The Deficit

Can any normal American honestly tell me that they worry about the U.S. fiscal deficit when they get up in the morning and when they go to bed at night?  The answer is no, of course not.  People care about jobs, healthcare, education and fringe issues such as guns and abortion (these shitheads are a lost cause anyway).  The population is too stupid to understand how the U.S. Treasury and Federal Reserve function, and they sure as hell have no idea about global currency dynamics that affect the cost of funding for U.S. government programs.

Now, all of the sudden, people start giving a shit about the fiscal deficit in America because southern European countries such as Greece are technically bankrupt.  And politicians are trying to scare people into thinking that the same outcome is right around the corner for the U.S.  This of course is total bullshit, and anyone who compares the U.S. and Greek governments as equal players in the global economy is beyond stupid.  Unfortunately, we live amongst moron voters who elected reckless fools in Congress who actually believe this shit.  The Greeks did not even collect taxes, corruption was rampant, they have no natural resources, and they have no control over their currency.  How does this compare to the United States?

First off, we have the reserve currency of the world, bitches.  Nobody seems to recognize that.  Every fucking thing from oil, gasoline, corn, lean hogs and paper clips are priced in U.S. dollars.  Our Treasury can issue 10 year debt at interest rates well below 2%.  There is no inflation in sight.  Developing countries don’t even want the reserve currency because they all depend on exports for their growth.  They would rather have cheap currencies so their goods and services are more attractively priced to consumer nations such as the U.S.  The euro sure as hell doesn’t seem to be any competition at this point.  Japanese Yen?  Don’t make me laugh.  Investors around the world are buying up U.S. Treasuries faster than we can issue the fucking things.  So to all you blowhards, shut the fuck up about the crippling deficit that is destroying our country.  This is a long-term problem, a generational issue.  This is not something that we should even be talking about right now.

How about getting me a fucking job?  I don’t give too shits about the deficit.  At these low rates, we should be levering up with 30 year bonds and investing in infrastructure projects across the nation.  If governors don’t want to take the stimulus money, then shove it down their fucking throats.  This would create thousands of blue-collar construction jobs.  When people have jobs, they pay taxes and stop receiving welfare.  When a larger percentage of the population participates in this economic recovery, tax receipts will increase exponentially over time, and eventually we will be in a surplus.  Look back and read about the Clinton years if you don’t believe me.

And giving rich people a bunch of tax breaks does nothing for economic growth.  These are the same fucks who are buying U.S. Treasuries.  They aren’t spending the money or investing in capital projects.  They are hoarding it like bitches, because rich people only have one goal in life: to stay rich.  They don’t have the balls to invest in this environment.  But if you give some poor schmuck a few bucks, I guarantee you he will spend that shit.  And if you extrapolate this trend across the broader middle class, it will grow the economy from the bottom up.

These same shithead pundits and politicians will also tell you that the current economic recovery is weak because of too much government spending and an overwhelming current account deficit.  This is the dumbest thing I’ve ever heard.  Our entire global financial system collapsed, so the government had to step in and restore confidence.  Government is the only entity that can provide demand when the private sector is falling apart.  This used to be common knowledge.  Now all of the sudden, Keynesian economics is considered some type of liberal, hippy, socialist crusade.  We need to cut Medicare and Social Security benefits in order to preserve our freedom?  Get the fuck out of here.  These assholes can’t possibly believe all the bullshit they say, at least most of them.  But they are able to convince their idiot constituents to get all fired up about it.  All of the sudden, everyone thinks they are an expert on global economics.  Half of Congress has no idea how money moves around the world, but they never shut up about it.  Do your own homework, read ‘The Noonan World Report,’ and stop listening to the stupid fucks on TV and talk radio.

