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Feb 18, 2008 23:42:10 GMT -5
Post by Jack Carney on Feb 18, 2008 23:42:10 GMT -5
High math from a UGA professor. Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing. The fifth would pay $1. The sixth would pay $3. The seventh would pay $7. The eighth would pay $12. The ninth would pay $18. The tenth man (the richest) would pay $59.
So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. 'Since you are all such good cu stomer s, he said, 'I'm going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80. The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. What happens to the other six men - the paying customers? How could theydivide the $20 windfall so that everyone would get his 'fair share?'
They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay. And so: The fifth man, like the first four, now paid nothing (100% savings). The sixth now paid $2 instead of $3 (33%savings). The seventh h now pay $5 instead of $7 (28%savings). The eighth now paid $9 instead of $12 (25% savings). The ninth now paid $14 instead of $18 (22% savings). The tenth now paid $49 instead of $59 (16% savings). Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings. 'I only got a dollar out of the $20,'declared th e sixth man. He pointed to the tenth man,' but he got $10!' 'Yeah, that's right,' exclaimed the fifth man. 'I only saved a dollar, too. It's unfair that he got ten times more than I!' 'That's true!!' shouted the seventh man. 'Why should he get $10 back when I got only two? The wealthy get all the breaks!' 'Wait a minute,' yelled the first four men in unison. 'We didn't get anything at all. The system exploits the poor!' The nine men surrounded the tenth and beat him up. The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill! And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier. David R. Kamerschen, Ph.D. Professor of Economics, University of Georgia For those who understand, no explanation is needed. For those who do not understand, no explanation is possible.
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Feb 18, 2008 23:52:36 GMT -5
Post by michaelfenoff on Feb 18, 2008 23:52:36 GMT -5
wow... that makes a lot of sense to me. Thanks for sharing that Jack... I'm finding we agree on a lot of the same issues.
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Feb 19, 2008 6:53:08 GMT -5
Post by ryanchittester on Feb 19, 2008 6:53:08 GMT -5
For those who understand, no explanation is needed. For those who do not understand, no explanation is possible. Good analogy, I think this quote says it all.
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Feb 19, 2008 10:56:58 GMT -5
Post by kamsdell on Feb 19, 2008 10:56:58 GMT -5
Goto love those Georgia professors!
Go Bulldogs!!
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Feb 19, 2008 11:24:03 GMT -5
Post by Brandon on Feb 19, 2008 11:24:03 GMT -5
From a mathematical standpoint I believe this is probably close to being truthful (although I have a very hard time believing 40%to 50% of Americans pay no tax). But what the good Dr. Kamerschen failed to mention is that the wealthiest actually receive a larger benefit from their taxes. Obviously I'm not talking about welfare handouts. But, in other services provided by taxes; better police protection, emergency services, roads, and most importantly....education. The education benefit (along with hard work) is the number one factor in a successful life. If anyone here has an economic background, they should understand that education provides a large positive externality. In other words you benefit from your neighbors education. So, I see the analogy something like this:
After the reduction in price for the brew:
The first 5 men pay nothing and get a can of Natural Light.
The 6th man pays $2 and gets a can of Budweiser.
The 7th pays $5 and gets a 24oz. Budweiser draft.
The 8th pays $9 and gets a 24oz. Sam Adams draft.
The 9th pays $14 and gets a 32oz. Guinness draft.
And, the 10th pays $49 and gets a 64 oz. Great Lakes.
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Feb 19, 2008 14:45:41 GMT -5
Post by Aussie Rob on Feb 19, 2008 14:45:41 GMT -5
As an ex econ major that is almost musical to read. However, i'm not sure i see the point? The rich don't leave....they stay. They will always play ball because the game that allows them to be rich is held in USA stadium.
Give a rich man a tax break and he'll use it to expand his business and employ more people right? Wrong. Trickle down economics simply doesn't work. Tax breaks for the rich typically don't show up in the economy because they save the money, or stick it in a portfolio. Tax breaks for the poor and middle class show up again and again in the economy as it gets spent, then earned by another middle income worker that was given a job because of the increased demand, then they spend it again, which allows more people to be hired and paid, and they spend it again, etc etc.
It's a cool analogy Jack, but not a very good real world representation. It makes the assumption that if you piss off the rich, they'll leave. Since they don't, it undermines the whole point of the piece.
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Feb 19, 2008 15:10:38 GMT -5
Post by Brandon on Feb 19, 2008 15:10:38 GMT -5
Rob, I thought you must have an econ background based on your multiplier effect comment on the president thread. I think we're getting into some pretty interesting stuff here (can we post a graph on this board?)....but alas, this message board is for triathlon, so I'm going to leave well enough alone.
