Great post Mike - but Moore’s comment is even more wrong than what you’ve pointed out: he says this (several trillion dollars of) cash is concentrated into the hands of a few people. But we’re talking about (for the most part) publicly traded corporations who are holding this cash.

Yes, there are some people who own a lot of stock in these corporations (CEO’s, former CEO’s, company founders, high level executives, billionaire investors, etc.), but the majority of the shares of these companies are owned by mutual funds, pension funds, and otherwise hundreds of thousands of individual investors, mostly through IRA’s and 401(k)’s. This includes the retirement funds of Wisconsin’s teachers.

I find it hard to believe that Moore doesn’t actually realize this, that this hoard of cash IS in fact already owned collectively by the “people”.  He makes it seem like we’re still in the old robber baron days, where these big companies are owned by the families who founded them, and a small group of fat cat zillionaires are holding all this cash, sitting around stuffing their faces like Jabba the Hut from Star Wars.

But you’re absolutely right, even if this WERE the case, it’s still their money, they earned it, and they DO spread it around by creating good paying jobs. Bill Gates may be worth $50 billion, but look at how many Microsoft millionaires he created too. Confiscating money from the coffers of these corporations would end up HURTING the little guy, as you point out.

Sometimes I think Moore doesn’t actually believe the things he says, that it’s all just a gimmick to appeal to his far Leftist base and make money for himself. Kind of like how Andrew Dice Clay in real life wasn’t really the character he portrayed in his stand up comedy routines - it was all just an act.

Im sure this will be a very dumb question, but here you go…

For the people that are against raising taxes on the rich, I understand the argument, kind of.

But, what is wrong with, increasing personal income tax on the very rich, and reducing business taxes.  So a corporations taxes become drastically reduced, allowing them to expand and hire.  The tax hit only comes when the owners cash out (pay themselves). 

Is that really so terrible?  Is that kind of idea what is referred to as ‘socialism’ in the US?

Hi Debate, no it’s not a dumb question. But here’s the answer:  you’re talking about taxing the INCOME of the very rich, but Moore is talking about actually confiscating a portion (a large portion) of their assets. This is a big difference. Bill Gates still holds tens of billions of dollars worth of Microsoft stock, but the only income he makes off it is the dividend it pays, which is currently 2.5% annually. Even if you tax that at 100% you’re still not dipping into the principle of the stock he owns. And as the stock price keeps going up over time (assuming it does), Mr. Gates keeps getting richer because those continued gains are unrealized and not taxable.

But you couldn’t even do this anyway, because if publicly held corporations knew that dividends are taxed at 100%, they wouldn’t pay them out to their shareholders anymore! They would find other ways of using this money to add shareholder value. Whenever you tax something more, you get less of it - that’s just the way the world works.

If you increase personal freedom and liberty from the system we have today, including your idea of reducing corporate income taxes, the result would be more wealth and prosperity for more people, and so you wouldn’t HAVE to increase income taxes on the very rich! In fact, the gov’t could actually reduce entitlement spending for lower class people because they would have greater means to support themselves and wouldn’t need gov’t assistance.  This is what Moore and the Left simply don’t get. They think the pie is of a finite size, and so the more some people have the less others have. Tell me, what poor people did Bill Gates “take” from to amass $50 billion in the first place?

I would never suggest that the dividends be taxed at 100%.  Thats not what I was saying. 

Also, its a little misleading what you said about Bill Gates, at least in the way you wrote it (possibly not in the way you intended it). 

Bill Gates may be worth $50 billion, but look at how many Microsoft millionaires he created too.

He didnt create hundreds of millionaires with his $50billion.  He created them in the process of his creating his $50billion.  There is a big difference. 

I just watched Capatilism recently for the first time.  It was pretty bad (as far as entertainment value, compared to his other films).  I dont think there was as much wrong in this film as his others, only because there wasnt as much in it to begin with. 

There were some truths in there that I think people will never agree on.  I find it hard to believe anyone (before the crash) thought such deregulation in the financial sector was a great idea.

Im absorbing all of this now, and I dont even know where to begin.  As an outsider, it doesnt look like things are going to get better anytime soon, only because there is no agreement on how to do that.  Its getting scary I think.  Even Dennis Miller has lost it I think!  Its a mad world.

But, what is wrong with, increasing personal income tax on the very rich, ....

