<P>Before I get to yesterday's unmitigated disaster, I want to address the war on success, which is ratcheting higher as we head into full election mode. I find it interesting as the market melts, our educational standing in the world fades, and confidence is a thing we used to have. There is a battle going on to take from people that have achieved a certain amount of success rather than finding ways to really spread the wealth. The way that's done is by people grabbing both bootstraps and pulling. Individuals need to have determination and set higher standards for working and learning. Still, it's desperation time, and with the White House giving up on a solution its laser beam focused on the blame game.
For me, it's very frustrating because not only does this nonsense unfairly paint hard working people as demons, it deters young people from trying to clear those high hurdles. If you really want to know how I feel check out this clip from a segment on "Varney & Co." earlier this week.
My rant didn't go viral, but there is a comment on class warfare that's catching fire on the Internet. Elizabeth Warren makes the case for taking from the rich and attempts to denigrate successful people by suggesting "we" played such a big role that "we" should get a chunk of the profits...or should I call it loot or booty?
Sure business owners benefit from police, firefighters, and a public school-educated workforce. But, they pay a ton of taxes. Moreover, Ms. Warren miscalculates with her assertion that "we" are somehow de facto partners of the person that put up the risk, the long hours, and sacrifice that 95% of our population could never imagine. While she grudgingly agrees that those that took the risks should keep a chunk of the spoils, she hints that an equal amount should go into the pot for the next generation.
How disingenuous can one be? Success in this nation isn't a zero sum game where there are limited amounts of wealth like the houses and hotels that come with a game of Monopoly. Money doesn't have to be confiscated and placed into a pot, because like outer space wealth is limitless. Moreover, wealth creators leave a trail already, a path where others picked from the fruits of their seeds and when they're smart, learn from footprints on where to step and where to tread lightly.
I agree that most wealthy people didn't walk alone. Many got financial help and guidance from loved ones and inspiration from others, including strangers. But, Ms. Warren is sounding like a Bolshevik rabble-rouser.
<U>The Use and Abuse of Public Services
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There is no doubt all of us benefit from the sacrifice and bravery of our military, police departments, and firefighters. Great school teachers also deserve a tremendous amount of praise. Presumably, Ms. Warren wants to go after legitimate millionaires and not households making more than $250,000 annually. If that's the case, then we can assume most of them send their children to private school. But, they are benefiting from other parts of the public sector.
This is true, but they don't tax the system nearly as much as those in lower income brackets that pay zero federal tax.
By my calculation, the top one percent of earners in Massachusetts pays on average $103,419.4 in state and local taxes and $593,390 in federal income taxes (based on average income of $1,659,400).
The bottom 20% of income in Massachusetts pays $1,186 in state and local taxes and no federal income taxes ($11,300 average income).
Here's the rub. In Boston, it's those neighborhoods where the average taxpayers have a net tax bill of little more than one thousand dollars that is abusing the public service system. Case in point there have been 44 murders in Boston this year, a look at these locations underscores the strain put on police and other civil servants. The map above is from StreetSafe Boston highlighting high crime neighborhoods.
<EM>Median Income $27,000 (% below poverty line)
</EM>Roxbury: 6 (27%)
Mattapan: 4 (33%)
Dorchester: 17 (18%)
South End: 4 (median income $41,390)
Chinatown: 1 (median income $14,890) not on map
The redistribution of wealth championed by Ms. Warren and Barack Obama means to take from those at the top in the name of economic justice, but it's the other end of the economic scale that's straining the public coffers. Those most beholden to the public aren't successful businesspeople building factories. By the same token, taking even more from those at the top will not change the rate of murders, illiteracy, indifference, and hopelessness for those in the bottom 20% or even 50%; this is economic bloodlust and twisted logic. If it were based on actual usage of the public sector the top one percent would pay a significantly lower amount on taxes than they currently do.
I get it that people need help, and that's fine. The rich are paying a giant chunk of their wealth for services rendered and not rendered. "We" have no claim on their success other than as consumers. When they go to bed at night if they're anything like me they thank God, family, friends and are living in the greatest country on the planet.
It feels like the Fed threw in the towel yesterday with Operation Twist, which seemed more like rearranging the chairs on the Titanic than a bold plan to create jobs. The market voiced its displeasure and maybe Bernanke will listen or maybe he'll be the smart academic that waits for the masses to come to their senses. In the meantime, the notion of a double dip seems more likely than in any other time this year as European manufacturing contracted for the first time in two years and as China's PMI has pulled further into contraction. Also, in China the four biggest banks reported this morning depositors withdrew $65.7 billion in the first fifteen days of this month. On one hand that is disturbing, but on the other it's likely that money is being rerouted into private financing because of mounting rules at banking institutions. </P>
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<P>This morning's news coupled with the IMF downgrade of economic growth is putting intense pressure on commodities and globally sensitive stocks. This is a real red flag. I'm watching FCX as the proxy for that as the stock looked oversold ten points higher. In the meantime, key equity indices are facing serious test of critical support points.
There was a yellow flag when the Dow couldn't breakout through key moving averages on the upside. Now the index is on the cusp of violating a pennant formation. A close below 10,700 would be a major blow. One could argue the next best support point would be 10,000.