Why did the Feds Lower the Fed Rate to Record Lows?

Why has our fed dropped the fed rate to a record low at zero to .25%?
There are a couple reasons for this, its an effort to help stimulate the economy and ease liquidity in the credit markets, but it is also to guard against deflation. What about the concern of inflation after cutting the rates so low? Do we want inflation? Yes, I feel there is a real threat of a deflationary spiral that needs to be hedged and thus the feds are making moves to start buying back treasuries putting more money in the market and the latest rate cut is to counter act this devastating effect..In this article(http://www.bloomberg.com/apps/news?pid=20601087&sid=aLj4INeKlU3M&refer=home)
it shows that there was an immediate response from the rate cut that was most likely predicted and hoped for by our feds, essentially hoping that the drop in the dollar will create inflation by making it more expensive to get foreign products. This also works in trying to keep business in the US, countries will look to buy our products becuase they are cheaper, and citizens will look to buying more US products aswell since it will come at a lower cost.


Here is the most recent CPI as of 12/17/2008













Notice the abnormal drop in consumer products over the past 4 months, much steeper then anything we have seen for the last 10 years according to this chart.

CPIhttp://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=CUUR0000SA0&output_view=pct_1mth


So what is a Deflationary Spiral? See below pulled from wikipedia.com
http://en.wikipedia.org/wiki/Deflation

Deflationary Spiral
A deflationary spiral is a situation where decreases in price lead to lower production, which in turn leads to lower wages and demand, which leads to further decreases in price. Since reductions in general price level are called deflation, a deflationary spiral is when reductions in price lead to a vicious circle, where a problem exacerbates its own cause. The Great Depression was regarded as a deflationary spiral.
A deflationary spiral is the modern macroeconomic version of the general glut controversy of the 19Th century.

Counteracting deflation Until the 1930s, it was commonly believed by economists that deflation would cure itself. As prices decreased, demand would naturally increase and the economic system would correct itself without outside intervention.
This view was challenged in the 1930s during the Great Depression. Keynesian theory argued that the economic system was not self correcting with respect to deflation and that governments and central banks had to take active measures to boost demand through tax cuts or increases in government spending. Reserve requirements from the central bank were high and the central bank could then have effectively increased money supply by simply reducing the reserve requirements and through "open" market operations (e.g., buying treasury bonds for cash) to offset the reduction of money supply in the private sectors due to the collapse of credit (credit is a form of money).
With the rise of monetarist ideas, the focus in fighting deflation was put on expanding demand by lowering interest rates (i.e., reducing the "cost" of money). This view has received a setback in light of the failure of accommodating policies in both Japan and the US to spur demand after stock market shocks in the early 1990s and in 2000 - 2002, respectively. Economists now worry about the (inflationary) impact of monetary policies on asset prices. Sustained low real rates can be the direct cause of higher asset prices and excessive debt accumulation. Therefore lowering rates may prove only a temporary palliative, leading to the aggravation of an eventual future debt deflation crisis.

Obviously... If we get past the deflationary spiral scare... because of all the money that is going into the market the next fear is of an inflation or hyperinflation stage, which is what happened to post World War 2 Germany... Folks where bringing wheel barrels to stores full of money to buy bread.

Hopefully our economy can recover before this happens. I guess the feds are addressing the issues as they come. I prefer being a fiscal conservative, small government and little involvement. Indeed a cut was needed, but cutting the rate as low as it did is concerning. With this extremely large government that has bend spend happy over the past 8 years (very Democratic like), this could doom the US into a lengthy and difficult depression, that is possible if this economy does not get under control. Lowering taxes and shrinking government spending is most likely going to be necessary in order to cope.

I think Obama is smart and sees this as he has already said he has frozen any of his plans to raise taxes in the next 2 years. I like this approach, taxes are already low for most, lets keep it that way and try leaving as much money in the economy as we can for now. Then within the next two years if there is an inflation scare they have the ability to raise taxes slightly and raise rates in order to take money out of the system and thus re-balance our economy. Again this is only going to work if the government learns to control spending and shrink!!!