Supply-Side Fallacy

Supply-side economics is a theory that asserts an economy’s ability to supply more goods and services is the primary component in generating economic growth.  Also known as ‘trickle down’ economics, this theory states that a reduction in tax rates on wealthy individuals and corporations will incentivize them to increase private investment, which in turn will bolster the economy’s production capacity.  Increased investment creates new businesses and allows existing companies to expand.  The wealth created from these new investments is supposed to ‘trickle down’ to the rest of society in the form of job creation and higher wages.  But the most important concept in supply-side economics is that people will be substantially more encouraged to work and invest if their tax rates are lower.  It is an unwavering, religious belief in the elasticity of the labor supply.  The promise of a slightly higher net income will bring more people into the labor force, and this larger tax base is supposed to make up for the revenue lost due to lower rates.  Supply-siders believe that capital gains and dividend taxes must be reduced to encourage investment, and marginal income tax rates must be reduced to encourage employment.  If this happens, the economy will grow, everyone will have a job, Jesus will love you, and the world will be a better place.

Generally speaking, there is some truth to this hypothesis.  I suppose there is some level of taxation that would discourage people from work, assuming they had other means to provide for themselves.  If the top marginal rate was 75% and we reduced it to 30% overnight, the psychology of labor and investment may change to some degree as noted above.  Unfortunately, these little tidbits of truth have nothing to do with the United States of America in 2011.  Tax policy would have to be transformed dramatically, such as in the previous example, to produce any meaningful change in behavior.  And while excessive taxation may have been part of the problem in the 1970s, it is not a problem now.  Tax rates are as low as they have been the past 100 years, and they are among the lowest in the developed world.  They were higher during the economic expansion of the 1990s, when over 20 million jobs were created.

Supply-side zealots do not understand that relativism matters.  I got news for you shitheads; the labor supply is not that fucking elastic.  If you increase the highest marginal tax rate from 35% to 39%, it will not have a dramatically negative impact on investment behavior or labor participation.  And if some rich douchebags refuse to work under a 39% tax rate, than they can go fuck themselves, and it won’t have an effect on GDP.  The world is awash with liquidity and corporate balance sheets are stacked with cash.  A haircut on someone’s net income will not change that.  Obviously there are other reasons why businesses are sitting on this cash rather than expanding, such as a lack of demand for their products and services.  Unfortunately, since supply-siders do not believe consumer demand is relevant, their only remedy for a stumbling economy is to cut taxes.

The people who bloviate about this shit on TV all day will have you believe that supply-side principles are a proven scientific formula for economic greatness.  Any deviation from this incredibly simplistic view (such as going back to what the highest rates were under Clinton as part of a budget compromise) will cause an economic meltdown.  If you raise the highest marginal rate from 35% to 39%, people will stop working and employers will not hire anyone.  If you raise the capital gains rate from 15% to 20%, nobody will buy real estate or invest in new businesses.  This is not an academic theory, it is a fucking religion, and Ronald Reagan is their god.  The people who preach this shit are either mindless idiots, or they are manipulating the mindless idiots who listen to them and read their books.  Most of them are greedy, rich assholes who don’t want to pay any taxes.  Some of them are Tea Party morons who were instructed to preach this nonsense by the greedy, rich assholes.  It is easier to believe in some bullshit about cutting taxes than it is to actually read an economics textbook.  Within the context of this country’s current economic predicament, taxes do not have any impact on job creation.  It’s just a fact.  Anyone who says otherwise is full of shit.

According to these jerkoffs, consumer demand is totally irrelevant when it comes to economic growth or creating jobs.  As long as rich people (I’m sorry, ‘job creators’) have extremely low tax rates, they will start businesses and hire people.  Hell, let’s assume that one of these rich pricks actually does own a small chapter ‘S’ corporation or LLC that is taxed at the highest marginal rate.  Supply-side proponents believe the tax rate will drive his decision-making process on whether to hire more people and make capital investments.  The overall demand for this person’s product or service is irrelevant according to them.  Does this make any fucking sense?  No, of course not.  That marginal rate could be 25% or 40%, but if there is demand for his product, he will hire more people.  That is how people make decisions and that is how capitalism works.  With all the fucking deductions available for small businesses, this guy’s effective tax rate will be half the marginal rate anyway, and he knows that.  The same is true for investment.  Let’s assume someone has the means to make a substantial long-term investment in stocks, bonds, or real estate.  When the opportunity presents itself, a 5% increase in the capital gains tax will not prevent them from pulling the trigger.  And if you really believe otherwise, than you are stupid.