Stock Prices and other Nonsense

The stock market is at an all-time high with the Dow Jones at 16,695, while the economy is mixed and lots of unemployed are hurting and the housing market is still weak. There seems to be a lot of money sloshing around.  Its owners do not want to accept the low returns from ordinary investments so are seeking high returns from those more risky.   

     Big companies are using their profits to buy other companies.  AT&T is willing to pay $50 billion for DirecTV.  The Republicans say that we can’t tax these profits because they provide jobs.  Bloody nonsense!  Many companies are cutting R & D spending.  More than a quarter of the 121 companies in the S&P 500 reported spending less than they did last year. (USA Today)  Investors rewarded these companies with higher stock prices.  Everyone knows that if you cut spending, you increase profits!  And their CEOs are paid big bonuses for this logic.

The Pope Is Not Fooled

Apartments in a new luxury residential tower off Central Park in New York City sell for $53 million and UP.  Who buys these?  I suspect many buyers grabbed their income from gambling in financial markets.  Some of these are the people who contributed to the financial crisis, and they are doing it again.  Some say we can't tax them because they provide jobs.  Sure for the maids who clean their toilets.  The Pope is not fooled, he does not believe in trickle-down. Rather Francis asks
"How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points?"

Oil subsidies

Obama proposes an end to government subsidies of oil companies. It's about time.

Farmland Bubble

The value of Iowa farmland has almost doubled in six years. They rose 160 percent in the decade through last year. The super rich are looking for places to put their money. So they are buying farmland hoping for prices to apprciate. Some guy who sold his business for 45 milllion dollars bid $4 million for 430 acres in Michigan. His capital gains are taxed at a low rate. The Republicans say we can't taax these people because the provide us jobs. But, like many other fat cats, they do not create jobs, they just inflate asset values. In this case, there are no more farm jobs than under the previous owners.
Part of the rapid rise in farmland prices is due to government subsidies for ethanol made from corn. The Congress passed this silly subsidy as presidential candidates competed for votes from the Iowa caucus. The same people who oppose Obama's increase in miles per gallon requirements for auto manufacturers probably support the ethanol subsidy in the name of reducing oil dependence.

Big Oil Gouges Bib

The Senate continues the unconsionable tax breaks for big oil. Last quarter profits for Exxon of $10.7 billion and 30 billion for 2010 are apparently not enough to keep them in business! The Big 5 gouged us for $35 billion in the first quarter.
The political power of oil makes a mockery of democracy! I am pleased that Michigan's Senators voted against continuing the tax breaks.
And Big Oil is using high prices to exploit the environment by lobbying for permission to drill off shore, etc. all in the face of the recent blowout in the Gulf.

Taxes and Jobs

Some Republicans are perpetrating another slogan of weird logic. They argue we must continue the tax breaks for the rich because they are the answer to unemployment. Can you believe that the state of Colorado will vote in November to eliminate all taxes on business. First, the rich argument--the rich will just stick any extra profits in their pockets. Tax policy is working on the wrong end of the income distribution. The problem is the decline in consumer spending. The lower income people would buy things and give investors the necessary incentive to invest to meet consumer demand.
Then the matter of business taxes. Business uses public services such as roads, an educated and healthy workforce. These are inputs into production just as are labor and materials. Why pick on taxes that support necessary inputs? Soon we will hear petitions to restore slavery as that would decrease costs of production, create investment and jobs for the slaves!
We need to remind ourselves that the cost of business credit is at a low point as it was for the Japanese for a decade. Just reducing one cost does not automatically increase investment when entrepreneurs are pessimistic about consumer demand. This is just opportunistic money grabbing that was rampant in the Bush administration when the tax cuts were first implemented.

Tax Cuts for Rich

If the tax cuts for the rich are extended, I will be deeply discouraged.
The facts are noted by Paul Krugman in his New York Times column of August 22.

"According to the nonpartisan Tax Policy Center, making all of the Bush tax cuts permanent, as opposed to following the Obama proposal, would cost the federal government $680 billion in revenue over the next 10 years. For the sake of comparison, it took months of hard negotiations to get Congressional approval for a mere $26 billion in desperately needed aid to state and local governments.
And where would this $680 billion go? Nearly all of it would go to the richest 1 percent of Americans, people with incomes of more than $500,000 a year."

This extension is unconscionable, immoral, and surely not in the interest of most citizens. Are the American people not able to understand their own self-interest?

Beholden to the Super Rich

Americans are beholden to the Super Rich. It is hard to explain why persons of average means defer to them. Cases in point:
1. The Senate recently voted to delete a House passed $250,000 limit of agricultural subsidies to a single person.
2. The Senate voted to kill a House passed removal of a tax subsidy for oil companies (as if their profits were not absurd enough).
3. Congress failed to eliminate the favorable tax treatment for hedge fund owners.
4. The income subject to Social Security tax remains capped at $102,000.
5. Michigan state income tax is not graduated.

There seems to be a dominant ideology that we working stiffs owe our jobs to the super rich so we must coddle them. I suspect part of the problem is that our new sources do not call attention to these super rich benefits. How many of the above were you aware of?

Hedge Fund Tax Loophole

The following excerpt from a Krugman NYT column expresses my opinion.

Money influence on Senate:
"The most conspicuous example of this influence right now is the way Senate Democrats are dithering over whether to close the hedge fund tax loophole which allows executives at private equity firms and hedge funds to pay a tax rate of only 15 percent on most of their income.

Only a handful of very wealthy people benefit from this loophole, while closing the loophole would yield billions of dollars each ear in revenue. Retrieving this revenue is a key ingredient in legislation approved by the House Ways and Means Committee to reform the alternative minimum tax, something that must be done to avoid a de facto tax increase for millions of middle-class Americans.

A handful of superwealthy hedge fund managers versus millions of
middle-class Americans,€” it sounds like a no-brainer."