card giants like American Express are trying to get in on that action. Thus, This auto bailout is nothing more than, informal fallacy argumentation, ethier we complie or we caused everyone to be affected. How did that first bailout work again? Oh that’s right it was pork filled and paulson changed his mind on how that 700 billion should be spent. Not to mention, the economy has gotten worse. The stock market has tanked, and the deficit has soared to historic proportions. We’re now on the hook for over $7 trillion and some people are still begging for more? Who created this situation? Was it the fault of the tax-payers? Or was it the fault of bad management, the UAW with democrat ties, and the big Government regulations? All Evidence points to the latter. Furthermore, this isn’t the first time in history one of these car companies has asked the government for a bailout. In the late 1970’s Chrysler asked the government for a bailout telling the government their sob story and in the end they got their bailout. Flash forward to 2008 here they are again with another sob story asking the government for another bailout. ie. The government trough has reopened and the bad management, the lobbying special interest, and the UAW all feel they’re entitled to feed from it once again. The point of my example is this, they’ll just keep coming back asking for more and more tax-payer money. Those who learn nothing from history are doomed to repeat it. The big three are like bank robbers with alot of hostages so they aren’t afraid to black-mail tax-payers with the canard of 3.3 million jobs will be lost. The only way to cure the big three once and for all is to let them file chapter 11 and restructer from the bottom up. Moreover, Those auto part manufactureers can also do bussiness with the international auto-mobile makers that produce right here in america. Obviously they’ll pick up the slack for the big three if they end up failing. Honestly, do chief executives who fly on private jets really need a bailout? Seems to me, if one can create enough urgency then one can implament their agenda. And their agenda is obviously; Lemon Socialism!
Other industries have survived bankruptcy just fine:
eg. Most of the major airlines have spent time in bankruptcy, including United, Continental, Delta, Northwest, and US Airways. Their predicament looked particularly dire after 9/11. But the major carriers made it through. And to the extent that they suffered, low-fare competitors such as Southwest and JetBlue picked up the slack, often offering superior service in addition to cheaper prices.
Others have not:
eg. TWA/Delorean too big/historic to fail? (obviously not america is still here)
While another auto-mobile industry (leyland) which was in a very similar position to the big three’s situation now was indeed saved by a government bailout only to still fail in/by 2005: eg.http://edition.cnn.com/2008/BUSINESS/11/20/auto.industry.uk/index.html
(Note: For now I’m not even asking the big three to fail i’m only asking they file chapter 11.)
http://online.wsj.com/article/SB122939117718809261.html?mod=rss_opinion_main
http://www.cato.org/pub_display.php?pub_id=9787
http://www.frontpagemag.com/Articles/Read.aspx?GUID=F0FB4204-8E58-4E63-A348-AD9151BB6834 (Chapter 11 allows operations to continue while helping shed fatally unsupportable obligations. It does not mean liquidation.)
3.) They don’t all pay similar real wages: “The average private sector worker earns $25.36 an hour in 2006 $17.91 an hour in cash wages and $7.45 an hour in benefits such as pensions, paid time off, and health insurance. Autoworkers at Japanese plants located in the United States earn substantially more than this: between $42 and $48 an hour in wages and benefits, which amounts to over $80,000 a year in total compensation hardly cheap labor. However, The typical UAW worker at the Big Three earns between $71 and $76 an hour in 2006. This amount is triple the earnings of the typical worker in the private sector and $25 to $30 an hour more than American workers at Japanese auto plants. The average unionized worker at the Big Three earns over $130,000 a year in wages and benefits.” Where the other problem lies: “Health care costs the Big Three so much because the UAW negotiated gold-plated health benefits that include medical, hospital, surgical, and prescription drug coverage. These benefits also cover durable medical equipment (e.g., hearing aids), dental benefits, and even lasik eye surgery. For all this, GM workers and retirees must pay monthly premiums of $10 for an individual and $21 for families.These gold-plated health care benefits put the Big Three, and especially GM, at a competitive disadvantage.” http://www.heritage.org/Research/Economy/wm2135.cfm
Are they in the auto-mobile business or in the health insurance business? Last time I checked the auto-mobile industries made cars for X amount of profit. Hence the running joke that the big three are really health-providers who just happen to make cars.
From the NYT; Mitt came up with this plan:
“IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.
Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course - the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.
First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.
That extra burden is estimated to be more than $2,000 per car. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota’s Avalon. Of course the Avalon feels like a better product — it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable.
Second, management as is must go. New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations.
