Goodenough Gismo

  • Gismo39
    This is the classic children's book, Goodenough Gismo, by Richmond I. Kelsey, published in 1948. Nearly unavailable in libraries and the collector's market, it is posted here with love as an "orphan work" so that it may be seen and appreciated -- and perhaps even republished, as it deserves to be. After you read this book, it won't surprise you to learn that Richmond Irwin Kelsey (1905-1987) was an accomplished artist, or that as Dick Kelsey, he was one of the great Disney art directors, breaking your heart with "Pinocchio," "Dumbo," and "Bambi."

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Tom Strong

Um, anyone who makes $250K but doesn't understand marginal tax rates probably shouldn't be making $250K.


Um, anyone who makes $250K but doesn't understand marginal tax rates probably shouldn't be making $250K.

In the words of Clint Eastwood, "Deserve's got nothing to do with it."

Nixon...[wipes nostalgic tear] now there was a bastard! I miss such honest, straightforward evil...Remember, when someone says he's not a crook, what is he? Oh, yeah, know!


Are those Indians throwing our tea overboard or just guys from Mutual of Omaha?

Do the Chinese get to say "No Credit Default Swaps without Representation!"


Perhaps the most insightful bit on Instapundit was a quote he took from an Althouse commenter:

“Does anyone really think Team Obama’s focus on Limbaugh reflects their success so far in office?”
Meanwhile the Wall Street Journal notes that the market is not happy with Obama's plans. But they're not being wholly fair to Obama, and it appears they haven't fully come to grips with the problem. Look at this quote from the linked editorial:
Housing prices have fallen 27% from their Case-Shiller peak, or some two-thirds of the way back to their historical trend.
Hmm. That would suggest that housing prices still have plenty of downside before we hit bottom. And since I've already brought up Professor Shiller, I may as well drop another indicator of his that we haven't entirely hit bottom:
There were four massive stock bubbles in the 20th Century: 1901, 1929, 1966, and 2000. During each of these bubble peaks, the S&P 500 neared or exceeded 25X on professor Robert Shiller's cyclically adjusted P/E ratio.* After the first three of these peaks, the S&P 500 PE did not bottom until it hit 5X-8X. We're still in the middle of the last one.

The most recent bubble peak, 2000, was by far the most extreme we have ever experienced. In 2000, the S&P 500 by prof. Shiller's measure exceeded 40X (it had never before exceeded 30X). With the S&P 500 hitting 700 today, the PE has now fallen back to 12X.

The linked piece explains that there’s more than one way to hit bottom on this index, though. Stock prices could already have bottomed out but will stagnate for years.

And here’s another indicator of how bad things got last year, this time from the New York Times:

Last week, Fannie Mae announced that it lost $58.7 billion in 2008, more than all its net profits since 1992. Freddie Mac is also expected to reveal record losses in coming days.
Obama’s impact on the housing and financial problems prior to his election were minimal, although he seems to have supported all the wrong policies, but he was hardly alone on that front. So as I wrote elsewhere, Obama doesn’t deserve the blame for this mess. He will and does deserve blame for his actions in office, however, and some discounted share of blame for the transition period between the election and the inauguration. And here the WSJ editorial is correct when they assert:
The market has notably plunged since Mr. Obama introduced his budget last week, and that should be no surprise. The document was a declaration of hostility toward capitalists across the economy. Health-care stocks have dived on fears of new government mandates and price controls. Private lenders to students have been told they're no longer wanted. Anyone who uses carbon energy has been warned to expect a huge tax increase from cap and trade. And every risk-taker and investor now knows that another tax increase will slam the economy in 2011, unless Mr. Obama lets Speaker Nancy Pelosi impose one even earlier.

Meanwhile, Congress demands more bank lending even as it assails lenders and threatens to let judges rewrite mortgage contracts. The powers in Congress -- unrebuked by Mr. Obama -- are ridiculing and punishing the very capitalists who are essential to a sustainable recovery. The result has been a capital strike, and the return of the fear from last year that we could face a far deeper downturn. This is no way to nurture a wounded economy back to health.