Isn't this strange, we had eight years with a "so called" republican (conservative) president, that spent money and acted more like a democrat. Now we have a democrat admin coming into office and in order to help this economy recover he has to act more like a conservative! Looking at his actions speak to this, all his actions in the transition period are showing a different Obama then the campaign Obama. He has backed off most of his "Change Policies" and has been going through all the books in the government looking at budgit, getting ready to shrink government, sweetness! Score for the fiscal conservatives! I did not vote for Obama, not because I did not think he would be the better president, as I feel he will be. I was concerned of having a democratic president and a democratic congress. This feels wrong to me, as the founding fathers themselves wrote a document that was heavy on "checks and balances". I was also concerned with his tax policies in this economic times and his possible spending habbits being a democrat. I guess time will only tell how good of a president he will be...
I didn't vote for McCain either, I couldn't bring myself to vote for him, his VP pick was aweful and his policies resembled too closely to the Bush admin policies, I voted for Ron Paul.


What is Hyper Inflation?
http://en.wikipedia.org/wiki/Hyperinflation

In economics, hyperinflation is inflation that is "out of control", a condition in which prices increase rapidly as a currency loses its value. Formal definitions vary from a cumulative inflation rate over three years approaching 100% to "inflation exceeding 50% a month." In informal usage the term is often applied to much lower rates. As a rule of thumb, normal inflation is reported per year, but hyperinflation is often reported for much shorter intervals, often per month.

The definition used by most economists is "an inflationary cycle without any tendency toward equilibrium." A vicious circle is created in which more and more inflation is created with each iteration of the cycle. Although there is a great deal of debate about the root causes of hyperinflation, it becomes visible when there is an unchecked increase in the money supply (or drastic debasement of coinage) usually accompanied by a widespread unwillingness to hold the money for more than the time needed to trade it for something tangible to avoid further loss. Hyperinflation is often associated with wars (or their aftermath), economic depressions, and political or social upheavals.

Another Government bailout for the Victims of the Madoff Ponzi scheme

Rumors of another Government Bailout?! What are we.. the USSA.. United Socialist Sates of America!

http://wcbstv.com/business/madoff.ponzi.scheme.2.888036.html

Let’s start by going over what a Ponzi scheme is then look at what is happening currently with Bernard Madoff’s scheme. A Ponzi scheme is simple in principle but can become very complex, as in the case with Madoff. Essentially an investment firm offers potential clients above average rates of returns (usually dumb investors, as educated investors should be diligent in the analysis of their returns), takes the new investors assets and will use it to pay towards the returns on the earlier investors and so on. These types of scheme are obviously going to fall apart at some point since there is no true business here or product. Its a scheme that will make one an incredible amount of money, that is until it collapses.

Recently the famed investor, Bernard Madoff got caught running one of these types of Ponzi Schemes. In which it is estimated that it could reach total losses of about $50 Billion!! That is a staggering amount of money that is now lost. There were a large number of investors impacted of coarse mostly top1% investors, including large banks, charities, pension funds, institutional funds, corporate funds and big wig CEOs. My biggest questions here is what are these firms doing chasing abnormal returns? Most banks are borrowing our tax dollars right now in order to stay operational, and yet there are banks using the liquidity they do have in this type of investment firm? Seeking abnormally higher returns? Bernard must be one hell of salesman, I can see the charities and personal investors falling into this, but the hedge fund managers and institutional investors? The corporate, the banks and pension funds? They didn’t have questions? His scheme must have been going on for at while, and no one notices something out of whack? the scheme relies on the buy and sell of unregistered securities, so what was our SEC doing? Busting the Dallas Mavericks owner for insider trading worth about 800K? Or were they busy worrying about Martha Stewarts insider trading practices? Ooops.... they missed this jack ass robbing hopes and dreams? (Charities)
(http://www.huffingtonpost.com/2008/11/17/mark-cuban-insider-tradin_n_144320.html)
(http://www.sec.gov/news/press/2003-69.htm)

"U.S. District Judge Louis L. Stanton ordered that clients of Madoff's private investment business seek relief under a federal statute created to rescue cheated investors. Stanton also ordered that business be liquidated under the jurisdiction of a bankruptcy court and named attorney Irvin H. Picard as trustee to oversee that process. Stanton signed the order after the Securities Investor Protection Corporation asked that steps be taken to protect investors in the scheme, which has ensnared several major banks and prominent figures as victims and could result in as much as $50 billion in losses."
"Congress created the SIPC in 1970 to protect investors when a brokerage firm fails and cash and securities are missing from accounts. Funds can be used to satisfy the remaining claims of each customer up to a maximum of $500,000. The figure includes a maximum of up to $100,000 on claims for cash."