Investments must be made for the future. No more focus on quarterly earnings or the kind of short-term stock appreciation that means quick riches for executives with options. Manage with an eye on cash flow, balance sheets and long-term appreciation. Invest in truly competitive products and innovative technologies — especially fuel-saving designs — that may not arrive for years. Starving research and development is like eating the seed corn.”
4.) The logical fallacy here is assuming europe only wants american cars produced by the big three, but the reality of the situation is the free market doesn’t care “by whom in america” as long as an american company makes; small fuel efficient cars. Thus, it does not follow that they have to come specifically from the big three. Therefore, the international auto-mobile companies in America would then gain their exporting business replacing the big three. However, If the big three file chapter 11 the former won’t happen and as they restructer they can remain doing business in the european market. As for our trade deficit the only way of recovering our footing there is by declaring that the U. S. policy is to gradually reduce our trade deficit down to near zero. The goal of all countries should be equal trade. By gradually increasing the tariff on all goods imported into the United States from the following five countries Japan, Germany, China, Canada, and Mexico; Whom are responsible for 60% of our tade deficit. This will be the correct path to equal trade. Now that is a tariff with a responsible goal, a goal which is to create an international trading system based on equal trade between all nations.
ps. your site is aligned too far to the left center it out so I can read what you have to say. It’s such a pain in the arse.
Won’t work. I won’t get in to the technical arguments about who pays what and why. I ll only saw that history proves that when you reach a certain level of taxation in democracy things implode. The plan would be a large step in that direction. The only way to pay for the stuff on a long term basis is to have reasonable tax rates which don’t discourage investment and to quit spending money. Only then will you catch up with you bills.
wow..what a great diagram! hopefully everything will work out great and not just crumble.
See other people’s comments about the credit crisis at:
http://www.benovarghese.com/category/finance/
I like how the graph shows our reliance on other countries’ money, or OCM:
http://willworkforjustice.blogspot.com/2008/09/ocm-other-countries-money.html
So we’re expected to trust a pack of Bolsheviks with our online banking credentials?
How it should have been set up…
your business fails. it fails.
I don’t understand the people who don’t want to take more money from the wealthy. Here’s what I think.
First of all, the rich do not have to be SIGNIFICANTLY more taxed. It can be a small percentage higher than the poor and middle class. How will that stunt innovation? YES, they will obviously have less money, but not enough to stifle growth. The money does not have to be redistributed in the form of welfare either. However, it CAN be redistributed through federal government projects, subsidies, and a TRUE bailout of “Main Street.” Some of the money may also be distributed to state governments to spur state run projects and help THEM get out of THEIR debt. It seems that whenever someone calls for REDISTRIBUTING MONEY, every hardcore capitalist seems to think “Well that MUST mean more welfare!” Hardly. Think about the bigger possibilities instead of bashing people with rational ideas.
I don’t fully agree that the rich should pay for this mistake. Although typically they get a win-win-win situation as opposed to people like myself who are constantly struggling with benefits, affordable housing, employment, and often just the perception of responsibility (because I don’t drive a beemer and own a ranch style house).
There is so much wasteful spending in government these days in my opinion. I know that much of that goes to pay salaries, but all that does is create a massive group of people who expect to make better than average salaries and not really work that hard. Is this what our country needs to succeed in this new era?
I remember back when personal computers hit the market and there was more confusion than stability. All that did was make it more difficult to understand or use them especially with the annual changes and enhancements. The U.S. Government could have become involved but instead opted to let the free market system take over and make a mess of it. This is not the only sector that was affected by this attitude. Health care seems to have taken a similar dive into mediocrity and abuse of power. There is no oversight for much of these groups so they only get their hands slapped when some major disaster strikes. I don’t know about you but I don’t trust the odds. I don’t want to put all my money on number 7 and hope my investment pays off a hundred-fold. Yet that is what the powers that be expect. They want to make the rules and control the players and all they do is alienate the public at large because when it fails and fails this big we can’t ignore it anymore. Is that the way to run a country?
Now that we have lost a huge market share to foreign companies and who knows how many jobs, the rich are the last to cry foul until they get hit. Maybe if you had cried foul ten or fifteen years ago we could have done something about this mess.