They fail to mention that the government is taking over the mortgage lending market and has no intention of letting go of its newly found powers. But the NYT’s article I linked to explains exactly that, and also explains how even the people brought into FannieMae to fix the problems have started bailing out because of too much government interference.
In the last six weeks alone, the Obama administration has essentially transformed Fannie Mae and Freddie Mac into arms of the federal government. Regulators have ordered the companies to oversee a vast new mortgage modification program, to buy greater numbers of loans, to refinance millions of at-risk homeowners and to loosen internal policies so they can work with more questionable borrowers.

Lawmakers have given the companies access to as much as $400 billion in taxpayer dollars, a sum more than twice as large as the pledges to Citigroup, Bank of America, JPMorgan Chase, General Motors, Wells Fargo, Goldman Sachs and Morgan Stanley combined.

Regulators defend those actions as essential to battling the economic crisis. Indeed, Fannie and Freddie are basically the only lubricants in the housing market at this point.

But those actions have caused collateral damage at the companies. On Monday, Freddie Mac’s chief executive, David M. Moffett, unexpectedly resigned less than six months after he was recruited by regulators, having chafed at low pay and the burdens of second-guessing by government officials, according to people with knowledge of the situation.

Fannie Mae has also experienced a wave of defections as people leave for better-paying and less scrutinized jobs.

I imagine that we will see another wave of political appointees to fill the empty slots at Fannie Mae, which is a part of what got us into this trouble in the first place. (Need I mention that the political appointees are likely to have little experience and less competence for their new jobs?)

Ah well, we’ve taken a bad situation and we’re making it worse. The bigger problem isn’t Obama, or the Democrats, or even our political leadership in general. The bigger problem is that the electorate has decided that government can and should take care of everything. We are the enemy. Obama, Reid, Pelosi, Bush, McConnell, Boehner, etc. are just the foot soldiers we the generals have sent to the front lines.


Um, anyone who makes $250K but doesn't understand marginal tax rates probably shouldn't be making $250K.

What's to understand? As the marginal rates go up at some point people get tired of working hard to make money for someone else. It's a question of whether or not it feels fair to people. If the top rate were 90%, and someone made $100,000,000, they would make $10,000,000, a tidy sum. But they're sure as hell not going to be pleased that the government got the other $90,000,000.

Everyone's inflection point is going to be different, but I imagine that somewhere around a marginal rate of 50% most people will decrease their efforts to make more money.

This all reminds me a studies on altruistic behavior in other primates....


I don't think the current market response is entirely, and probably not even mostly, a "capital strike". The markets are sill adjusting to the idea that all the debt "out there" will have to be repaid. Add to that fear of markets that don't seem to go up, and distrust that whatever anyone tells you (financially and economically) is a lie.

Really, who to believe? In June of 2007, Citi was trading over $54 a share. As I write it's trading at $1.22 a share. People are asking themselves "What the FUCK?! What the fucking FUCK?!!?" The answer they're coming up with is that people have been blowing smoke up our asses, and as a consequence no one believes anything anymore.

Obama needs to address this confidence issue as much as anything else, but he seemingly doesn't have a clue. (To be fair, no one else does either.) Geithner stumbling around like a drunk in a cluttered, dark room isn't helping either.


The idea is that if you make over $250k you have more than you need for a decent life, so you should not mind helping out the less fortunate.

One problem with this idea is that someone could make $250k after working for almost nothing for most of his life, developing some invention or talent, for example. So now he finally gets a chance to start saving for retirement and the government wants to grab a big part of it.

Another problem with the idea is that maybe the guy (or lady, whatever, not trying to be sexist) who makes $250k has goals in life way beyond daily survival. Maybe he longs to retire at age 40 in order to pursue an acting career. Or whatever.

The progressive worldview has everyone living in their predefined compartment. Progressives know how much you need and how much you should be allowed to have.

So that is part of the problem. Another thing is that the over-$250k earners are going to figure out ways to hide income. Or, as was already said, may cut back on hours worked.

So we might not get the enormous tax revenues needed from taxing the top earners.