So now there are rumors that the government will do a full Bailout… I’m torn about this.. its another example of the upper echelon of our society are going to get out of their unfavorable situation and not take any ownership. These investors took extra risk with their investments, looking to make fast cash now! Then when the pyramid falls apart its ok to loose a couple billion dollars because you’ll get bailed out… I’m sure a lot of folks made a lot of money on this while it was working including some of the investors themselves... I agree of with allowing the SIPC coverage, of up to 500k per investor but going above this amount per investor is letting them off easy on being irresponsible. I don’t know the whole situation, I’m sure Bernard was very convincing, but were these investors diligent? I don’t think so.

So what are we left with? These companies went after abnormal returns and offerings, taking on extra risk with their investments, probably received an incredible return while things were good. And when the scheme collapses... Again a scheme that relies on gullible investors, we the tax payers are going to bail these guys out!! This is maddening. I want to take incredible risk personally, I’m going to quit my job, start my own company spend all my assets, poorly manage this company and when it fails I’m going to hold out my hands to uncle Sam to pay me back, and make things whole! Right

US Auto industry bailout

Well, I don't like whats happening in our economy today, I think our leader (Bush) is making poor decisions that are going to cause problems in the future, and hinder the growth phase of our economy, when it returns.

The auto industry bailout is a poor idea that should never have been considered by our leaders in the US. The auto companies are in terrible shape because of 1 reason POOR MANAGEMENT. Unfortunately the market (due to this poor economy) is shrinking, this is what happens in recessions, and with a shrinking market you need to shrink your business, this is how the economy works and this is how business management works. If you are having issues shrinking your business to a level that can function in the current economical crises, well then you file chapter 11 in order to restructure your business that will survive in this crises. This is what business is about! You plan for these down cycles and when it is worse then expected, you contract your business to a level that can function.

The worst thing you can do is shoulder the auto industry with America's tax payers money, this is an awful plan. People may lose there jobs, plants may have to close down, union contracts most likely will need to be resolved or restructured. In the end the Risk of a default at a later date, on the tab of the working American citizen is unacceptable, I applaud our senators who let the original bailout bill fall apart. Now hopefully, our spend happy president is smart and leaves the original financial bailout package alone to be used in the manner that is most important... Getting liquidity and cash into the system, to the corporations (banks, financials) that is what it was intended to to do.

Think about things, if you give GM $15 billion to continue their operations currently (which obviously is not working), GM has a running cost of about $2billion dollars(http://www.npr.org/templates/story/story.php?storyId=96844977) a month. With demand for cars globally expected to fall through 2009 and possibly 2010. That means even with a taxpayer bailout of the company they will need more!! So the eventuality is a restructuring of the company. This short term bailout is a shot in the dark, with the unions, and the companies executives supporting hoping for a miracle turnaround, which is unlikely.

I am an American citizen, with a background in investments, and this is a bad investment I don't want our country to make. When you are relying on a miracle to make your investment turn out positive in the short term with no long term benefit apparent your out of your mind. I would rather see the money go to a program for the folks that ARE going to lose there jobs, funding education, secondary schools, unemployment and other programs. This as well does not have a short term return, but it has a more promising long term effect overall.

Here is a great article on why the original bailout failed in the Senate... Thank you senator Coburn (R-TENN) http://www.cnsnews.com/public/content/article.aspx?RsrcID=40775

“As far as the failure of last night, it solely lies on UAW,” Coburn told CNSNews.com. “All we asked was, ‘Just give us a date at which you will have competitive wage rates. We will put it in and that’s what you will have to meet.’ They would not move. They would not renegotiate their contract with GM as far as wage rates.”

McCains proposals on How to solve economic stress focusing on Retirement and savings accounts

The following was written prior to the elections of 2008, Obama was elected and so I lost interest in comparing the two strategies, But part of the McCain strategy was passed through congree recently http://taxes.about.com/b/2008/12/15/congress-waives-required-mininimum-distributions-for-2009.htm It looks like someone liked part of his plan.

Lets look at what McCain suggested to help folks out on their retirement and investing accounts during this economic "slump." Today Ill start with McCain's proposals to accelerate the economy and I will address Obama's plan next week.

John McCain's Plan can be found here: http://www.johnmccain.com/Informing/News/PressReleases/6548c935-9534-40c9-b780-5c435ecc5767.htm


For The Retired.
Topic one.
Under McCain's proposal to help out Americans who are retired, McCain has asked the US treasury to eliminate the minimum required withdrawals for retires to withdraw assets (at age 70.5) from there tax-deferred retirement accounts, as well as eliminate the 50% penalty for missing those required distributions. McCain does not specify how long her would have this in place, but I would expect he would look to have this last through 2009.