When do we begin to mimic Germany circa WWII, the frank was printed in such large quanities that families would burn them to stay warm, the wealthy left the country once the standard of living declined so there was no one with heavy pockets to bail the country out. Minus the literal burning of currency we are facing a similar dillema, the well-off have already begun to look to the door with there bags packed.additionally we are inflating faster than an irritant puffer fish. Is there a possibility we are scratching the ceiling of a room filling with water? Is is possible that a bail out just wont work. Are we witnessing the match that will burn Rome, ignite? Our own consumerism has lead to this situation mostly, our “bling-bling,” attitude combined with a middle class pocket book has created defecit that cannot be filled. No matter wich way you look at it or what chart you sketch our standard of living is falling and it will be much time before they rise again… dont believe me? Look at the consumer reports for the month of November and December 2008 and contrast them with last years and the year before… scary.
looks a lot like Lenin’s plans
One of the interesting parts of this is that it shows how short-sighted some members of Congress have been while trying to find band-air bailouts. I think they need to work harder to fix the problems in the long-term, instead of focusing solely on the short-term.
Mitch McConnell, the Republican Minority Leader in the Senate, has been one of the few Congressional representatives who is talking about fixing the economy every chance he gets. He is making two key points. The first is that we don’t waste any additional tax dollars. The second point is that any economic stimulus/recovery plan needs to be well thought out. I strongly agree with both of those points. We need to make sure that any short-term fix doesn’t have major negative long-term consequences.
One of the areas I am most concerned about is the power that President-elect Obama and the large Democratic majority in Congress will have to repay political favors. Repaying those favors may come at the expense of truly fixing the economy. For instance, labor unions spent well over $300 million to help elect Obama and strengthen the Democratic majority in Congress. Now it seems the unions expect to get repaid for their support by having Congress quickly pass the Employee Free Choice Act, also known as the “Card Check” bill.
This bill would take away secret ballot elections in businesses where unions want to organize. I have no problems with unions when the workers decide on their own to form one. Especially in business sectors involving dangerous materials or processes, unions can serve a great purpose to protect worker safety. But it doesn’t seem to make any sense to take away the workers’ right to decide whether to unionize in a secret ballot election. Just as people were intimidated and coerced to vote certain ways in political elections in the early days of this country, the same thing would happen to workers who weren’t able to keep their votes secret. It would effectively stifle a lot of the debate because people with dissenting viewpoints would be opening themselves up to retaliation.
Plus, the fear of harassment could lead to “push-button” unions in a lot of businesses that really don’t require them - like very small businesses. Small businesses have always been the driving force of job growth and this bill could stifle them under excessive regulations. And that would really hurt the long-term prospects for the economy. I saw that the Friends of the U.S. Chamber of Commerce is working to make sure everyone knows about the potential negative effects of this bill. I encourage the other readers to sign their petition or directly contact their Congressional representative and ask them to protect worker privacy, fix the economy first, and fix the economy in the right way to ensure long-term growth. Here’s a link to the petition and some more information about the bill - http://friendsoftheuschamber.com/email/email4.cfm?id=178
I don’t think I’ve ever seen an American on a message board with any understanding of what socialism actually is.
Robin Brown, you said it all right there. I thought this would be some sort of real educated visual guide, not some sort of leftist theories. That solution did not compute realistically. It was like shooting us in the foot or brain for that matter.
The Worldwide Economic Crisis Started with the American Mortgage Debacle and Will Not Be Over Until It’s Fixed - Period
Let’s keep government intervention to a minimum. When Hank Paulson showed up in Congress with a three-page request for $700 billion and no real plan, it quickly turn into 451 pages loaded with pork, including a cut in taxes on toy arrows and extending a tax break on wool products. So far, the money has not helped many distressed homeowners.
To read more-
http://www.4fairhaven.com/index.php?option=com_content&view=section&layout=blog&id=9&Itemid=76
It’s a quite difficult decision for any politician choosing between more bailout packages or letting the free market economic principles take care of the failed businesses, whether it is the financial institutions or automakers. The main focus should be defending the interests of middle-class Americans and creating a stable economic system that will guarantee long-term stability and sustainability. But here we also can face more challenges, since right now the Washington politicians are talking about the second large bailout package. If we bailout financial institutions and other industries again, when are they going to ask for the third bailout package? Or fourth? Maybe this is a time to let free market economy work rather than keep bailing out large, failed corporations? After all, it is the small and medium size businesses that create vast majority of middle-class jobs in America, not the large corporations. Maybe the government is better off to replace banks in lending practices and directly give loan packages with low interest rates to small and medium size businesses? That might work better and have a direct, immediate impact on economy and the middle-class America…
You forgot:
- Exxon should be nationalized because its become a monopoly (and they haven’t paid for the Valdez spill YET!) - gas & oil purchases would replace income taxes.