There are two wrongs with it.  First, it penalizes people for being successful.  It penalizes people for living the American dream.  Secondly, who defines “the very rich?” (Generally speaking, the “rich” are those who make more than the person speaking.)

But how much is enough?  How much should a person pay in taxes? 

Quote: 

2. What income group pays the most federal income taxes today?

The latest data show that a big portion of the federal income tax burden is shoul­dered by a small group of the very richest Americans. The wealthiest 1 percent of the population earn 19 per­cent of the income but pay 37 percent of the income tax. The top 10 percent pay 68 percent of the tab. Meanwhile, the bottom 50 percent—those below the median income level—now earn 13 percent of the income but pay just 3 percent of the taxes. These are proportions of the income tax alone and don’t include payroll taxes for Social Security and Medicare.

Source: 

I find it hard to believe anyone (before the crash) thought such deregulation in the financial sector was a great idea.

Why?

You do realize that regulation was a cause, if not the major cause, of the banking crisis, right?

There was an article in the Wall Street Journal interviewing one of the people that were indirectly involved with the banking crisis.  He made several points that ring true.
1) The banks were forced to make bad loans by government regulations.  The CRA (Community Reinvestment Act) compelled banks and lending institutions to make loans that were against the financial interests and well being of their institutions. 
2) The banks now had “bad paper” and began, under the watchful eye of regulators, to sell the paper on the idea that it would guaranteed by the person borrowing the money (that didn’t work out) or be backed by the government.  That would be the same government that was regulating that banks issue bad loans to begin with.
3) Banks and financial institutions, once again under the eyes of regulators, continued to sell the bad paper in some sort of warped pyramid scheme. 
4) At every step, the regulators were watching the acts of honest banks and failing to see what was going on with the less than honest banks. 

In other words, the regulators helped cause and did not prevent what happened.

The fact of the matter is that there are a lot of smart people in the financial sector who have good degrees from good colleges.  They know how to think and think outside of the box. 

The government, on the other hand, has “regulators” who are not as smart, not as talented, and are restricted in their thinking much less thinking outside of the box.

The article quoted one bank president saying that when the regulators would examine his bank’s books, they were laughed at because of their ignorance of what was actually happening. 

Regulations won’t prevent people from doing wrong anymore than a speed limit sign prevents people from speeding. 

Yet that is what people want.  They want the security blanket of “regulations” even though the regulations and regulators are worthless.

You arent actually saying that the banks are not at fault, its the government who is at fault for having regulations?

Regulations won’t prevent people from doing wrong anymore than a speed limit sign prevents people from speeding.

You have to be joking.  I dont even know what to say to that.

The latest data show that a big portion of the federal income tax burden is shoul­dered by a small group of the very richest Americans. The wealthiest 1 percent of the population earn 19 per­cent of the income but pay 37 percent of the income tax. The top 10 percent pay 68 percent of the tab. Meanwhile, the bottom 50 percent—those below the median income level—now earn 13 percent of the income but pay just 3 percent of the taxes. These are proportions of the income tax alone and don’t include payroll taxes for Social Security and Medicare.

The numbers here dont really tell me anything, I will have to look into this some more.

I think one problem is that taxes in some areas have gotten out of control.  So now everyone goes to the extreme, and says all taxes are bad.  That is simply not the case.  Ok, Im not going to say they are good, but they are kinda like going to the dentist.  Its sucks, but you kinda have to.  So the money has to come from somewhere.

I see what the quote above is saying, but just to go to an extreme to make it clearer… If the top 1 PERSON in the US earned 90% of the income, I wouldnt see an issue if that one person paid 92% of the income tax.

You arent actually saying that the banks are not at fault, its the government who is at fault for having regulations?

I am saying that when the regulations push companies into untenable situations, it is not simply the companies that are at fault.

In the case of the mortgage crisis, you had three laws and regulations that were contrary to any good business practice.  First, as noted, you had the CRA which forced banks to make high risk loans.  Then you have the law that requires banks to maintain a certain amount of liquidity and the SEC regulations that require publicly held companies to exercise due diligence in returns on investments.

So you had a law that was requiring banks to make high risk loans going against a law requiring a high level of stewardship of funds, going against another law on maintaining assets. 

My point is a simple one.... regulations initiated the mortgage crisis, and did nothing to stem the crisis from getting worse.  Yet people want more regulation.

You have to be joking. 

