Saturday, March 13, 2010


Here's a sobering look at how difficult our debt situation has become.The Tax Foundation produced this chart showing the tax increases that would be required merely to eliminate the federal budget deficit for just this year.This would not touch the total DEBT,only this years DEFICIT.

Table 1
Federal Individual Income Tax Rates for Joint Tax Returns
Current Law Versus Rates Necessary to Erase Deficit

Tax Brackets for
Couples Filing
Joint Returns
Current Law
Tax Rates
Rates Needed
to Close Deficit

$0 to $16,750

$16,751 to $68,000

$68,001 to $137,300

$137,301 to $209,200

$209,201 to $373,600

$373,601 and over

Note: The rates are the same for single taxpayers,
but the brackets vary. For the bottom three brackets, the
threshold amounts are exactly one-half what they are for
couples. For the top bracket, the threshold is the same for
singles as for couples. Brackets are shown for 2009; inflation
adjustment for 2010 will be announced in the summer of 2010.

Source: IRS and Tax Foundation

Of course,Obama and his co-horts in Congress plan on racking up trillion dollar deficits for years to come,so these tax increases would have to be permanent merely to keep pace.The obvious solution would be to cut spending dramatically,but let's keep it real here.

The debt and spending issues are well known.We are also led to believe that the recovery efforts are based on consumer driven spending.The White House publicly states that it wants us to become savers again as a nation.Unfortunately,it's policies dictate that we must spend like drunken sailors for the economy to rebound.It's a misconception that consumer spending is down drastically.Less than 2% from 4Q2007 thru 2Q2009.That's significant,but not a deal breaker.Consumer confidence is,however,down appreciably and that is a more telling statistic.

The more critical number to watch is investment spending.Down almost 30% from early 2006 thru late 2009.This has a direct negative effect on the economy.Investment in equipment,software,training,etc. by companies allows them to stay competitive and grow.

The clock is ticking.State budgets are collapsing.More banks are failing.Unemployment is still growing,even if less severely.Commodity prices continue to rise.Commercial business foreclosures are escalating.The Federal Reserve continues to lend money nearly free which is encouraging banks and other investment companies to wade back into the derivatives markets.The bailouts have given the signal that they will be rescued should they fail enabling them to leave good fiscal practices out of the equation.Even if the bomb blast doesn't get you,the flying shrapnel likely will.More to come...

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