In2 Ricardo is the man

THEY may not have heard of Ricardian equivalence but American consumers sure act like they do. US disposable incomes rose by 1.6% in May, the third largest monthly gain since May 2001. But they only increased their spending by 0.3%; the savings rate jumped from 5.6% to 6.9%.

In the long run, this may not be a problem. Americans haven’t been saving enough. But in the short run, this was a disappointment. Because the big jump in income was largely driven by a one-off social security payment of $250, part of the Obama stimulus package. Consumers held on to the bulk of that money, or used it to pay down debt, rather than spending it.

Ricardo reckoned that rational taxpayers would see a tax cut, if it occurred at a time of government deficit, as simply a sign that future taxes would have to rise. They would thus save the money so they can use it to meet a higher tax bill. Is this the chain of reasoning? (How many consumers actually know the size of the US budget deficit?) It may be that governments only hand out tax rebates in recessions, when consumers are cautious anyway. Nevertheless, Ricardo seems to be vindicated this time round (last year’s Bush tax cuts were also a bit of a damp squib for consumption). Economist

I’ve put into bold the points I am all about.

Some Thoughts:

On Ricardo

I didn’t know a damn thing about the economist of a time gone by and I imagine most regular folks don’t know about him and his ideas.

On Savings

So true. Americans need to save more for so many reasons. One being that SS is a goner baby and it’s really a necessity that people face that.

Checks,debt and Presidents

It has always been a kick in my crotch that people seem to embrace the Obama checks but boo- hooed the Bush checks. Same thing for the most part and a joke for the same reasons. People had debt to pay off which didn’t help the greater economy. Also folks like me (unknowing Ricardians I guess) put the money in the bank. Fortunately I put mine in the bank and not the market. Yippee !

Paying,saving and government

Let’s face it folks we have a huge bill coming due for every American for the rest of the time America exists. Democrats especially are never going to curb the insatiable beast that is government spending. TRUST ME ON THIS I’m from Massachusetts and have been handed one of if not the largest tax increase in the Commonwealths history.

The bureaucrats dream of the economy turning around and revenues returning. I got news for you folks a big chunk o’ cash is never coming back. We are looking for something to come back to our peril. We need to figure out what is potentially replacing what we’ve lost. The private sector has had to undergo a major adjustment. These companies will NOT return to the practices of the past. The ongoing assaults of continued globalization and government policy changes alone assures this. The companies,sectors,nations and entrepreneurs will need to think differently,act differently. It’s NOT GOING TO BE THE SAME!!!!!!!!!

My fellow Americans. Your taxes are going to go up. This isn’t a partisan threat it is reality.

The increases will not just be the fat cat millionaires and their lesser brethren the 200k plus earners. It will be you and me no matter what the One says.

Your utility bill is going up in answer to climate change measures from every level of government. . You will pay more for gas,coal and other heating sources as well as electricity charges for heating, cooling and charging the mythical electric car that is soon to grace your driveway. Rebates will not be long lasting if present at all.

Your driving needs of oil,gasoline,and diesel will all be on the rise due to taxes and the inevitable return of increases from the producing nations and transport and refining costs. The there are the excise taxes and tolls all up to levels that along with fuel costs will easily crush the hard working classes and small businesses.

If you own property your property taxes are always going to increase as a rule. This is abundantly clear to many even now where municipalities are forced to raise revenues no matter the recessions grip.

Your paycheck is due to experience some serious shrinking too. Your benefits will be taxed sooner than later as so called health care reform from either party looks to get the estimated $250 billion the insurance exemptions “costs” the government annually.