Our educational system is woefully short in the education of how our economy works and survives and stands as one of the strongest in the free world. Although our dollar was once the bench mark of the monetary system its current shortfalls are not predicated on the capitalistic system that is still the strongest and most resilient system that exist. Without getting into specifics of dollar strengths and monetary systems I would like to touch on three things that I feel are necessary to understand certain basic principals of what fuels growth and the ultimately the housing market. I predicate my dialog on the fact that I am a conservative and a republican and I do have a bias. I will attempt to quell any partisan thoughts and try to make this blog as neutral as possible. However, part of our economy depends on attitude. When you have half of the people fighting the other half because they disagree with their politics then this does have an effect on the economy because they support things that may be bad for them. You be the judge! I plan to stop at three areas. Taxes, Investments and Real Estate.
Let us first start with Taxes. It is a myth that the poor are taxed and the rich pay very little taxes. In reality the opposite is true. The more you make the more you support the government and all the entitlements. The tax system is designed to be so complex that no one understands it and in that regard it has succeeded. We have one party saying tax the rich and give to the poor, with the other saying stop taxing and let the economy work. In reality the poor pay no taxes today and anyone earning less than $40,000 pay little or no taxes. If you raise the taxes on the wealthiest individuals you will take dollars from the next area we will cover which is investment. John Kennedy, Ronald Regan and most people that really understand economics know the outcome of removing this capital from the market and putting it in government hands. The most the government can do is spend the money on goods and services. It does not spend the money on equipment that creates jobs. Yes their spending money may keep an existing job but that is not growth.
Investment is the key to the capitalistic economy. We view a 13,000 Dow and say somebody must be making money. We invest in 401K and other retirement programs and don’t even realize that we are the seed capital of our economy. We only look at how much was it up or down. Without that seed capital a Wendy’s or Chico’s or any other company that went public could not exist today. All the jobs that they created would be gone. It takes people with money to start them and people to invest in them after they are started. If you tax the rich where they have no capital to start them you have no companies to invest in and no jobs to create more capital. That is what they called trickle down. It was pooh-poohed but it is a fact. Municipal-Bonds create your roads, hospitals and water treatment plants and local services, corporate bonds fund the expansion of corporations so they can hire more workers. They are all part of your retirement funds if you are in any type of growth or bond funds. The road you drive on would probably not be there if it were not for a bond fund that financed it. If you tax the buyers of those funds so much that they don’t have the money to invest, who is the loser?
Real Estate is the American dream with the white picket fence and the swing in the backyard. That only happens when the first two topics are handled correctly. If you raise taxes so high on those that can afford to invest you stop the influx of capital. You do away with the dollars to invest in mortgages. Capital becomes tight and it is all a result of high taxes on the people you blame for being successful. It is like cutting off the hand that feeds us. High taxes hurt everyone and the poor more than the wealthy. You only have to look at how our government spends money to understand it is not where you want to invest. Their track record both Democrat and Republican is dismal. Let’s build America as our forefathers had in mind and do it through helping fuel the American dream by putting someone in that home and holding down all taxes on the wealthy and the poor.