Friday, May 27, 2011

Don't you wish it was 1963 again?

Consumer spending is up, as an excellent indicator of economic health this would normally be great news, but all of the increased spending went for food and fuel. So the rosy cheeks are really from strep.

There are still a lot of foreclosures and the right wingers will tell you what a great thing it is to re-adjust the market. Lot’s of buying opportunities you know, all those people who couldn‘t afford a house can buy one now. It’s not happening of course, the National Association of Realtors index of home contracts pending is down 11% in April and down 26% from last year. Contracts typically take 60 days to complete so this is a leading indicator, expect things to get worse in coming months.

Home sales are currently half of what they were in 1963 despite a 130 million increase in population. It’s even worse than that of course because families are smaller now, the number of households has gone from 53 million to 115 million. Home sales should be brisk, the so-called housing bubble didn’t really exceed the need for housing. It was the deliberate depressing of wages over the past 30 years that caused the collapse. People were buying houses they couldn’t afford, but they should have been able to afford them and wages continue to plummet.

Commodities are up as the USD goes down, the people who churn the market are doing very well thank you. When you go to the gas station or buy food remember how much they appreciate you, you make their 10 digit incomes possible. They also thank you for not begrudging their 15% income tax rate that you and the Republicans provide for them, remember they are the job creators and you make it all possible.

There are some jobs coming back to non union America, wages of $7.25/hour with no benefits make factory output cheaper here than anywhere in the industrialized world. Even compared to China, the higher productivity in the US offsets the wage advantages as Chinese workers can make as much as $2/hour and climbing. China is also starting to crack down on the worst polluters and if Republicans have their way there won’t be any pesky EPA controls here.

China also taxes business at a much higher effective rate than in the US. The Republican talking point is that the US has the highest corporate tax rate in the world but 2/3 of corporations operating in the US pay zero taxes and you can’t get much lower than that. Of course the other talking point is that business doesn’t pay taxes, consumers do! This is absurd to anybody who can do 5th grade math, corporate taxes are paid on profits. If they increase prices to pass along taxes then they would make more profits and pay still more taxes.

Now they can just increase prices, cut wages and pay no taxes. Good luck having the consumer pay all the taxes as their wages fall. This is of course why government can’t pay its bills, because corporations and the rich don’t pay any. The number of other people who can pay taxes declines daily. The Republicans have a solution for that however. It’s called the Flat Tax, you get to pay tax whether you have any money or not. The tea baggers say it’s that way now, but they haven’t seen anything yet.


Anonymous said...

Well said. Thanks for this.

-M in Korea