Sunday, September 21, 2008

"I knight you Sir Luke, The Adult"

It's been about 2 years and 4 months since I graduated from college. During this time I have begun to assimilate into the "adult" world, whether I like it or not. I have started to learn and have reason to pay attention to words like 401k, IRA, Roth (401k and IRA), economy, Fed, interest rate, mortgage, savings, money market, stocks, bonds, mutual funds, index funds, retirement, compensation, benefits, health, dental, premium, insurance, deductible, yield, coverage, return, liability, policy, claim, depreciation, deduction, IRS, income, tax, income tax, state income tax in silly Virginia, Alan Greenspan, and finally Ben Bernanke.

Overall, it can be a bit confusing, overwhelming, and at different times seem completely unnecessary. As I continue to learn, I've read a few books, watched a few documentaries, and tried to think critically so as to learn and not get sucked into the propaganda that some of them are laced with.

Most of the stuff we hear lately revolves around two things, the election and the economy. Let me share with you my 2 year and 4 month understanding with you. I'll start by whittling down the basic ideas both John and Barack have (I thought I'd call them John and Barack since they always get called McCain and Obama in the news. The last name convention also reminds me of junior high athletics, where we all got t-shirts that said "Name: __________, property of Central Spartans." That always felt weird to me. One, I wasn't the school's property. Two, if my coach doesn't know my first name, how can he know what I need as an athlete? It got better in high school and college though, so my scars are minimal.) John says, "I'll lower everybody's taxes, and lower high income taxes the most." Barack says, "I'll lower everybody's taxes, except for the high income folks. There's will be raised to make up the difference." He might also throw in the word "change" a few times.

Laying aside partisanship and looking at the net effect, both John and Barack have a policy in mind that will lower the income of the government. To me, this seems like a strange plan. If I did the same thing personally, it would mean I would find a job that pays less money, while continuing to borrow and increasing my debt to my friends. If I keep making less money and borrowing more from my friends, at some point, the ruse will be up. They will realize I'm not ever planning on paying them back. At that point, I'm going to be out of luck when I go to hit up my friends for more money.

This thought led to my next question. Who do we as a country owe all of this money to? I found this video on the internet the other day that explains the money system we use. It's put together as a cartoon, and watching it brought back fond memories of School House Rock. It definitely tries to persuade you towards a certain opinion, but I think it's worth a watch if you have 45 minutes and you'd like to understand your pal, Ben Bernanke, a little bit better.


I'm curious to know what the older and wiser adults think about all of this, so please let me know. For now, I continue pondering the situation without having come to that many firm conclusions.

1 comment:

Stokes said...

Answer: Reaganomics, an extension of supply-side economics. (I'm no economist, but lookup Reaganomics for the basics.) The economy isn't a 0-sum game like your own budget is.

One premise is that lowering taxes ultimately brings in more tax revenue. That doesn't work with the personal bookkeeping example, unless I guess you're a feudal lord who collects from people using your land.
Tax less and people do more. They innovate more and create more jobs, and produce more (taxable) things.

The other side of conservative spending is just that: spending less. The goal is to cut government, partly because almost everything government does, government does badly.
In this area most Republicans have been all talk, falling short of conservative ideals, and the whole tax-cutting thing is a bit weak without it.

One more thought is: what do the wealthy do with their money when you cut their tax rates (70% to 28% during the Reagan years)? They don't put it under a mattress, they invest it. That money goes to fund companies, create jobs, produce goods, and therefore generate more tax revenue. Bottom line, cutting taxes for the rich is good for everyone.