How this helps retirees:
What is the minimum required withdrawal rule? Its a law that requires tax-deferred account holders, including traditional IRA and institutional deferred compensation retirement plans(401ks, 403b...) to start withdrawing there assets based on a lifetime table. Whenever a tax-deferred account holder reaches the age of 70.5 they must begin these withdrawals, and could face a 50% penalty for missing them. This is a basic description, there are many rules to an MRD, that allow further deferral of retirement assets and there are different lifetime tables that are allowed to be used depending on certain factors.

I'm not sure I like this..... its a bit two faced.
Bottom line... I don't think this would be very helpful to the economy in the short term, this promotes saving rather then spending! And in a time where we need spending to fuel the economy this is questionable.. In my mind this supports the wealthy population, or the retirees that don't rely on their tax deferred savings account to live on. What are the benefits of this? benefits the retirees that have taken additional risk in their retirement portfolios, (hopefully because it was appropriate, meaning they were not relying on the assets) by having exposure to the markets. McCain's proposal gives them more time for recovery, so these retirees don't have to sell when the market is low. In the long term it could prove useful to our economy when these assets change hands (inheritance), but I don't see any short term benefit to the economy, again this is influencing savings and not spending... There may be some retirees out there that were taking additional risks on their portfolios because they got greedy and wanted a little extra growth before they started to rely on it.. Poor planning on there part, if your going to rely on your retirement assets in the short term, then make sure you plan for them to be there, so I don't feel as bad.


My judgement on this: Poor policy, with out all the numbers I couldn't say for sure, but I feel this benefits the wealthy not the economy.

Topic two... McCain proposes is to lower income tax on the retirees that are withdrawing from retirement accounts. McCain does not specify the amount in rate reduction.. but I like this one, this promotes spending and money movement now! Retirees that do rely on these asset types, and did properly allocate there retirement accounts (not heavy allocation in stock), get a little more in the pocket to spend, give away to grand kids and so on! For the wealthy retirees, since they have to take out money anyways with MRD rules...(hoping the first topic does not pass)... this will also put more money in the hands of consumers now, again supporting spending one of the keys to pushing the country out of its current economic slump.

My Judgment on this topic: Good! Lets promote spending, promote withdrawals from retirement account and get money in motion!! And make our retirees feel good about it!

Topic three, for savers McCain is proposing to increase the tax write off on taxable accounts where investors take a loss on the sale of a stock. The proposed increase would be raising the write off from the current $3000 to $15000. As always, with tax cuts and putting money in the hands of the people, I like this. The only people that are going to be selling their stock in this environment are the folks out there who need the money, any other experienced investor that has stock positions, who don't need the money are more then likely going to just hold on to the stock positions and wait for the recovery phase of the market. This helps the needy, and puts money in the peoples hands for spending, living, keeping there homes, and helping the whole economy all together.. The things I don't like is this should only be temporary, 2008-2009, and McCain does not specify a time frame. The reason this should not be permanent is as Ben Franklin says best, "in this world there is nothing certain but death and taxes." Who could not be more right, well balanced taxes keep a civilized, well functioning society. There needs to be balance to our tax system and tax write off should be returned to the $3000 annual limit after 2009.

My Judgement: OK.. Supports spending, needs more clarification.

The last proposal from McCain is to reduce the long term capital gains rate from the current 15% to 7.5%.. essentially cutting this tax in half. I'm not sure about his one, I like it as it supports spending and selling stock, but I feel the 5% or 15% (depending on income rate) is an already low, well balanced rate.. relative of coarse to the standard income rates.. My reasoning here? Well, capital gains rate were introduced to the US tax system with the intention of promoting capital investment and entrepreneurial investing. So how does it work? Well investors looking to put there money someplace are going to look to areas where they get preferential tax treatment. They could invest in a dividend paying, fixed income investment, but dividends are taxed at normal tax rates, which are higher then the lt-capital gains rate. There is the incentive, invest in stock, equities, and support the system. In return when you sell the stock at a gain you get the sweetener! These rates are still incentive enough to invest in stock and take additional risk, and people who do have the cash to invest in stock at this time are going to do so, benefiting the wealth only, because the people who are in need are already tapping their accounts, and already getting a great tax rate on doing so.

OK well that's it on this topic... I know its a bit down to basics but sometimes that's what we need to see the picture.

Why higher corporate taxes are bad

Bottom line, Why are higher Corp. Taxes wrong?

