Our Financial System Has Gone Mad

[No DUplicitous DUpe]

Our Financial System Has Gone Mad
http://saneramblings.com/phpBB/viewtopic.php?f=1&t=105 (posted with permission of the author)

Dear Reader,

Citibank collapsed. The U.S. government bailed them out with billions of dollars. As if this whole ugly thing hadn't happened Citibank is spending $400 million to name the new New York Mets stadium "Citi Field."

But if you lose your job and need help, good luck to you. Briefly you can draw unemployment. It's not much money but it will help pay your bills as you actively look for work.

When you had a job, in most states you paid a combined federal and state income tax rate of about 40% of your wages. Hopefully, after paying taxes you were still able to put some money away for a rainy day, money you may desperately need now.

Meanwhile insurance mega-giant Prudential wants a mult-billion dollar bailout of taxpayer money. Is it because it too is in dire straits?

Nope. In the past 10-years, its pretax profits were almost $25 billion. But on those enormous profits, it paid just $1.3 billion in tax, an effective tax rate of only 5.1%.

Prudential said it "pays its fair share of all applicable taxes and adheres to all applicable tax laws." As you read this statement you might wish you also had lobbyists working on your behalf to write tax avoidance code for you.

But Prudential is not the only gigantic, tax avoiding insurance firm seeking bailout funds. Hartford, Lincoln National, General Electric spinoff Genworth and others also want to join the money giveaway.

They've seen gargantuan insurer AIG collect three bailouts now totaling a staggering $152 billion, and all since September. AIG was about to collapse from their own gross mismanagement when the government rescued them.

Now among other purposes, AIG is using the money to pay millions of dollars in bonuses and not long ago hosted a lavish party costing over $400,000 at the St. Regis Hotel in Orange County, CA.

Yet in the middle of all this corporate greed for your money, you and your family are left to fend largely for yourself should you lose your job or your home, or can't pay your medical bills.

Every day, millions of people in America suffer from hunger or from serious illnesses and don't have the money to help themselves. In fact the world is plagued by hunger, sickness and poverty and it too must fend for itself.

But the U.S. government has billions of dollars to fight wars in Iraq and Afghanistan, killing people and destroying what existed of their homes, of their jobs, and often of their families. And no-one seems to know why.

In God's name, where are America's priorities? Where are its values? Where is its compassion?

When the corporate bailouts were announced, Americans were furious and flooded political officials and the news media with phone calls, emails and letters of protest.

For a few days, it stopped Congress from allocating the money. Then they quietly added $150 billion in pork barrel spending for themselves and quickly passed a $750 billion corporate bailout, the one we have today.

As this happened during election time, to get re-elected, as usual Congress collected corporate campaign contributions including from companies seeking bailouts.

Regarding the "free market system" we've long been told is responsible for our nation's success, Wall Street cheers the bailouts. The stock market fell sharply until companies like AIG and Citibank became "too big to fail."

If they're too big to fail, who is next? The car companies? The credit card companies? The home builders? How about our cities and states struggling to pay their bills? California is facing a budget gap that could skyrocket to $40 billion by 2010.

Worse yet, you and I as taxpayers don't have the money for these bailouts. Our government borrows it, sinking our nation ever deeper into debt with no idea how we will ever pay it back.

And here is something else that might stun you. No-one is tracking what happens to this bailout money. It's given to these corporations, many of which are still run by the same bad management that got them into trouble and no-one is being held accountable.

Rumors say as much as 40% of the bailout money is being paid out in corporate dividends and bonuses. But no-one really knows.

Nor is their a new and more powerful regulator, it's the same old regulatory system that failed us in the first place.

If you have had enough of this madness, raise your voice and compel this system to do the right things. Your voice matters so don't be silent or you'll get more of what you are getting.

And take heart. As this financial crisis worsens, you and I will help each other as was done in the Great Depression. Eventually, we will work our way out of this catastrophe dropped abruptly on us and from its pain, we will change the political system from the misbegotten farce it is now.

Dick

The Citibank naming rights deal with the New York Mets was described briefly in Sports Illustrated (12-8-08, page 22). The parent company Citigroup, which is the entity that did collapse, is paying $400 million "over the next 20 years." "Neither the Mets nor Citigroup, which earlier said it will not alter the naming rights agreement, has commented."

The Prudential, Hartford, Lincoln National and Genworth source: "Lightly Taxed Insurers Aim to Tap TARP" . The Wall Street Journal, 12/12/08

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Read the whole column, begun in October, at http://saneramblings.com/phpBB/viewtopic.php?f=1&t=105

[truedelphi]

1. We just filed with the IRS to start paying off some back owed payments.

So in addition to feeling angry that after being penalized for "raiding" M's retirement funds so he could get medication and pay insurance so he could have eye operations, we now owe money to the IRS as well.