Let me give you an example.  There is a law call the CPSIA - the Consumer Product Safety Improvement Act.  The law came about after Mattel had some toys made in China and the Chinese company making the toys used paint with lead in it.  One kid died from the toys because the symptoms of lead poisoning were misdiagnosed.  A second child got sick. 

Congress held hearings on this and determined that the regulations needed to be enhanced.  We needed more regulations on top of the regulations that were in place. 

Lead paint has been outlawed in this country for 35 years.  The paint used on the Matell toys was found to be several gallons of lead paint.  Think about that for a second.  Think of all the paint that is used on toys and because of two gallons that were already illegal, Congress decided that we needed more regulations. 

So Congress mandated that companies have to test each batch of paint for lead for each production run of product that is for a child under 12, or may be attractive to a child under 12. 

The regulation (for 2 gallons of paint) requires that each color be tested in a 3rd party lab. 

The cost of testing is about $100 per test.

Now I am sure you are thinking “that seems reasonable.”

You are wrong. 

Here’s what happened.  There are people in this country who belong to what is affectionately known as the “craft industry.” You may have seen them at craft fairs.  You may have seen them at boutique stores.  I happen to be one of the members of that industry.  I am a wood carver.  All of my pieces are unique.  I have a piece that I make that is for a Christmas tree.  It is whimsical and kids love it.  I used to sell it at shows and on the internet for $20. 

But because it has 9 different colors on it, I now have to pay for those nine colors to be tested for lead.  To make the same profit, I would now have to sell the same piece for $925.  The law prohibits me from getting the paint tested and then using it on multiple pieces. 

I am not alone.  The craft industry - also known as the “home cottage industry” is shutting down.  This is an industry that collected $10 BILLION in taxes every quarter and it is going away because of a regulation. 

So because of a couple of gallons of paint that are not available here in the US, people are shutting their doors.  Because of people shutting their doors, $40 billion a year is lost in tax revenues. 

Does the regulation make anyone safer?  Nope.  Not a single person.  All it does is make people think that they are safer.  It is another layer of garbage on top of garbage.

Now the real irony of this is that Mattel, who caused this, got a waiver from the Consumer Protection Agency to have their testing done IN HOUSE. 

Regulations often give a false sense of security and are initiated by people who never worked in the industry, never made a living in the industry, never ran a company in the industry and don’t understand the industry.

Such is the case with the CPSIA.  Such is the case with more banking regulations.

So the money has to come from somewhere.

Most people understand that taxes are a necessary evil.  The problem comes when the government doesn’t act like a company or a household.  The government only looks at raising taxes.  It seldom looks at reducing spending.

If your household has X amount of income and Y amount of expenses, you are going to either get another job to raise your income to Y, or you are going to cut expenses from Y to X. 

You have a choice as to what you are going to do.  The Government, on the other hand, seems only to look at raising taxes because they can.

If the top 1 PERSON in the US earned 90% of the income, I wouldnt see an issue if that one person paid 92% of the income tax.

I agree.  But that is not what is happening.  The top 1% pay more than their share of taxes.  As stated, the wealthiest 1 percent make 19 percent of the income, and yet account for 37 percent of the income taxes.  How is that right or fair?

And just to bring this back to Moore’s hypocrisy, when he made “Capitalism,” he refused to use union workers on the set saying that the union workers had never taken documentary producers seriously. 

So Moore hired non-union workers at a lower rate. 

When Moore stands up and tells the union workers that he is with them, he is giving lip service.

He didnt create hundreds of millionaires with his $50billion.  He created them in the process of his creating his $50billion.  There is a big difference.

I never said he created millionaires WITH his $50 billion Debate. I said look at how many millionaires he created too. And you’re right, he created them IN THE PROCESS of creating his $50 billion. That’s exactly my point, that rich people don’t become rich by “taking” from others, but this is exactly what Moore says. (and by the way, THOUSANDS of Microsoft millionaires were created)

To those who say we deregulated banks and that was the problem, I would love for anyone to tell me which financial regulations were done away with or reduced. They can’t because there was no deregulation! The idea that we deregulated banks is a complete myth. Gitarcarver is absolutely right, we continued to regulate them more and more, regulations which served a political agenda but were bad ideas in terms of economics. Go look up fair value (or mark to market) accounting and its role in all this. The regulators had good intentions but they didn’t understand the negative unintended effects their stupid rules would have.

The deregulation came in allowing banks to merge with investment firms.  This was not allowed before because it was/is a bad idea to allow banks to gamble with your money that you deposit into your bank account.