- Nationalize all banks - profits would replace all taxes.
- Honor Treasuries with equal value foreclosed properties.
- Reduce gov to 1/10th the size.
- Reduce SS & Medicaid to only what is needed.
- Reduce, Reduce & Reduce wasteful spending & pet projects.
Then there will be enough funds for:
Super Insulate & make all buildings efficient.
Alt-Power Up US
Rebuild America
@ Clint
“Maybe I’m naive, but maybe someone can tell me - WHERE IS THE MONEY. Money is like matter or energy- its never truly gained or lost it just circulates. ”
Yes you are naive, but don’t worry- you are not alone. Until the average American understands the rules of the monetary game or better yet, the workings of the Federal Reserve, most will remain so. Matter may not be able to be created or destroyed, but the Fed creates money out of thin air.
THIN AIR, homie. Fractional-reserve banking depends on it. See also Derek’s post on Dec. 12th.
Thank you for elucidating some difficult financial concepts. I enjoyed reading your article.
First of all: pardon my english, its not my first lanuage;
Love your blog man!
Just stumbled into this site and its really funny! Actually the comments are just as funny as the diagram! Living in one of those nasty socialist countries of Europe, I`m laughing pretty hard of some of those guys that write
“This looks like the plan of Lenin” -> Yeah….I totally see the arrow where you overthrow the goverment and kill the royalty… and then take all private property and divide amongst the poor… Seriously.. are you high?! Lenin? BTW.. That wasnt the plan of Lenin as sutch cause he died relatively shortly after the 1918 uprising of russia, but youd have to actually know some history to know that 
And “All the rich would flee the country…” Yeah.. thats why no rich people live in Europe and Canada… they live.. ehhh… in a big magical place where everyone is happy and pays nothing for anything
I`m not going to go into the whole capitalism/sosialism thing but I`m thankfuk that in the current crisis I live in a country where the unemployment rate is under 3% at the moment,we have a healtcaresystem that provides to everyone thus getting them BACK to the workforce, and a good unemplyment system so that people who loose theire jobs dont loose theire homes etc. My taxrate is 25-30% directly off the salary, and I pay it with happyness for the security it gives me. BTW..My wage as a nurse is about 45 000$ (US) pr year..so yeah…all sorts of sosialsm is a evil and bad!
Okay..so I kinda got into the sosialsm/capitalism thing.. My point is this; The best solution is propably somewhere in the middle.. not on either side! Both true capitalism and sosialism (communism) is bad for the people and the economy.
Thannk you and goodnight
EndGamePlayer, I agree with reducing government to 1/10th it’s size, but nationalizing all banks will increase government size not decrease it. The profits from the banks will not replace taxes, the profits will be eaten up by the inefficiency of the government.
FDR tried nationalizing all banks as well as many other socialist agendas and ended up extending the depression 8 years longer than it should have been.
That’s not true Jonny. Don’t use lame republican talking points. Think for yourself. BTW, the “socialist” countries of Europe… most of them have a higher standard of living than America. Also I don’t know if any of you trade, but when you’re a good trader the concept of working for an hourly wage seems like slavery and an absolute waste of time.
You could tax the rich once…. then what. I doubt they will leave the country but why would they work anymore. So basically your being shortsighted. If you beat people up for making money and driving the economy they will stop…QED. Really wouldn’t you ?
Rich people got rich by driving the economy, putting people to work. The reason they are rich people is because they wanted to be rich for some reason - don’t take their money away because they have it, and you want it.
Stop believing that all rich people are happier and better than everyone else. They have issues and problems like everyone else - geeze. After you take their money what are you taking next ?
BTW “P” I don’t know how many European countries you’ve been too, or which ones.
But I wouldn’t live in Germany, Italy, Poland, or England. They do not have higher standard of living. Most don’t own cars, and houses are small. Many areas still have stay at home moms…..
I lived in Canada, and the United States, thankfully born and raised and most importantly educated in Canada. It’s funny because almost all of you are wrong. Eh oh well what can you do. I guess when greed runs our personal lives it’s going to be pretty easy to point fingers and just dodge personal responsibility all together.
Question though, How many CEO’s get to work union jobs where they have minimal production requirements and they don’t have to preform to keep their jobs and get annual raises and 8 hour work days? I’m just curious?
