The Whole Pie (5 of 6)

OK: Monday will be the final installment on this topic, but before we get to the final installment we have one more piece of this data that has to be unraveled   Some people reading this series (and I admit there are a lot fewer of you than there were 4 years ago before this blog when into hibernation) are probably concerned that I keep wanting to revert to the "total wages" number when calculating the size of the problem rather than using the whole GDP.  Doing that, you may be thinking, magnifies the problem and seems to put it out of reach of a solution.

The problem, of course, is that in the United States, we tax individuals (human beings) based on their income (which: in a P&L, is the "top line" of revenue), and we tax Corporations on their net profits (on the P&L: the "bottom line") -- both adjusted for deductions, of course.  So while there may be a top-line (as measured by the GDP) of stuff over and above wages to the tune of more-or-less $11 trillion, a LOT of those dollars are swallowed up by cost of goods and are not taxable using the current model of taxation.  And, in my view, they shouldn't be -- they are not really income dollars: they are cost-of-goods dollars, and in some sense they are double-dipped against wages.

Here's how to think of that: Abe's Accessories makes screws.  In fact, last year, Abe's sold $1 million in screws to Bob's Barricades, and Bob sold $10 million in barricades to Carl's Contractors, who used the barricades for $100 million in highway work they did for the state of Delaware (hypothetical).  All $111 million of that shows up in the GDP, but Abe only made $90K in profit; Bob only made $190K in profit, and Carl made $500K in profit which he had to split with his brother who is also an invested private owner.  All the metal in the screws, the blocking material in the barricades, and the stuff Bob used to pave the highways (from machines to paving material) was not taxed: only the net profit (final income) was taxed.

In other countries, there's a way around this: they charge a VAT tax when you buy something wholesale.  So when Abe buys raw materials to make into screws, he pays the foundry for the difference in price between the raw ore and the raw metal he receives -- and a tax to the government for the difference in value.  When Bob buys screws from Abe, he pays Abe the screw price, and then the government a tax on the difference in value between raw metal and screws.  Etc.  In that case, almost all of the value in the GDP is therefore taxed -- but it also results in much higher prices for the end user.

The alternative to this, of course, is a universal sales tax -- which is sort of a simplified VAT tax anyway (unless you're an economist).  But in the current system, that is itself double-dipping against income which was already taxed when it was paid out (in most cases).

That's why, at the end of the day, the comparison of private income vs. public expenses looks like this:

That's right: all the hoopla about excessive corporate profits, and it turns out that corporate profits in the US are about 25% of all income in the US.  AND: the total of all wages plus corporate profits is actually less than all public expenses (federal, state and local).

You now have everything you need to know about whether or not the US has a tax rate problem or a government expense problem, and we will discuss what to do about it on Monday right before you cast your vote.

Have a nice weekend; be in the Lord's house on the Lord's day with the Lord's people this weekend as you pray about this and all the other things which are worrying you about this present age.

The Whole Pie (4 of 6)

I know this is going up after lunch, but real life intervened here.  Sorry about that.

So our last graphic was this:

Which shows us that right now (well: from the place of our benchmark, which is 2011) the GDP of the United States is smaller than the total debt plus expenses of the United States Federal Government.  That problem is now an economy-sized problem -- a problem of the whole pie, as they say.  But it is actually much worse than this -- because this chart only shows us the matter of Federal expenses and debt.  Let's build it again using all governmental debt (federal, state and local) on the left, and the GDP on the right.

See: somehow the National conversation has overlooked the fact that when we're talking about what the "government" spends, we need to roll in all government expenditures -- Federal, State and Local.  And one fault of the new bar chart there is that it doesn't account for the ~$200 billion in state and local debt floating around in our economy.  It's out because I couldn't find a reliable summary, and also because it's just a single-pixel line in the scale of this chart.  I have one last chart to saddle you with before we start making conclusions or shouting fire in a crowded theater.

In case you didn't remember the "all wages" number from back on Monday, there's the comparison between "all wages" and "all government expenses".  That's right: our governments (Federal, State, Local) actually spend more money on stuff than all our personal incomes combined -- before we account for all the past debts those entities have accumulated.

Let that sink in, and then tomorrow we'll tackle part 5, which is the really terrifying part related to GDP.

The Whole Pie (3 of 6)

So yesterday we provided this chart:

To show that when we compare the money the Federal Government spends every year to all wages paid by all businesses, it would take an income tax of more than 75% to fund the Federal dole -- but we also admitted that "all wages" is not the whole of our GDP.

You can find the long-form explanation of what GDP is over at Wikipedia if you have that kind of time, but here's the short version.  GDP is the market value of all officially recognized final goods and services produced within a country in a given period of time (usually one year).  The basic calculation is this:

GDP = private consumption + gross investment + government spending + (exports − imports)

And they say that the GDP ultimately equals Gross Domestic Income. So it might be said that the right comparison to find out the tax burden to pay all the Government's bills would be to compare the Federal Expenditures to GDP/GDI.  If we do that, we get this:

Which looks a lot better, yes?  $ 3.598 Trillion is only 23.48% of $ 15.320 Trillion, and therefore we just need to tax everything at about 24% to get what the Federal Government needs to fund the continuing operations of all things in the current scheme.  And let's face it: right now we only collect about 18.5% in taxes, so the math seems to turn out in favor of the folks who say it's all just fine, we just have to get to a fair share.