Still say there has been no deregulation?

Furthermore, financial insitutions were allowed to create new ‘products’, and any regulation on these were fought against by the financial services industry (and they won of course).  This isnt deregulation, I will agree with that, but it has the same consequences (complete lack of regulation in new endevours). New products like CDOs, and derivitives, allowed these newly formed investment banks to take higher risks with your money. 

Are you guys really trying to say, that this whole collapse, and the resulting multi-billion$$ bailouts to the financial servies industry came as a RESULT of government regulations??  Well lets hear your side.  What stupid rules did the regulators have that caused this thing to happen?

I mean, I understand you are all anti-govt getting involved in anyting, and Wall St is just filled with a bunch of red blooded American capitalists, so they are obv the good guys, but come on.  This line of thinking is exactly the problem.

I dont think govt should be huge either.  But like JimK said once on this site years ago, the primary role of govt should be defense.  To me, this includes policing the homeland, against people who will do you wrong.  Putting regulations in place so that corporations cant create massive clusterfucks that affect everybody but themselves (to a large extent) should be part of this.

I know about mark to market accounting.  If you are talking about the housing market, that was not the cause of the problem.  The problem was the lenders giving away money way too easily.  More buyers are all of a sudden on the market, and simple supply and demand dictates that this will cause prices to go up.  Because lenders were(are) no longer lending their own money, because executives were(are) no longer getting compensated on the back end, the middle men in all of this were borrowing money, and WAY over leveraging themselves to shell out as many loans as they could write. At the same time, companies like Goldman Sachs are selling these loans to investors on one hand, and with the other hand, buying mulitple insurance policies (per loan) AGAINST these loans because they were not good loans. 

And there were no laws or regulations to stop any of this.  But apparently, thats a good thing, because regulations are always bad.

Let me give you an example.  There is a law call the CPSIA - the Consumer Product Safety Improvement Act.

I do not see how that is an example of making a rule, and people not following it (your speed sign example).  I see that as one badly writen law that affected you personally because it made an in efficient business model unsustainable.

I agree.  But that is not what is happening.  The top 1% pay more than their share of taxes.  As stated, the wealthiest 1 percent make 19 percent of the income, and yet account for 37 percent of the income taxes.  How is that right or fair?

Under the Bush tax cuts, the top 1% received 90% of the tax breaks.  So you should be happier now.

But because it has 9 different colors on it, I now have to pay for those nine colors to be tested for lead.  To make the same profit, I would now have to sell the same piece for $925.  The law prohibits me from getting the paint tested and then using it on multiple pieces.

Why you?  Or does this apply to everyone?  So if you buy 2 gallons, get it tested, then use 1 ounze on a unit, the rest of that 2 gallons is unusable?  Weird.

Michael Moore, a millionaire film maker, talking down on capitalism, the irony is inescapable.

Rusty Shackelford
iPod Docking Station with Speakers Store

I do not see how that is an example of making a rule, and people not following it (your speed sign example).

Generally speaking, most people will follow rules and laws that are reasonable.  Just because a law is made will not guarantee compliance of the populace.  They will just ignore it.

Why you?  Or does this apply to everyone?

It applies to everyone who makes a unique, one off product.  If one does, each piece must be tested.

Under the Bush tax cuts, the top 1% received 90% of the tax breaks.  So you should be happier now.

You’re just full of talking points that have no meaning, aren’t you?

Your first erroneous supposition is that the tax cuts somehow unfairly gave a break to the so called “rich.” The fact of the matter is that the “rich” were taxed at a much higher rate than lower brackets.  Reducing taxes on the so called rich still kept their tax bills as the highest percentage of any bracket, but simply lowered the rate to a level that is much more fair and equitable.  It rate is still neither fair or equitable, but the tax cuts brought the rates closer to being so.

However, the tax cuts were part of a package of economic reforms.  Under that package, 40 percent of Americans no longer pay taxes or get a “refund” for more than they paid in taxes.  That is up from 30% before the so called “tax cuts.” In other words, the tax cuts shifted the economic tax burden more toward the upper income rather than away from it.

Tell me, sir, how is is fair that people are getting a refund for taxes they did not pay? 

Furthermore, the tax breaks to the lower brackets reduced tax income more than that tax breaks to the rich.  If your concern is for more tax revenues to pay for programs, why are you not upset that the tax breaks to the no-so-rich reduced tax incomes more than the tax breaks to the so called rich?

