Wednesday, October 19, 2011

A Glimpse Into Our Future; This Could Happen Here

The protests in Greece turned violent today
Athens, Greece. Oct 19. 2011.  The Financial Times is reporting today that Greece has erupted in violence as the Greek Parliament passed their austerity package designed to prevent the nation's economic collapse.

The Greek Parliament had no other option, having borrowed so much that they cannot possibly pay it back without dire cuts in government service.

From the Financial Times:

"A protest by more than 100,000 striking workers did not deter Greek lawmakers on Wednesday evening from approving the country’s latest austerity package at its first reading, by 154 votes to 141.

The result, which followed a day when clouds of smoke billowed over the Athens skyline after angry rioters set fire to piles of rotting rubbish and clashed with police in one of the biggest demonstrations seen in the Greek capital for decades, was a success for prime minister George Papandreou, improving the odds that Greece will be able to draw down the next €8bn tranche of its bailout loan from international lenders." 

We in the USA are going down the same path as Greece has. Our government has lied to us by telling us we can borrow and spend our way back to prosperity. 

President Obama does not understand the math
In the end we simply must stop spending money we don't have, because eventually there will be no one left willing to lend us more.

President Barack Hussein Obama, D-Kenya, is convinced the solution lies in more spending, which can easily be financed by raising taxes on the "top 1%."

Obama's own class warfare rhetoric has inspired all these protests in the streets, which have so far been mostly peaceful. It will not take much for these protesters to turn to violence, especially if the President keeps encouraging them.

But the problem for Obama is that our top 1% simply doesn't have enough money to fund all the generous government programs he wants. Right now, the "top 1%" pays 40% of all Federal Income taxes, and pays about the same in taxes than the "bottom 95%," with the next 4% paying the other 20%.

The reason for this is because the "bottom 40%" pay virtually no income taxes. In fact, many get Earned Income Credits, which are a type of "reverse tax" in which low wage earners get a tax refund, even if they paid no taxes.

President Obama keeps saying that the top earners don't pay enough.  Using his logic, the top 1% should be paying much more, and everyone else should be paying much less.

But... what happens if you keep increasing the tax burden on the rich, and lowering it on everyone else, while simultaneously adding more new very costly government programs like Obama-care, for example?

Eventually, you end up with no one left to tax, once you make everyone poor. Then the whole house of cards comes crashing down and the riots begin.

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