I too feel there are giant loop-holes for corporations and there is a cause for concern that corporations are going through such lengths to avoid corporate taxes in the US, but is higher taxes really the answer to this? Like Obama wants? My father and Nicky complain that the corporations don’t pay enough in taxes, and they support this aspect of Obama’s campaign, arguing against me on this…. But instead of just accepting Obama’s promises I ask why this is happening and what is creating this effect?

This actually seems to be a predictable effect when taxes are high; it’s something that we have seen happen throughout history see this study http://www.ncpa.org/studies/s159/s159.html, this is a study I found comparing historical tax rates to tax revenue and economic growth amongst different nations and the US. I saw several studies and several articles similar to this online, all with the same repeating story.

So, lets think this out... Historically, not just with corporate taxes but also with income taxes on the rich, we see tax revenues actually drop in times of high income tax, and tax revenue goes up in a era of low taxes… why? I’m glad we asked! It’s because people and corporations will go through greater lengths to avoid paying taxes when they are at higher rates compared to a standard. The standard, or benchmark, for corporate taxes is the average global corporate tax rate of industrialised nations. Here is another article I found on the tax rate in the US compared to other nations that gives you an idea of where corporations would prefer there income taxes paid. http://www.cato.org/pubs/tbb/tbb_0707_48.pdf

I also agree with you there should be steps taken to encourage corporations to pay there taxes, but I feel an essential step would be to reduce the corporate tax to a level more common with the rest of the industrialized world, and when the taxes are lowered that’s the time you start closing the loop-holes (eliminating credits and free lunch discounts congress has passed out), and some of the loop-holes start closing themselves(Small government).For example if there is 15% corporate tax rate in the US, and the average for industrialised nations is 17% then corporations are more likely to want to pay there taxes in the US. I think you would see these corporations start filtering not only the money they do earn in the US but also money earned abroad would be made to look like it was made in the US as to take advantage of the favorable tax treatment, this in essence closes the loop-hole.

If I had my way I feel our overall tax code should be dropped to under 10 pages (Flat Taxes, yet again small government)

Here are some of the concerns when corporate taxes go up
It will put a strain on any economy and limit growth.
It promotes corporations to move outside of the US to other nations with lower tax rates or to shift assets through subsidiaries, in essence getting foreign tax rates and avoiding the US rates!
When businesses move to other countries this in turn lowers job rates (see below for more on the topic of jobs) in the US at a time that the US needs jobs and job growth. (Although I feel global outsourcing is a very important part to a nation in a growth phase, ship’em out, but that’s another debate for another time, and we are not in a growth phase).
Corporations that do pay, have a tendency to pass on these taxes to there consumers and to their employees = less employee benefits, more costly products.

Lets talk about Job growth now, and come back to the tax issue later.
These quotes I am commenting on below are from an email that some one used as an argument that with low taxes we did not see job growth during the Bush admin, this is my response.
"What were Clinton's job growth numbers in 2001??" job growth averaged out at 2.8% for Clinton's administrations two terms... "(Much larger growth then the Bush admin except for Federal government which he shrank)" Well in this case, the democracy-Bush (by which I mean large government, big spending typical of democrats) policies have created an interesting issue. So he lowered income taxes for everyone (but not the corporations tax tables, they remain what they where through the Clinton admin), but you are right, the truth is jobs have fallen since Bush took over office, job growth has shrunk drastically, but this should not be used in this argument (lower/higher corp. taxes support job growth, limit economy, generate higher/lower tax revenues), because there were reasons job growth in the US dropped drastically that were uncontrollable to the Bush administration and not reflective of typical low tax rate eras, lets take a look at those reasons though; of coarse the two bear markets (really three if your consider the dot-com bubble) that the Bush admin has had to endure, 2001 (terrorist), 2008 (financial meltdown), and as well some poor policy from Bush administration over all. Here you can find the data on the employment history in the US, and it shows the drastic drop in employment during the two bear markets.
http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=LNS12000000&output_view=net_1mth

In short the bear markets were the reason for the drastically poor job growths through this current administration but, I will give you this, that between 2003-2004 and a lot of analysts did expect a higher recovery to the job growth then what did happen… but, when the JGTRA 2003 was signed into law (the Bush tax cuts) Jobs growth immediatly reacted to this and jobs seemed to gain quite strong in 2005-2006 until yet again another approach on a bear market, This time a systematic financial failure that can be blamed on both the Clinton administration for promoting the buy up of junk mortgages by the government agencies, and the bush admin for lack of oversight on the mortgage industry when taking over Clinton's trash....But can we really expect more from Bush?? lol

