National Debt

We hear Congressmen /Congresswomen and Senators talk about reducing the national debt of $9,374,145,939,713.01 and growing by raising taxes and balancing the budget. Lowering budget deficits or creating surpluses that lead to debt reduction do not lead to improving the economy.

Lowering tax rates will encourage more investment and employment. The economy will be stimulated and inflation will be lower than if we have higher government spending. Increased government spending will lead to inflation, higher interest rates, and economic slow down.

The Laffer Curve has been correct every time it has been tried. The Harding-Coolidge rate cut in 1925, John Kennedy in 1964, Ronald Reagan 1981, and George W. Bush 2001.

The revenue to the U.S. Treasury increased with the lower rates because the point of maximum return has been surpassed on the curve.

To reduce government deficit, Congress must reduce spending and cut tax rates. This creates a surplus and stimulates the economy. The results are more revenue and a budget surplus that can be applied to the national debt. As of this date Congress has alway spent the money in some buy more votes program and the debt increases.

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Calculating Time Value of Money

Have you ever wanted to know how long it will take to pay off a debt at various interest rates? Or,how long will it take to double your retirement funds? There are three formulas to calculate this type of result.

Rule of 72

This is the number divided by the interest rate or the number of years of the loan. The first result being the number of year to pay off the loan The second is the number of years of the debt divided into 72, determining the interest rate.

Rule of 114 (114.4 Exact)

This is the number to calculate how long it will take to triple you money.

Rule of 144

The calculation for quadrupling your balance is dividing the rate into 144 or dividing by the time element to determined the rate of return needed.

These number are not exact but while helpful to determined some number for your long term planning.

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Revenue Created By A Tax Increase.

Have you ever wondered why the amount of revenue increases when federal income tax rates are reduced? This is called the Laffer Curve.

For example is the bus company does not have enough revenue to cover expenses there are two ways to increase revenue. 1) Increase fares ) 2 Reduce fares to fill the bus in addition to better marketing. The fare increase assumes that the ridership will not change . Let,s say the fair goes from $1.00 to $1.50. The bus has 35 seats. Average ridership is 7-9. Total revenue is $7.00 to $9.00. When the rates are increased the ridership drops to 5 so the revenue drops to $7.50. If the fair was reduced to $.75 and the ridership was increased to 20 the revenue increases to $15.00. Maximize ridership to maximize revenue.

Laffer Curve shows when tax rates get to high the number of tax payers decreases because the "movers" and "shakers" stop creating taxable income. Every time it is tried it has worked and the politicians just keep raising taxes.

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I Can Save Money Too

There are some guide lines such as your debt service should not be over 25%, and long term savings needs to be 10%. Two thirds of households over $50,000 income use a paid financial adviser. The questions are: 1) Do I spend enough time trying to improve my income or grow my business? 2) Do I keep an eye on what is being paid out in taxes of all kinds? 3) Do I spend money wisely for family expenses? and 4) Do I reserve enough for future spending needs.?

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Target, Focus, Vision, Goal

The greatest gift that can be experienced by a human being is to born in the United States of America. The freedoms that we have provides the opportunity to make great achievements. Financial wealth is the most sought after, of all the many successes available. The first step is to make a decision on what is to be achieved and concentrate on its accomplishment.

How or when this will happen may be unknown in the beginning but amazing thing can happen if you are focused,patient, and committed.

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