AND GET THIS: it costs an individual $ 125 to apply for the IRS re-payment plan.

I couldn't help but think of the irony of it all - the back payment monies are going straight into the pockets of the CEO's at companies receiving the BailOuts. These people - who mismanaged the American economy into the poor house - will be vacationing, accruing executive bonuses (Although in some cases those bonuses will need to be called something else) And they won't be required to pay a stinking $ 125 tab to apply for those things.

And all of their monies are on our collective dime!!

[unblock]

7. i thought there were hardship exceptions to the penalty

i assume you looked into this and so i'm probably wrong, but i thought you could avoid the 10% penalty is it's going straight to pay back taxes or medical hardship.

my guess is that the irs's definition of medical hardship is not very accommodating.

[truedelphi]

13. We had a choice here - this is how it played out

We could have "opted" out of paying the $ 1,000 a month COBRA health insurance payments, and just paid the eye operations out of pocket. Those operations would have cost $ 34 000 and then we could have said the money was hardship etc.

But we decided it made more sense to pay $ 16 K for health insurance (that way I had some exams and needed (though much more minor) treatments, as well as M having his eye operations. But doing that, it was no longer considered hardship.

After all, the government's reasoning seems to be that health insurance is not an essentiel. Unless of course you are a CEO or Senator.

However, maybe I can ask that the whole situation be reviewed?? It is probably too late to do anything for the first monies we raided out of the retirement funds, but the second "tranch" of payments we received, those happened less than three years ago, so maybe I can ask that the IRS review it?? I'll let you know if your advice plays out in any meaningful way. (As well as offering my semi-eternal gratitude.)

[unblock]

16. ouch. aren't the amounts involved ridiculous?

$16k for just health insurance. ouch.

i'm not an "expert" in this area, just know a few useful questions to ask if you DO get an expert to look into your situation.

i think you can change your taxes up to seven years later, so if you've got money coming back to you, go for it.

and good luck!

[truedelphi]

19. Yep, 16 K for sixeen months of health insurance is ridiculous

And all that gave us was continued coverge at Kaiser, where they mis-deiagnosed M, and mis-advised me about my health needs, not admitting I needed surgery until some 90 days before the insurance expired.

And before you can have the surgery, you have to attend the one day seminar explaining the surgery - they make that attendance madatory. The only day they would let me attend was the same exact date as M's second eye surgery!

You also can not find any lawyers to sue Kaiser -as they usually win. Part of the reason they win, is that they control the patient's files. In our case - M would not have been blind if his doctor had not mis-diagnosed him! But we could never get the files that showed that out of their hands.

[lutherj]

2. Do I smell revolution in the air? nt

[Greyhound]

5. Not soon enough.

:grr:
:banghead:

[CrispyQ]

3. Everyone wants to move their place in line at the trough, up as far as possible, before it goes dry.

Fuck the little people.

[bbgrunt]

4. the biggest heist in human history....and all going according to plan.

[lutherj]

6. Exactly. It's one big conveyor belt moving all the wealth from the many

to the few.

[unblock]

8. when people complain about the "fairness" of out tax system, i ask why is LABOR taxed the highest?

all income from labor is taxed. it's personal income, you pay income tax (federal, probably state, and possibly local) AND payroll tax (and your employer pays a share of payroll taxes as well).

all in all, your marginal dollar of labor can easily be taxed near or even over 50%. 15.3% payroll tax plus 28% federal income tax is already 43.3%.

worse, most of your expenses are your own. commuting is considered your own damn fault for not living at your work site, it's not deductible (except for transitcheks, which are limited and not applicable to most people). suit and tie or whatever "professional attire" is these days is considered fashion statement and is not deductible, unless it's a very specific uniform (in which case your employer probably picks up the tab, one would hope). most other employee expenses are deductible only to the extent they exceed 2% of your adjusted gross income. in other words, the government merely softens the blow a bit when you're really getting screwed.

let's be clear. if your salary is $50,000 but you had to spend $1,000 for unreimbursed employee expenses, you really only "earned" $49,000. but you are taxes on $50,000.

if you were a business, you would only be taxed on your NET PROFIT, not your gross income. so not only would you not be taxed for the $1,000 in employee expenses, but you would also get a deduction for rent and food and so on. basically, if you managed to save just a measly $5,000 all year, which is actually pretty decent, then you would pay taxes ONLY on that $5,000.



moreover, dividends are taxed at, what, 15%? as are capital gains?

when wealth earns more money, the taxes are deferred until you cash in. or not even until retirement if it's in one of many tax-deferred vehicles.

so when WEALTH is taxes, you wait until the end of the entire investment, tax only the profit, net of ALL expenses, and then tax it at 15%.

when LABOR is taxed, you tax it immediately, you tax it based on the gross income not the net profit, you get hit with both payroll taxes and higher income taxes, and most expenses don't reduce your taxes.


yeah, that's real fair.