Another problem with the Obama plan is that it completely relies on an unproven theory -- that if the federal government spends huge amounts of money, on anything at all, the economy will be pulled out of a recession.

Why do some economists believe that theory? Maybe it's because WWII pulled us out of the Great Depression, and WWII required lots of government spending.

But that is not a logical conclusion, since we don't know why WWII ended the depression, or even if it did.

Can we safely assume WWII ended the depression because it ended unemployment and increased government spending? Well ending unemployment probably was a major factor. But unemployment did not end because of government spending, but because so many men were employed by the military.

See what I mean so far? Maybe government spending was not a major factor.

And there were other things going on at that time as well -- new inventions and technology, new things for the US to manufacture and for consumers to buy, and therefore more jobs. Also the positive attitude resulting from being on the winning side, but not having been destroyed by bombs.

The US had lots of reasons to improve after WWII. Government spending may have helped, or it may have hurt, or it may have done nothing.

Now our government is assuming the spending as much money as possible will cure this recession and prevent a depression. I wish someone could explain what logic I may be missing. Are these economists just mindlessly following a theory they were taught, without even wondering if it's true?

Tom Strong


I'm not saying there won't be deadweight loss associated with the tax increase - there will be. But I'm very skeptical that there will be much if any deadweight loss associated with taxpayers near $250K in income. The marginal gain for anyone in that area code is just too small.

I suspect the interviewees in the article are either ignorant of how marginal taxes work, or are just making a political statement that they are unlikely to follow up on with action.

RW Rogers

Tom, it is not as simple as a slight marginal increase in taxes, though, is it? When you add in 33% higher rates for any capital gains and the loss of itemized deductions, the penalty for exceeding $250,000 could be viewed by a rational person subjected to it as being excessive.


So, basically what y'all are saying is: now is not the time to plunk down 400k$ for a farm w/land- add 40 more cows(ave 2000$/cow) and go to town producing twice as much milk as we usually do?

Oh, well. Here goes everything we own!!!!!!

Tom- "Um, anyone who makes $250K but doesn't understand marginal tax rates probably shouldn't be making $250K."

I want to be able to afford our larger family farm. It requires us to add more cows- to increase our productivity and to make so much more money. I freely and unabashedly admit to ignorance of your above said statement, as i never had a head for finance(even though i have an Associate degree in Ag Business). I excelled in the animal husbandry aspect of my limited higher education. I(we)know how to get our cows to make milk- i(we) know how to pay down debt(hopefully)- yet, to configure taxes and what we will owe- and the sale of our farm and the purchase of a much larger one- egads. I'm about set upon by a case of the vapors!

Yet- we'll forge ahead and be stooges for Obama.

Long live the King.


Plenty of game-theory studies show that people do not always act "rationally" when it comes to money. The classic example comes when you give $20 to A, who decides how much to give to B. Then it's up to B to decide whether to accept the amount he's given or not. If B accepts, both A and B keep the money. If B rejects, both A and B lose the money.

Logically, it is always in B's best interests to accept the money, even if A only gives him 1 cent, because that's 1 cent more than B would have if he rejects it. But in fact, the more "unfair" the division made by A, the greater the chance that B will reject it, just to punish A for being so stingy.

So while it may not be rational to say "I'm not going to make more than $250,000" simply to avoid paying a higher marginal tax rate on the amount above $250,000, it may well be very human to do so.

Beyond the game theory "fairness" aspect, the amount of effort required to go from making $250,000 to $300,000 may be justified, in the worker's mind, if he will get to keep 67% of his increased earnings, but not be justified if he will only get to keep, say, 60% of his increased earnings.

Finally, I second what others have pointed out about the impact of the possible capital gains tax increase on those making more than $250,000.

And I remind everybody that after the Bush tax cuts in 2003, federal tax revenues INCREASED. The reverse is also possible.

Tom Strong

Randy - That's a good point. In retrospect, I can at least see how that combination might have a psychological effect for some people. I continue to doubt that it will lead to much actual change in behavior though.

