[quote=EconProf]I second your comment about increased government debt in the 2000 – 2010 era being an especially large burden when the future interest burden is factored in. And given that today’s 10-year bond interest rate is 1.99% and likely to rise some day, we could really get walloped when that happens. Our “short-termism”, whether practiced by HELOC’d consumers or governments at all levels is coming back to haunt us.
The word “investing” is much abused by politicians. It sounds good to invest in infrastructure, until we find out it is something like that bridge to nowhere in Alaska, or, equally foolish, high speed rail for California. (The latter, by the way, is doomed according to every outside analysis of the subject.) As for me, I am planning on investing in a steak dinner tomorrow.
We part ways when you suggest raising marginal tax rates on the highest earners. I am all for cutting certain loopholes and privileges, though some like the benefits to homeowners will elicit howls. But the top rates already exceed 60% when you factor in federal (about 39%) Ca (about 11%), FICA, and a bunch of miscellaneous taxes. It may feel good to sock it to the rich, but they include the creaters, inventors, and hirers. Right now 47% of Americans pay NO income taxes, and a good share of them actually get money back through the earned-income tax credit. That big part of the electorate is certainly not going to vote for a leaner government[/quote]
The increased debt — public AND private — is definitely what’s coming back to haunt us. Agreed, the fact that interest rates are so low today is a warning sign, not a sign of hope for the future. At some point, the artificially low rate environment of this past decade is going to catch up with us…big time. They can only fake this “growth” (with extra printing and “stimulus”) for so long. Eventually, we will have to pay for the credit bubble, which is why I keep saying that our problems are not even close to be solved. The crisis is before us, not behind us, IMHO.
As for top marginal rates, there is absolutely no evidence that higher top rates keep people/companies from hiring…none. As a matter of fact, the most successful decades in this country saw some of the highest top rates in history (70-91%, IIRC), while the past decade (of slow/no/declining growth outside of the bubble) has seen some of the lowest top rates. The last time we saw rates this low (and wealth/income disparity this great, and debt loads so high) was just before the Great Depression. This is not a coincidence, IMHO.
The job creators will create new jobs when there is demand to justify it. I’ve never heard a single person say they would turn down good money and not expand production because of tax rates when there was ample demand for their goods/services. Why? Because somebody else will do it, instead. It is demand that spurs economic growth, and we cannot have demand when the bottom 50%+ of the population barely has enough money to feed and house their families (which is why they CAN’T pay taxes).