[RC]

9. And on top of that Corporations are persons under the law.

[Odin2005]

11. That's why the Investment Class must be gotten rid of.

They used to have a useful function but now they are no different then the aristocrats of old, demanding tax money from us "lowly serfs" while paying no taxes themselves. They are what British historian A. J. Toynbee labeled an uncreative "Dominant Minority" that rules trough force instead of by inspiration and merit and threatens to fatally damage Western Civilization just as the slave-owning landed aristocracy of the Classical Mediterranean fatally damaged Graeco-Roman Civilization.

[No DUplicitous DUpe]

12. That is a GREAT post, unblock...Thank you!

It should be posted as its own thread.

Excellent points!

Kick...

[Odin2005]

10. IMO private capital investment has become obsolete.

The Investor Class is a relic from back when governments were not as powerful and wealthy as they are now and thus wealthy private individuals were needed as a source of capital for new economic enterprises, especially for inherently risky economic enterprises. But now governments are wealthy enough to fund publically owned investment banks, and thus get rid of an class of rich investors that now corrupt our politics.

I'm not so much an "anti-capitalist" as much as I am a "capitalism-as-we-know-it-is-obsolete-ist". That is, capitalism is not inherently good or bad, but it has served it's purpose and has become obsolete. It should of been replaced decades ago, but the forces of inertia causes by entrenched interests has prevented this from happening, resulting in the sick and diseased economy we have now.

Also, the concept of "Capitalism" must no be confused with the concepts of "Free Enterprise" and "Market Economy". Capitalism needs those 2 things, but those 2 things do not require Capitalism. Conflating these 3 concepts results in much bad thinking on the subject, to the benefit of the entrenched economic interests, and in many cases this confusion has been promoted by those entrenched interests. This confusion is also the result of conflating "Socialism" with Marxist-Leninist Economic Planning, with the result of the entrenched economic interests using the failure of Marxism and Economic Planning to wrongly declare Socialism to be a failure, which is total BS.

Unfortunately the conflation of "Capitalism" with "Free Enterprise" and "Socialism" with "Planning" has become the basis of Neo-Liberal Globalist attacks on Socialism starting with Fredrich Hayek's famous work The Road to Serfdom, Where Hayek rightly attacks, and warns of the dangers, of Economic Planning, but then he wrongly conflates planning with Socialism, mainly because when people talk about "Socialism" most people are actually talking about the Marxist form of it, something that annoys non-Marxist Socialists like myself.

My socialism doesn't come from Marx, but instead is in fact partly based on the thinking of Marx's most famous critic, Karl Popper and his concept of the "Open Society". IMO Capitalism has become the enemy of Popper's "Open Society" because it has come to oppose all democratic efforts to reduce human suffering and increase the freedom needed to find our own happiness. Capitalism instead has hitched itself to Market Fundamentalist cultism that puts a supposedly sacred "free market" ahead of the moral need to reduce suffering and enhancing people's freedom to find happiness.

[Hannah Bell]

15. Governments didn't "become" rich. Gov'ts always have the option of creating money & paying people

to make stuff (assuming the necessary resources lie within their borders). So long as the people believe the currency is exchangeable for goods & services, it works.

It's how you BECOME "rich," not something you do AFTER you're "rich."

In fact, a group of people could do the same without a gov't, given access to resources.

The supposed need for "investors" is an illusion of history, on a par with the supposed need for kings & the supposed need for the guidance of Zeus & Venus.

[Odin2005]

17. But the political will to accept the income taxes needed to build up wealth didn't exist.

It was not until the early 20th Century that The US passed a constitutional amendment to even allow allow income taxes. Before that our source of income for the federal government was actually quite restricted, a lot of it was from tariffs and sale of frontier land.

[Kablooie]

14. According to predictions, 2008 is the year for it to go mad. 2009, it completely collapses.

And in 2011 the current economic system will be totally eliminated and replaced with something else drastically different.

We are in for "interesting times", as an old Chinese saying put it.


Maybe it's time to dig up all those old 1960 bomb shelters and stock them up again.

[Odin2005]

18. 2008 = 1932. 2009 = 1933. Now = the Hard Winter of '32/'33