Karen - I bet you understand marginal taxation fine, even if you haven't heard the phrase before. If your expansion is successful, you will increase your income. The extra $$ you make above certain threshold amounts (like $250,000, say) will be taxed at a different rate than the $$ you make below those amounts. That's all it means.

And GOOD LUCK with your expansion! Entrepreneurs like you are one of the things that makes our country great, and I wish you all the success in the world. If your milk ever starts getting sold as far south as Virginia, let me know - I will buy it.

Peter Hoh

Karen, won't investing in that extra land and cows help lower the income side of your balance sheet?


If people knew more about Lincoln than the hagiography, they wouldn't be starting to find the comparison so inapt.


Peter: yeah- it will. It'll be the whole farm, not just land. It's keeping both healthy and producing that's the catch- but, that's farming. Our purchase is still not something i grasp fully as of yet- it's a touchy thing, working w/family.

Provided that organic milk is stable and doesn't drop in the farmer payprice, we should be ok. I just wonder- i'm no tax genius, for sure- our gross income is going to be really high. If our market tanks- well...

"Logically,... But in fact, the more "unfair" the division made by A, the greater the chance that B will reject it, just to punish A for being so stingy."

That's kinda funny, Pat- as it reminds me of how the more conservative of Republicans wouldn't vote for Mc because he wasn't what they felt represented ~true~ conservatism. So, they w/held their votes and now we have-- this. ta-dah!!!

Tom- our Co-op is actually based in Wisconsin- it's called Organic Valley. Our own milk goes into Stoneyfield products, but any support of Organic Valley is support for our Co-op and the stock we hold w/in it. Farmers = stockholders... in so many ways:0). Spud is a member, as well. See, Libs and Pubs do agree in certain subjects!

I still plead way dumb when it comes to finance/taxes. I'm just lucky i have a frugal gene w/in me as opposed to a love of plastic charge cards.


Hey- & thank you, Tom.


For what it's worth, I got canned yesterday. I have some severance pay coming and maybe I'll take a few classes. And since nobody can accurately predict what sector's going to start growing again, I may as well take them in something I like!

Right now I'm liking some Vermont maple syrup. Karen, maybe I'll move up by you and tap a tree.


Hurry up, Melinda- 'tis the season right now!!! If you do want any syrup- give amba your info for me: i'll mail you some- 'cause i think you're great:0).

There's a little sugarwood on the family farm- someday we hope to get a little rig and tap a couple hundred trees. That, btw- is puny compared to so many. My husband has sugared before, it's in his blood- i never have.


Melinda: Oh no!! After Icepick and Charlie, who fell prey to preliminary tremors of this jobquake, you're the first casualty in our little virtual community. Hopefully you have some nuts buried, so to speak.

Karen: as a kid I read a description of how during the boiling-down of the sap they poured fresh maple syrup on the snow to make a kind of taffy. Ever since, I've wanted to experience that.

Tom Strong

Nice. I've actually been buying Organic Valley for years (and Stonyfield, though less so).


I have some nuts buried, and my overhead is low. The thing I'm afraid of is going nuts! There's a lot to be said for having the structure of a job, even one that's driving you crazy.


Yes, very true and scary. Even having someplace to get up and have to go is so much easier than structuring your own time, even if you fill it with projects.


Tom, it is not as simple as a slight marginal increase in taxes, though, is it? When you add in 33% higher rates for any capital gains and the loss of itemized deductions, the penalty for exceeding $250,000 could be viewed by a rational person subjected to it as being excessive.

Randy, don't forget that Obama wants to hit all income over $250,000 with Social Security taxes, too. That's an extra 6.2%, and 12.4% for the self-employed.


Melinda, my advice to you is to start drinking heavily. Better listen to me, I'm in pre-med.

(NetFlix can be a wonderful resource during times like these, as can your local library system.)


If people knew more about Lincoln than the hagiography, they wouldn't be starting to find the comparison so inapt.

Cal, you're helping again....


I kind of believe that any structure (including a job) that is imposed, will, eventually, be overthrown. Don't 'impose a structure'; choose to do what you need to do. In the end, it becomes much more a part of you, and never an imposition.

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