With your logic of making everything fair and equal all that would happen is that you’d end up with an entire society with moderate motivation to achieve if the guy above you doesn’t have any more why would you work harder or use your brain? and thus the fall of capitalism and with it America as the super power in innovation, global giving, peace keeping, protection, etc…
STOP THE BAILOUTS and FIX THE BANKS
- Solve the loan problem.
- Solve the derivative problem.
- Reassemble whole loan mortgages.
The U.S. economy is shrinking fast, because businesses cannot get loans that they need to operate normally. Banks and lenders already made $ billions in bad loans, and they are afraid to make new loans. The government gave $ billions in bailout money to banks, and the banks hoard the money to save themselves.
Our financial system became untrustworthy, because it mixed $ billions in bad loans in with most of the good loans. Now, banks do not trust any of the loans, and the entire credit market stopped working.
The U.S. economy will continue to shrink until we untangle the loans. Once the bad loans are isolated, they can be fixed one at a time. Then trust will be restored. Credit will flow, and the economy will grow.
So far, our government is spending $ trillions on bailouts and pork projects, out of ignorance and political ideology. The real solution is much less expensive than that.
The USA has fixed this problem before, and it is not hard to do again.
A) Start with the Resolution Trust Corporation (RTC), which our government setup to solve a Savings and Loan problem in the 1980s.
B) RTC buys up components and derivatives to reassemble whole mortgages.
1. Total securitized mortgage market is estimated at $1.3 Trillion by a Professor of Economics at Ohio State University. (Also see the graph from Deutsche Bank at “The Death of Securitized Mortgages” http://www.nakedcapitalism.com/2008/06/death-of-securitized-mortgages.html )
2. Government buys components and derivatives at the lowest market price set via a reverse auction. (Google on “reverse auction”.)
3. Squatters, who sit on their derivatives in order to extort big $ from the rest of the system, can be forced to sell. (Law is analogous to eminent domain, or sales forced on cybersquatters that registered the domain names of well-established companies.)
4. Government pays derivative squatters at market price set by previous reverse auctions, perhaps with a penalty to the squatters.
5. Sellers give up all rights. No new law there.
6. Banks, investors, and insurers now have cash instead of questionable loans and derivatives, so the banking system is healthy with cash to lend.
7. Credit will flow, and the economy will grow.
C) Government reassembles whole loans from securitized mortgage components and derivatives.
D) Government sorts the newly reassemble whole loans (mortgages) into groups according to risk/quality.
1. Government uses traditional mortgage experts and guidelines to sort the home loans into quality groups, for example, a high quality group would include homeowners with 20% (or more) equity in their house at today’s market price; and house payments that are 25% (or less) of homeowners monthly income.
E) Government (RTC) sells groups of reassemble mortgages to traditional mortgage banks.
1. This solves the problem of renegotiating home loans with homeowners. Read on.
2. Law must be changed so that reassembled whole loan mortgages cannot be securitized into derivatives, again.
3. An important purpose is to reconnect each homeowner with his lender, and vice versa.
4. It eliminates incentive for mortgage lenders to make predatory and junk loans. If the loan fails, the lender is stuck with a bad loan.
5. Government recovers much of the $1.3 Trillion purchase cost, because government sells off the reassembled mortgages.
6. Groups of lower quality mortgage would fetch a lower price at auction.
7. Mortgage companies that buy the risky groups of mortgages did so at a lower price, and they have room to negotiate with the homeowners.
8. Some homeowner negotiations will not succeed. Those homeowners will move into affordable rentals. (The government does not owe everyone a free house.)
9. Other renters would like to buy those empty homes at reduced market prices.
10. If the government gets stuck with some homes, the government could profit by selling those homes when the housing market recovers.
F) Insurers like AIG may be reorganized through bankruptcy.
1. Securitized mortgage pools never made business sense, unless they were protected by various insurance schemes.
2. Those insurance schemes always were a scam.
3. Insurance only works when most of the insured assets are never hit with a disaster. That is why flood insurance does not work in the private market. A major flood ruins all the buildings in a large area, all at the same time. That is the fallacy of securitized mortgage insurance. In an economic downturn, the “disaster” hits all the houses, all at the same time.
4. Companies that ran the huge insurance scam will go through bankruptcy.
5. Never ending government bailouts for insurers like AIG are just throwing good money after bad.
This plan is inexpensive, tried and true. It leaves the banks healthy, with cash to lend. It restores trust in the credit markets, so loans will be made. It reassembles mortgage derivatives into whole loans, and restarts traditional mortgage lending. People can get loans to buy homes. Credit will flow, and the economy will grow. *
guy, gmmillennium_at_Yahoo.com
—————————————————-
*(footnote) The economy will grow if President Obama’s massive tax, borrow, and spending plans can be stopped, before he creates another Great Depression. Presidents Hoover and Roosevelt already tried to tax, borrow and spend their way out of a recession in the 1930s. Instead, they created the Great Depression, which lasted 12 years. Straight as he goes, President Obama is doing it, again. Nevertheless, cleaning up the securitized mortgage mess is a necessary first step.
