Rich Republicans Are Dumber Than I Thought Regarding Taxes

[titaniumsalute]

Here's an article written a few minutes ago talking about the S&P putting a "negative" on the US Credit rating. It is killing the stock market today. http://money.msn.com/market-news/post.aspx?post=5c65cf72-1c96-4613-bd19-e5de89c0ee12

So who plays the stock market? The Rich People. Who stands to lose the biggest amount of money if the market drops significantly in value? The RICH PEOPLE. Yet they refuse to really try to balance the budget with the help of increasing taxes. Frankly, it seems like if the RICH PEOPLE got together and all agreed to pay say 5% to 8% more each (over $1mill incomes) that would really help the deficit and boost the credit rating. You boost the credit rating and ease the deficit the market goes up. They make a lot more in the market than the taxes they would pay.

I'd look at it more as an insurance policy by the RICH PEOPLE than taxes. They stand to lose the most amount of money in this soon debt/deficit debacle. But they are stupid short-term greedy assholes.

[originalpckelly]

1. Rich people are unfortunately not the only ones who play the stock market.

So does anyone with a retirement fund, and some pension plans do as well. We think we are disconnected from the top and we are bound up together.

[titaniumsalute]

2. Agreed but they stand to lose a lot more

I have a decent-sized 401 K. But compared to what many welathy pay have invested in the market it is a drop in the bucket.

[JoePhilly]

4. They have the money to ride out fluxuations.

And the money to buy-in during the dips.

[dkf]

5. I found this on the funding of pension plans. It is sobering.

http://www.governing.com/columns/public-money/Will-2011-Investment-Markets-Bail-Out-the-Pension-Funds.html

2. Pension actuaries and trustees already assume perpetual 10 percent annual increases in equity values as the baseline. Some public officials naively believe that if stocks earn 10 percent in a given year, their pension funds can afford to give them relief from employer contributions. What they don't understand is that the average pension fund, with a long-term actuarial return assumption of 7.5 to 8 percent, already expects its stock portfolio will produce a double-digit return every year for eternity. That is because stocks represent 60 to 65 percent of the total portfolio, and bonds will only return 4 to 5 percent in the next 30 years — and less if interest rates increase which depresses their prices.

The failure to account for business cycles and normal recessionary market declines in bear markets — and the mathematical necessity for markets to significantly outperform their long-term averages during expansion periods — is one of the true shortcomings of public pension fund leaders and their advisers. Policymakers assume that trees will grow to the moon forever, and in a straight line. Financial markets don't work that way.

So if the stock market returns 15 percent next year, which would make it a huge over-achiever by historical standards and well above today's Wall Street consensus, the beneficial impact on a typical pension fund's ratio of assets to liabilities is likely to improve its funding ratio by only 2.5 percentage points. If bond prices decline because the economy improves and investors no longer seek a safe haven, the prudently diversified pension fund will benefit even less.

In today's world of 70 percent funding ratios for the average pension fund, that would move us up to 72 percent. That still leaves a 28 percent funding shortfall (representing more than a half-trillion dollars) to be amortized over the remaining lives of the employees. It's like making an extra monthly payment on your home mortgage: it reduces the future payments a little, but not enough to pay for a new car.

So even a 10 to 20 percent increase in stock market values will not restore the funding ratios to 2007 levels. In fact, a return of stock prices to peak 2007 levels will not bring the pension plans back to their 85 percent funding level that year, because they have lost four years of compounded investment growth that they had previously assumed. The Dow Jones Industrials Average (DJIA) would have to exceed 18,000 before 2012 in order to restore public pension plans back to their 2007 funding status.That would require an unprecedented increase, just to return us to 85 percent funding!

[aquart]

3. Shortsightedness is a Regressive hallmark.

As is the inability to reason from B to C.