The answer is that you, like so many, are simply jealous of the people that have money and want to punish them for their success.  Jealousy at living the American dream is not a sound economic policy.

Yes, I am happy that the so called wealthy got to keep money they earned.  I am a firm believer in Thomas Jefferson’s statement that

“...a wise and frugal government, which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government.”

Your disdain at the tax cuts is akin to anger that a robber didn’t take someone’s last dollar out of their wallet.

But there is something else you miss:  The tax cuts invigorated the economy.

More crucially, after the 2001 initial tax cuts, the annual growth rate went from 0.3% in 2001 to 2.5% in 2002. By 2004, GDP growth was the highest in 20 years.  Source: http://www.ncpa.org/taxes/

The 2001 and 2003 tax breaks did two things:  1) The helped the economy out of the recession or downturn of 2001 and 2) brought more money in tax revenues in 2003 and 2004 as both a whole number and as a percentage than in the history of the country.

The economic crisis in this country happened because of two things.  First, regulations forced banks and lending companies with sound economic economic and business practices to move away from those practices into highly risky behavior.  Secondly, with the increased revenues from the Bush tax cuts, a Republican controlled Congress spent like drunken sailors.  When the Republicans were voted out of office in 2006, the Democrats continued to spend like the Republicans only now the drunken sailor had a prostitute girlfriend.  Once “Hope and Change Obama” got elected, the spending increased even more. Now the drunken sailor with the prostitute girlfriend was making it rain everywhere. 

It is government regulation and spending - not tax breaks - that brought forth this mess.  Unfortunately, people like yourself seem to have bought into the leftist meme echoed by people like hypocrite Micheal Moore, of class warfare and “tax breaks for the rich are bad.”

Note:  I mentioned earlier that when making Capitalism, more refused to use union labor.  He also prevented the writers of “Roger and Me” from joining the Writer’s Guild. 

It is a catchy saying and relies on the jealousy of people.  After all, why should people work for something when they can just take it from another person?

The general response from people who believe as you do is that “the rich can afford it.” I asked this before and you never answered, but I will try it again.  Who are you, or anyone, to decide what a person can or cannot afford?  Isn’t that up to the individual?  Tell me, sir, if you are so good at managing and making the money decisions for others, why aren’t you part of the wealthy you seem to view through green eyes? 

All taxes are not bad.  But when a class of people are singled out for their success, that is not only bad, it is against the American Dream in concept as well as against the Constitution in law.

Generally speaking, most people will follow rules and laws that are reasonable.  Just because a law is made will not guarantee compliance of the populace.  They will just ignore it.

I agree with this.  I was just saying I dont see how your story was an example of that. 

It applies to everyone who makes a unique, one off product.  If one does, each piece must be tested.

Well, its obviously a moronic rule then.  The paint should just be tested, then the paint can be used.

I dont think anyone should have a problem with regulations saying you cant have lead paint in childrens toys. Just because they came up with a stupid way to accomplish it, doesnt mean its not a sound regulation.

And Im sorry, but I still think you are wrong that having too many regulations caused the mortgage crisis.  I still do not see any evidence to that fact.

No, I am not jealous of the rich, and therefore want them stripped of their wealth.  But I do think the money has to come from somewhere.  God knows you guys are never going to lower your defence budget.  The problem is you guys are too big of a country, and your problems create ripple effects worldwide.  Otherwise I wouldnt care at all (obviously).  The scary thing is I think too many have the Dennis Miller attitude of “i dont even know what a deficit is, and i dont really care”.  I think it was RR who started that line of thinking iirc.  Its dangerous.  And at the heart, its what lead to all of this, the idea that its a-ok to spend other peoples money anyway you see fit.

It just almost sounds like you are saying the people at Goldman Sachs, AIG, Bear Sterns etc… were victims of govt regulation.  Please tell thats not really what you are saying.

But, what is wrong with, increasing personal income tax on the very rich, and reducing business taxes.

Businesses, even humongous publicly traded corporations like Walmart or Ford Motor Company, do not just appear out of thin air. There’s a reason Mr. Walton’s company or Mr. Ford’s company has his name on it. He started it personally with his own pocket, sweat, and hands.