Clinton did do a good job with managing the budget, and the reducing the federal deficit, and some might say that job growth was strong and he raised taxes in 1993??? But I think Clinton was smart and new that the tax raises he singed in August 03 would have a negative growth effect, so he raised taxed and then influenced job growths in other ways.. NAFTA signed in (Dec 03) as one of them. But I dont think Clinton needed to do much here to spur growth, the tax increases he made were not that drastic, and there was alot of things happening at the time that kept a confident public... No major wars, no pearl harbors, no runs on the bank, only dot-com bubble and people felt great when Clinton left office beacuase this speaculative market happened to be peaking for him.. Poor Bush, gets into office and starts off with getting the blam on the dot-com bubble snap which plunged the NASDAQ between 2000-20001... Lets get back on topic though

Now let’s go back to taxes and the GAO report and how it might be miss-leading.
The common article
http://www.reuters.com/article/newsOne/idUSN1249465620080812, "57 percent of U.S. companies doing business in the United States paid no federal income taxes for at least one year between 1998 and 2005." "About 25 percent of the largest U.S. companies paid no federal income taxes in 2005 despite $1.1 trillion in gross sales that year, they said." This is taking a pin out of a hay stack and every lefty media report is circulating this, truly creating a miss-informed public, and what everyone takes from this article is that we need to change and raise taxes to the corporations, even I think this in reading this article, maybe that would not be so but in the time of presidential elections around the corner it certainly falls well in Obamas favor, I mean he says on TV one night that he will raise taxes on the corportaions and upper class.. then this comes out... what the press fails to report is the possible reasons and solutions.

See the issue with this article is you can’t trust it, the media coverage of this you just can’t trust!! Its like they take only what they wanted to hear from this article.

The actual GAO report http://www.gao.gov/new.items/d08957.pdf happens to be better prepared and actually states the following which supports my claimes on the reason why we are seeing these corporations do this to the US. This is what the report lists as a couple of reasons.

“Transfer prices are the prices related companies, such as parent and subsidiary, charge on intercompany transactions. By manipulating transfer prices, multinational companies can shift income from higher to lower tax jurisdictions, reducing the company’s overall tax liability.” Basically telling us corp. are shifting money to foreign sub-companies where they get favorable tax treatment

And

“Differences in company size, age, industry and other nontax factors…could explain some of the differences in reported tax liabilities.” hmmmm, they never elaborate..

But did you know that 50% of the businesses in the US today are S-corps, and many more are built as LLP’s and LLC’s? This report does fail to identify the population of companies it used, only separating large from not large, foreign from domestic; did it include S-corps, LLC’s or LLPs? Because each one of these business formats allows for pass through taxation, allowing the taxes to be paid by the individual owners, shareholders, or partners rather then the company. There are some very large holes that have not been explained here. Yet there are some very BIG companies that also file under these chapters. Did you know that Fidelity Investments is an LLC? http://www.iht.com/articles/2007/11/04/bloomberg/bxinvest.php 40000 Employees, 1.8 Trillion in assets managed, 13 billion in revenue in 2006, that’s pretty big. Earnst and Young is an LLP, with 135000 employees, $25 billion in revenues.… Why would big companies become a LLC or LLP? Because the corp. tax rate is too high! And in Fidelity’s case, Fidelity wanted to reduce what that was costing the customer, and it seems to reduce extra overhead costs.

In summery,

Corporations are paying taxes, but where or who is on the shit end? In this already high tax environment it’s the US tax system and the US people. I hope this explains my thoughts on this topic a little further, and if you don’t understand…

So would a higher corp. tax rate that calls for more IRS code, more oversight and laws (naturally creating a bigger government) be appropriate for an economy in a contraction phase? No. I believe it will not.

Now the thing to understand about my politics is I don’t support McCain, I don’t support Bush, and I don’t support Obama because in truth they are, it seems to me, either democrats or closet democrats. Each one of them has or will have out of control policies that will do nothing but make government bigger… But on the issue of Corp taxes, I do agree with McCain that a lower corp. tax rate would be the prudent and right way to manage our limping economy. My call is Obama is going to win this, but people expecting Obama to create change for the better are in for a shock, he is inexperienced, has bad economic policies (does have some other policies I like) and like all politicians he will say what ever it takes to win a vote… Hopefully he is smarter then I give him credit for... but only time will tell.