Here's the Problem:

As of 2011, All the existing debt of the Federal Government plus all the annual expenses is greater than the GDP/GDI of our entire nation.  That means if you spent all the GDI -- every dollar taken in in trade either as wages or as payment (not just the profit) -- on Federal debt or expenses, you would still have $2.3 trillion which is uncovered -- and you will have spent every nickle of the value in our whole economy for the whole year on things which aren't leaving any economy behind.

The size of the problem is an economy-sized problem.

More tomorrow.

The Whole Pie (2 of 6)

Yesterday, I gave you the following pie chart to consider:

Which is its own puzzler.  Today I have a second pie chart to show you:

Which is the gross summary of how the Federal Government spent its money in 2011.  So the first thing is this: the Economic Census is out of date by 5 years, and wel'' be pleased to get a new one when it comes around.  The flip-side of the coin is that the size of our economy in 2011was, nor or less, exactly the same as it was in 2007.  Real GDP in 2007 was 13.33 trillion; Real GDP in 2011 was 13.34 trillion -- a difference for the accountants of only 0.07%.  So for the sake of the kind of comparison we're going to do, this is definitely the same ball-park.

Here's the thing:

Just as a side-by-side comparison, the Federal expenditures tally up to more than 75% of all wages to non-farm, non-government employees -- which, for the record, includes all CEO wages, all owner wages, all wages paid to the percent which makes the evil excessive wages as opposed to your wages.

That is: if we taxes all wages at 75%, we could pay for the current net expenditures of the US Federal Government.  This doesn't include your local taxes, mind you: this is just to  run the stuff at the Federal level. It means that everybody has to work all day Monday, Tuesday, Wednesday, and until about 2 PM on Thursday just to pay for what the Federal Government right now says cannot be done without.  To tax our way out of the problem, everyone need to pay a 75% income tax rate.

"Yeah, well, wait a minute, Cent," says the somewhat-informed person reading this post, "That's one comparison of the money, but the GDP for the US is $15 trillion.  You have left out a lot of stuff here to get to your calculation -- like corporate income and farm income.  You are making this out to be a lot worse than it really is."

That's an interesting point, and we will deal with it tomorrow.

The Whole Pie (1 of 6)

There are only 8 days to the election, right?  Well, I have something which you will need for the next 10 years if you live in the United States, and it's a series of posts based on this pie chart:

Click to Enlarge

That Pie Chart is the result of the 2007 US Economic Census, and it tells us what the total wages paid out by all the major industry groups (non-government) were in 2007.  You can click it to enlarge it.  There's enough information in this chart to make you both angry and sad and amazed for the next 3 weeks, but this is where we are starting for the count-down to election day.

Enjoy.  More tomorrow.

Comparing Zeus to the Triune God

All right, kids: Back in the Day, the Apostle Paul said this to the pagans at the Aeropagus:

“Men of Athens, I perceive that in every way you are very religious. For as I passed along and observed the objects of your worship, I found also an altar with this inscription, ‘To the unknown god.’ What therefore you worship as unknown, this I proclaim to you. The God who made the world and everything in it, being Lord of heaven and earth, does not live in temples made by man, nor is he served by human hands, as though he needed anything, since he himself gives to all mankind life and breath and everything. And he made from one man every nation of mankind to live on all the face of the earth, having determined allotted periods and the boundaries of their dwelling place, that they should seek God, and perhaps feel their way toward him and find him. Yet he is actually not far from each one of us, for 

“‘In him we live and move and have our being’; 

as even some of your own poets have said, 

“‘For we are indeed his offspring.’ 

Being then God's offspring, we ought not to think that the divine being is like gold or silver or stone, an image formed by the art and imagination of man. The times of ignorance God overlooked, but now he commands all people everywhere to repent, 31 because he has fixed a day on which he will judge the world in righteousness by a man whom he has appointed; and of this he has given assurance to all by raising him from the dead.” (Acts 17:22-29)

And more recently, the Mormon Mitt Romney said this:

My passion probably flows from the fact that I believe in God. And I believe we're all children of the same God. I believe we have a responsibility to care for one another. I served as a missionary for my church. I served as a pastor in my congregation for about 10 years. I've sat across the table from people who were out of work and worked with them to try and find new work or to help them through tough times.

Now, here's the thing:  the buzz from the discernment internet is that Mitt Romney has blasphemed God, and this simply underscores why exactly we can't possibly elect him president.

Yeah, well: pheh.

Paul, in the Aeropagus, is quoting the poet Aratus from the poem Phaenomena, and here's the common translation of the passage in question:

From Zeus let us begin; him do we mortals never leave unnamed;
full of Zeus are all the streets and all the market-places of men;
full is the sea and the havens thereof; always we all have need of Zeus. For we are also his offspring;
and he in his kindness unto men giveth favourable signs and wakeneth the people to work, reminding them of livelihood. He tells what time the soil is best for the labour of the ox and for the mattock, and what time the seasons are favourable both for the planting of trees and for casting all manner of seeds.

Let's be honest: if Paul quoted that poem today in front of the internet, he'd have his head ripped off for comparing Zeus to the Triune God.  But he actually did it, and it got caught in Scripture, so you people with the large vein protruding from your foreheads this week because of Gov. Romney's statement need to get Pauline for a moment and understand something: there are things which even the pagans understand in ignorance which are true enough.

They may be true enough to condemn them as idolaters, or as sinners, but they are true enough for secular discourse.

You know: since Mitt Romney was not appealing to anyone to convert religions but only to have some sympathy for the fact that he has one, maybe we ought to find better ways to approach his true enough statement about the general revelation of God to all men which the Apostle Paul agrees with than to roll a Mormon under the bus for saying what Aratus said 3000 years ago.