It’s often very expensive, and there are usually a whole lot of expenses associated with starting a new business. (The least of which is not the bullshit licenses and fees that the government usually collects on just for the privelege of engaging in most businesses.) More times than not, large chunks of individuals’ excess personal income is put towards the cost of entering into a new business. It also happens that the “very rich” reinvest their own personal wealth into new businesses....a lot. Why else do you think members of Congress file bankruptcy so often? They get to make up the rules as they go along and rig the game, and they’re still at risk because they use their own personal stacks to break into businesses.

If you take away this personal wealth from the “very rich” (who probably accumulated it in the first place by working for Walmart or Ford Motor Company), who’s going to be left to pony up the funds to create the Kmart’s or GM’s of the world to compete with Mr. Walton’s business or Mr. Ford’s business? Over-taxing personal wealth is a good way to ensure that the largest, or most evil if you will, corporations on the planet and the same small group of people who are the richest because of them remain as such. You want to keep the names and companies on the Forbes 100 list the same forever? Take all of their money away.

This stuff is most certainly not rocket science.

Obviously any money put back into the company should be tax-deductable.  Or, put another way, if you are going to take $1m out of the business to pay yourself, then put half of that back into the business, why not only take out $500k to begin with?  Its not rocket science.

Believe me, Im all for the profit insentive in order to grow and innovate. I think its the only way.

The paint should just be tested, then the paint can be used.

Please explain why the paint should be tested if it is already illegal to use lead paint in the US?  Why should companies that would never use lead paint, or even have access to lead paint have to test for lead paint when it is already illegal?

Just because they came up with a stupid way to accomplish it, doesnt mean its not a sound regulation.

It is a stupid regulation because a regulation outlawing lead paint already exists.  The CPSIA does NOTHING to enhance the safety of anyone because the law is already in effect that bans lead paint.  It is just another regulation that punishes law abiding businesses without making a difference to the public or the product.

I still do not see any evidence to that fact.

I am sorry that you don’t understand what happened with the CRA.  I tried to explain it to you and you seem to think that closing your eyes and not seeing it is the same as the facts don’t exist.

No, I am not jealous of the rich, and therefore want them stripped of their wealth.

No, you just want them taxed at a level different than people that make less than they do no matter what the consequences are.  That says to me that you are jealous because you are only looking for ways to get money from what you consider “rich” and you don’t care what effects that causes. 

But I do think the money has to come from somewhere.

Why?  Why does money for government programs have to come from somewhere?  That position assumes that all government programs are good and should therefore exist.  As that is your position, please take the time to defend it because it makes no sense. 

Why is it better for a government to take more money from the citizens instead of first looking at ways of trimming the budget?  Isn’t that what households do?

God knows you guys are never going to lower your defence budget.

Actually, the defense budget is being lowered, so you are woefully misinformed on that as well.  Even so, tell me why the defense budget, that actually puts people to work in building things, actually has research, and actually trains people is not a good investment? 

The problem is you guys are too big of a country, and your problems create ripple effects worldwide.

Pardon me?  Tell me, who died and left you the sole arbitrator of what country is “too big?” Or who is “rich?” Or who can afford more taxes?

And at the heart, its what lead to all of this, the idea that its a-ok to spend other peoples money anyway you see fit. 

The idea of spending other people’s money as you see fit is the problem and it is something that you are defending.  You seem to think that it is fine to tell the rich that by way of taxes, the government can spend people’s money more effectively and in a better way than the person can.

It just almost sounds like you are saying the people at Goldman Sachs, AIG, Bear Sterns etc… were victims of govt regulation.  Please tell thats not really what you are saying.

I don’t have to say it.  You already did.

On 3/19 you wrote:

The problem was the lenders giving away money way too easily. 

Those lenders were required to make risky loans and give money away too easily because of government laws and regulations. 

You see, you agree with Freedomlover and myself, but you just aren’t willing to make the final commitment and say that government started and helped the financial crisis.  For you, you just can’t bring yourself to admit that not only are you jealous of those who make more than you do, but that government more often than not causes more problems in the financial sector than it solves. 

Those of us who live in reality know this to be true.  Those of you who live in a fantasy land and think that government is the cure of all things will never admit that you are wrong.

Obviously any money put back into the company should be tax-deductable.

Obviously not.  Any money that is put into a company should not be backed by the government.  To do so only encourages bad investments and bad business models. 

Or, put another way, if you are going to take $1m out of the business to pay yourself, then put half of that back into the business, why not only take out $500k to begin with?

