The creation of the IRS and the Federal Reserve both occurred in 1913. It's interesting to note that even in 1926
tax rates were exceptionally low or non existent you had income greater than 10,000 a year, and that was an
income that would translate into 250,000 or 300,000 K or so today.
We've really seen Bracket create, of the taxpayers in this country occur over the past 60 years, and especially
since the early 1960's. JFK was said to have gone to his summit with Soviet Premier Nikita Khrushchev. woefully
underprepared for the ideological debate, that they engaged in on east west relations, and the merits of
Soviet style communism compared with US style Capitalism.
When Kennedy left the summit, he is reported to have said, that We must now go into Vietnam, as The Soviets
perceive me as weak. Clearly the buildup in Vietnam, escalated exponentially under LBJ's time in office, and this
couple with the high cost of the Great Society" safety-net programs (clearly well intentioned, but expensive) led to
expanding budget deficits.
The Guns and Butter Approach, created Current Account Deficits, Trade Deficits etc, that induced foreign central
banks to start to withdraw Gold from the US in the late 1960's. The motivation for withdrawing Gold was the
large increase in US Dollar denominated debt obligations.
I'd have to argue that this process has been very bipartisian and has co-opted people from all political and social
stripes.
I think the budget surpluses of the past few years are something that happens once every 30 years or so, just
like the US getting the unemployment rate down to 4.0 %, which we last saw in 1969, coincidentally the last
year of a US Govt Budget surplus until the late 1990's. We had a stock market Mania, in the late 60's that
capped off an 18-20 year secular bull market that started in 1949 or so.
1968 was such a bubble like year that the top 10 % gaining stocks of 1968, had all gone out of business, and
ceased to exist by 1972. The Value Line index of Small stocks was all of the rage back then and speculation
looked a lot like Q1 of 2000.
Governments just don't seem to run surpluses for very long, as the urge to spend is always present, and
beyond that even the Harvard Business Review has printed articles suggesting that Budget surpluses are
deflationary in nature. Now that's a very speculative question..... But in summation, I never really thought that
budget surpluses would last for any long period of time.
silly Clintonesque notion of balancing receipts and
expenditures on the part of government go by the wayside
Ted Kennedy and Henry Waxman would tell you that Clinton co-opted the long running Republican mantra of
reducing budget deficits, and had it not been for the Widespread "Gingrich Revolution" of 1994, and then the 1996
election where the lack of Democratic gains, induced President Clinton to say the Era of Big Government was
over.
The questions of who benefits and how so from the Government Debt Market is something that we can explore
going forward.
John |
