Shots Across the Bow

The song was recorded in 1929 one month after Black Tuesday, when the stock market, overheated by excessive speculation, collapsed spectacularly. A few months after the collapse, the economy seemed to be righting itself. The stock market had recovered much of it's losses, and businesses were slowly expanding. Unfortunately, the American people were rattled and had no faith in the economy. Despite massive intervention by the federal government, or rather, because of it, consumers lost confidence in the economy, and held on to their money, or used it to pay down debt, rather than spend it on goods. The economy floated along for a few months, then tanked hard in 1931-32.

Does any of this sound familiar?

According to the AP, tax receipts in the US have fallen lower and faster than at any time other than during the Great Depression. To see such dramatic increases, you have to go back to, you guessed it, 1931-32. For this year, personal income tax receipts have fallen 21.9% over the same time period last year. Corporate income tax receipts have fallen 56.9%. Overall, total tax receipts have fallen 17.9%

There's a couple of very important things we need to look at here.

First of all, let's pretend that your boss has just told you that he's cutting your salary by 18%. he goes on to tell you that you'll probably take another pay cut next year, hopefully no more than 7 or 8% or so. You go home to your wife who tells you that she wants to redecorate the house and add on a new home theater to watch NASCAR. Is now really the best time to spend a lot of money you aren't going to have? President Obama does. He's expanding spending faster then the receipts are dropping. Economically, this is like leaning into a punch instead of ducking.

Second, did you notice that total tax collection track with personal income tax collections much more closely than they do with corporate? There's a reason for that. Individual and joint taxes far exceed corporate taxes. What this mean to you and me is that every time President Obama says that he's going to pay for a program by taxing businesses, he's lying through his teeth failing to calibrate his words properly. There's not enough money in corporate taxes to cover his spending plans and he knows it. He will have to come after you, the middle class American taxpayer, whether directly or indirectly, because you are the motherlode of taxable wealth. If all you need is a few billion dollars, tax the millionaires. But when you need trillions, tax the middle class. That's where the real money is.

So yes, the happy days of 1932 are here again indeed and they look to be about as happy as they were the first time around. Except this time, we've traded in Shirley Temple for Paris Hilton.

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