There could be any number of reasons.  You could need the money for a short term investment into another venture.  You could invest it into the market or bonds.

Then, after the investment matures, you might want to put more money into the business.

Believe me, Im all for the profit insentive in order to grow and innovate. I think its the only way.

Then why are you against the people that initiate growth and innovation?  Why do you feel that the people that go “the only way” should be taxed more for their success than those who do not spur growth or innovate?

Obviously any money put back into the company should be tax-deductable.  Or, put another way, if you are going to take $1m out of the business to pay yourself, then put half of that back into the business, why not only take out $500k to begin with?  Its not rocket science.

Believe me, Im all for the profit insentive in order to grow and innovate. I think its the only way.

I wasn’t talking about a putting money back into any business. Businesses don’t coalesce from thin air. Someone has to have money to make an initial investment. If you tax the top incomes at 90 percent and only cut that rate if someone invests in a pre-existing company, you’re stuck with the Walmarts of the world, and they’ll only get bigger and bigger. And the people that make the most money from them will only get richer and richer. How would anyone else ever begin to compete if you took away all of the money every other rich person had for startup costs? Or is that the point? This is not even considering money for investment into new technologies. This is elementary Economics 101.

I know about mark to market accounting.  If you are talking about the housing market, that was not the cause of the problem.

With all due respect to you, you don’t really know about this the way you say you do. If you’re truly open minded and willing to learn and consider ideas other than what you already believe, read the following when you have a chance:

http://www.ftportfolios.com/Commentary/EconomicResearch/2008/9/25/mark-to-market_mayhem

http://www.forbes.com/2009/07/27/suspend-mark-to-market-fasb-cpa-opinions-columnists-wesbury-stein.html

http://www.forbes.com/2008/10/01/intelligent-investing-transcript-neil-hennessy.html

http://www.aba.com/Press+Room/PR_Accounting_FVAQuotes.htm#Robert

http://www.redstate.com/jsobieski/2008/09/22/is-the-financial-crisis-the-result-of-account/

http://www.chicagobooth.edu/news/2009-05-01-accounting.aspx

http://www.advisorperspectives.com/commentaries/ira_053010.php

Imposing mark to market accounting for assets for which there may not always be an active, liquid market, and which banks use as capital, is a terrible idea. FDR imposed it and then realized what a disaster it was and then got rid of it in the late 30’s. It was not imposed again until 2007. Economists have said that if mark to market accounting was in place in the U.S. during the Latin American debt/currency crisis in the early 1980’s, every large U.S. bank would have been insolvent.

The problem with mark to market is it often over values assets.  Im just saying this wasnt the cause of the problem.  Mark to market only made it worse.

I dont think AIG went under because of mark to market.

Mark to market only made it worse.

I’m going to consider this a partial victory on my part . . . you’re admitting that a government regulation made things worse.  But it didn’t over value assets as you say, it severely undervalued them:

Let’s say your house is worth about $250,000, but there are several people in your neighborhood who are very financially distressed and have to sell their houses ASAP, and reduce the price of their houses to $150,000 to sell them immediately. Now you have no plans on selling your house, and you’re able to keep making the mortgage payments. Mark to market accounting says you have to account for your house as if it’s worth $150,000. Now, if you’re a bank, and instead of a house you have mortgage back securities on your balance sheet, and this is capital to back up your liabilities, you’re now insolvent. This is what happened in 2008.

So, to say it wasn’t the cause of the problem but only made it worse is like saying a pool of gasoline on the floor of your house is a problem, and throwing a lighted match on it simply made it worse.

There’s truth to the idea that banks loosened their lending standards too much. But that was mostly because they weren’t going to hold the loans for the life of the mortgage, so what did they care? They knew Fannie and Freddie were going to buy the mortgages from them, and this process was a creation of: yes, government regulation. And as many other people have pointed out, the Community Reinvestment Act only made this worse as in the 1990’s and 2000’s Congress pushed Fannie and Freddie more and more, and then Fannie and Freddie pushed banks more and more to make more mortgages available to people who live in low income neighborhoods, to satisfy some social agenda. Again, government regulation.

Some regulations are good, and necessary. But over the course of time, Congress (and state legislatures) have abused their power and over-regulated. The lefties’ (and Moore’s) claim that deregulation was the problem shows how little they really understand about what happened. The idea that the Dodd-Frank financial reform regulation passed last year is going to prevent another financial crisis is so laughable it’s ridiculous.