Thursday, April 8, 2010

Fear subsides, prices rise

A quick update on an enduring theme that has been one of the best explanations for how the recession of '08-'09 got started and how it ended.


alstry said...

Fear is definitely subsiding....


You had a great point earlier about cutting government workers wages......

right now there are over 21,000,000 highly paid workers working for all levels of government. My guess is the collective payroll probably comes in around $2 trillion dollars.

Of the approximate $1 trillion in income taxes received by government each year, what percentage of it do you think comes from the paychecks of government workers?

Do you think more fear would set in if the world actually knew the number???

Scott Grannis said...

Let's do the math. Government workers are highly compensated relative to their private sector counterparts, but I'll wager that only a handful make more than $150,000/yr. Only 5% of taxpayers make more than that, and we know from IRS data that those highly paid individuals pay 60% of all income taxes.

So let's assume that at least 90% of government workers earn less than the top 5% of income earners in the country. That means that of the 22 million government workers out there, who comprise a little less than 20% of the workforce, at least 20 million of them make less than 150K. Taxpayers that fall below that income threshold pay 40% of all income taxes.

So, that means that that vast majority of government workers pay less than 20% of the 40% of all income taxes that are paid by those earning less than $150K per year.

So the answer to your question is that government workers pay less than 8% of all federal income taxes.

Do you think this is fear-inspiring?

alstry said...

In all seriousness, thank you for your response.

If you were to dig a bit further, I think you would find the number of government workers earning over $160K filing jointly far exceed a handful.

Than if you included those workers in government directly subsidized industries such as health care, defense, will find that the MAJORITY of government income tax receipts comes directly or indirectly from government spending.

The key is to determine with the initial dollar spent originated to ascertain the multiplier effect. With government running a $2 trillion dollar deficit, much of the dollars are being originated from government providing a fantastic stimulous to the economy.

What many don't realize is that practically the entire U.S. economy has become dependent on government spending to function as we know it. It is amazing how those deficits can creep up on us without even realizing it.

Scott Grannis said...

alstry: I think that if you make the effort to put some facts behind your wild assertions you will soon find that your are tilting at windmills.