Once the “rich people” leave the country who will answer the question- “What you want me to do now boss”?
The more government gets involved the worse it’s going to get. When card check gets signed into law and it will as part of the 100 days of left wing terror the three stooges have planed. The greatest math lesson will be taught to the working class. They will find out the company’s they are working for don’t make as much as they think and will just shut the doors.
this is terrible robin hood philosophy. i expected to see a chart about how people should save more money. while, none of the proposed taxes would apply to me, i still think you are insane.
i have no idea why you such a site would publish something so communist. i loved this website until now.
@CCC, not sure why you’d expect a visualization about the bailout to be a chart about how people should save money. But there are plenty of those kinds of charts in our product if that’s what you’re looking for. You can try our Ways to Save feature here:
http://www.mint.com/credit-cards/
Thanks for your comment.
Wow… Why doesn’t Mint just manage our nations money?
Wow… lots and lots of comments.
I like the idea of cutting back gov’t because it’s turned into something that’s just to big to support.
How about a flat income tax? Oh, yeah.. that’s right…. that would be too simple and would make the wealthy pay too much. Are taxes even *really* legally required? There was a time (some would argue that it’s never stopped) that taxes were voluntary.
How about not holding everybody’s hand and letting people who took out huge mortgages lose it all and start over. And letting the banks who made the stupid decision to give these people mortgages fail.
How about getting rid of the legal gambling on Wall Street (called hedging) and derivatives games?
People need to start being responsible for themselves and the decisions that they make.
I know… I know…. it’s not socialistic enough…. (sarcasm implied).
Everybody needs to exercise their freedom to either succeed or fail.
Too bad the politics will never allow simplicity.
Great idea - a wealth surcharge to get more money. Let’s punish the people who own the companies that provide jobs for people and give it to the people who don’t work, or to those who haven’t earned it.
This problem won’t be solved as long as there is no respect for the potential for the individual to be great. Welfare destroys the initiative for good honest people to work and earn their living rather than stealing it off the backs of those who are productive. No, we can’t all be millionaires, but we can work hard and be happy with what we have rightfully earned.
How about reducing taxes on those who already pay too much so they get to keep more of what they have actually earned and allow them to make the choices on how to invest their money. Then adopt a version of the flat tax so we all have a stake in the game and we all care about where the money is actually getting spent.
wow… a Wealth Tax. That is truly a frightening concept. Invest wisely so you are forced help out others who made a series of poor choices. Only solution I have for the feds is Cut Your Budget.
get rid of the federal reserve they are the biggest con since ghengis kaun, if you do a little research on fractional reserve banking you will probaly agree, i’m not even sure if america even exist anymore as a constitutional republic, from what ive gathered usa has been bankrupt for a long time and resorted to fiat tyranny long ago the sad thing is they got away with it for decades and still even afyter the bailouts people refuse to see the truth, many of us were sold out before we were even born
Alright, this entire thing is silly.
1. The current bailout isn’t going to cause massive inflation, that is impossible in a case with skyrocketing unemployment so you really don’t need to worry about that and if it did, inflation is much easier to deal with and much better for the country than recession.
2. Borrowing money from other countries is not a bad thing and no, China is not going to kill us by dumping all their dollars as it would destroy their economy. It is OK for a country to be in the red in a recession as long as we’re making the money back in the expansions. Stop trying to tax people when we should be cutting taxes.
3. Nobody is suggesting the US increase the speed of printing money. That’s is just ridiculous and the only country that is in a bad enough economic situation and daring enough to do that is the United Kingdom.
You know what, stop making economic initiatives without studying economics. I’m sick and tired of people thinking that balancing the budget is a solution. THIS IS NOT MICROECONOMICS. TAKE A CLASS AND STOP PRETENDING LIKE YOU KNOW THIS.
I didn’t know Mint.com was run by a bunch of psudeo-socialists. shame on you for telling people that creating value and wealth are bad while you’re trying to do the same!
What Can we common Poeple do about the Bailout? Nothing.. we just have to wait and see if the company comes up and develops new cars and prototypes to please the americal consumer