Communication breakdown is what creates most problems…and right now there seems to be a disconnect between Washington, D.C. and the American people.
Government bailouts and "stimulus" packages are confusing not only to the people, but to our Congressmen and women as well.
My goal here is to improve the understanding of how this stimulus package will affect us financially.
The Government’s Financial Statements
Everyone (including the government) has a set of financial statements. These documents help monitor and track where money goes. Most of us don’t think about the government’s too often…and perhaps we ought to.
If you’ve read my others posts, including America’s Financial Future and Is America Bankrupt? you’d see that we are in dire straights financially as a country. It may be helpful to review these posts before continuing to give you a greater context.
Congress has before it a massive "stimulus" package somewhere in the neighborhood of $789 BILLION dollars.
Let’s look at this from a standpoint of simple math and money knowledge…
| Assets | Liabilities |
| Taxes | Social Security |
| Medicare | |
| Medicaid | |
| Welfare | |
| Governement Programs | |
| Federal Employees | |
| "Stimulus" Packages |
So if we get a "stimulus" package, it becomes a long-term liability on our government’s balance sheet.
The only way for the government to get rid of this long-term liability is by adding assets to the asset column that will generate income to pay for the expense of the liability. It can do this by raising taxes , finding new sources of tax revenue (i.e. tariffs), or by continuing to borrow from overseas. Oh…and it can also print more money. Wouldn’t it be neat if you could do that?
None of these options are pleasant, or will help our nation regain it’s strength.
One reason why this "stimulus" package won’t work: it won’t create enough long-term jobs. There are economists on both sides of the issue, however the simple math doesn’t work.
Our national balance sheet can’t handle another long-term liability that we all will have to pay back with interest…or else print more money and cause inflation.
One way to actually stimulate the economy : reduce the corporate tax rate so companies from other countries would consider moving here and hiring U.S. workers, thus allowing other small businesses to spring up to service these companies and their employees.
According to The Tax Foundation:
"…the average combined federal and state corporate tax rate in the U.S. is 39.3 percent, second among OECD [Organisation for Economic Co-Operative Development] countries to Japan’s combined rate of 39.5 percent"
The table below looks at the relationship between U.S. State and Federal Corporate Tax rates when compared to the rest of the OECD…
Table 1
Comparing U.S. State Corporate Taxes to the OECDSource: OECD, http://www.oecd.org/dataoecd/26/56/33717459.xls
As you can see, we are less appealing as a place to help corporations increase their bottom lines. When they go, many jobs go with them (the Multiplier Effect ).
In an age where you can hire an entire staff over the internet for a fraction of the cost of employees in America…it’s time to start rethinking some of our nation’s business policies.
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Thanks for letting me know about your website. Very informative.