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Feb 19, 2008 15:31:26 GMT -5
Post by Jack Carney on Feb 19, 2008 15:31:26 GMT -5
As an ex econ major that is almost musical to read. However, i'm not sure i see the point? The rich don't leave....they stay. They will always play ball because the game that allows them to be rich is held in USA stadium. Give a rich man a tax break and he'll use it to expand his business and employ more people right? Wrong. Trickle down economics simply doesn't work. Tax breaks for the rich typically don't show up in the economy because they save the money, or stick it in a portfolio. Tax breaks for the poor and middle class show up again and again in the economy as it gets spent, then earned by another middle income worker that was given a job because of the increased demand, then they spend it again, which allows more people to be hired and paid, and they spend it again, etc etc. It's a cool analogy Jack, but not a very good real world representation. It makes the assumption that if you piss off the rich, they'll leave. Since they don't, it undermines the whole point of the piece. I disagree. Most of the buildings I build are paid for by money trickled down to me from rich people.
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Feb 19, 2008 15:35:48 GMT -5
Post by Aussie Rob on Feb 19, 2008 15:35:48 GMT -5
Maybe it's good on some selective micro levels, but on a macro level it doesn't. Besides, i imagine that was corporate tax breaks (which do tend to be reinvested in capital), not personal tax breaks for people that make $XXX XXX (which tend to be horded). Again though, the beer analogy fails (unless you're in the business of beer).
It's interesting though. It's this kind of thinking that has people voting against their own interests. I always wondered why people did that, but now i think i understand. People think that it's more important for the rich to be happy than themselves. Interesting.
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Feb 19, 2008 17:50:57 GMT -5
Post by Jack Carney on Feb 19, 2008 17:50:57 GMT -5
Maybe it's good on some selective micro levels, but on a macro level it doesn't. Besides, i imagine that was corporate tax breaks (which do tend to be reinvested in capital), not personal tax breaks for people that make $XXX XXX (which tend to be horded). Again though, the beer analogy fails (unless you're in the business of beer). It's interesting though. It's this kind of thinking that has people voting against their own interests. I always wondered why people did that, but now i think i understand. People think that it's more important for the rich to be happy than themselves. Interesting. I stick to my theory beer or otherwise, macro or micro. People with money spend it and investments stimulate the economy when businesses get capital to work with when investors stick it in their portfolios. When taxes are high rich people have ways to avoid paying them. And they should get the breaks and cheaper beer because they pay the lions share. I have no clue what you mean by people voting against their own best interest because they feel it is more important for the rich to be happy. Maybe they like me think rich people deserve breaks because they are the ones who create jobs and wealth in this country - not the government.
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Feb 19, 2008 19:36:31 GMT -5
Post by Charlie on Feb 19, 2008 19:36:31 GMT -5
Well, I am off to buy some beer at CVS. Hmmm?
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Feb 19, 2008 20:05:56 GMT -5
Post by watchman on Feb 19, 2008 20:05:56 GMT -5
Jack
That was a great analogy. You will find that most who disagree with you are under 40 and have grown up in a generation that has been blinded by liberal ideas that the Government is the answer.
The Government has two purposes 1. to restrain evil. 2. reward the good. It is never to be involved in wealth redistrubution like Robin Hood.
The fact is "wealth " is leaving our country, the bottom is falling out. The scale of the down fall will beyond anything we could imagine. The rest of the world is going to come in and buy everything here at baragin basement prices. It is happening now. China, Europe, Saudi Arabia have an overabundance of dollars. They can let it disappear or use it to buy everthing here. It is happening now. We have depended on debt for growth and it all has to end at some point.
I am going to share this analogy with alot of people.
Thanks Jack
mike
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Feb 19, 2008 20:44:38 GMT -5
Post by Aussie Rob on Feb 19, 2008 20:44:38 GMT -5
We'll have to disagree Jack, because the U.S. economy is a consumer economy. Regular people like you and me going out and buying nuts. What is the number one indicator economists like to look at? Consumer confidence, because if we stop buying, the economy stops spinning. Mike, only people under 40? How do you explain all those 40+ democrats in Washington?
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Feb 19, 2008 21:06:05 GMT -5
Post by watchman on Feb 19, 2008 21:06:05 GMT -5
Rob You have the brainwashed ( under 40) and you have the ones doing the brainwashimg for there own adgenda ( over 40 ). Remember Socialist ideas always end up killing motivation to work. also who said all democrats disagree with Jack. Many would agree. This is not a political issue. also I said "most" not all. How do you put the little smiley faces on? Us over 40 have trouble with some of this stuff mike
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Feb 19, 2008 21:37:48 GMT -5
Post by Charlie on Feb 19, 2008 21:37:48 GMT -5
What is it 'bout being over forty that makes power seem so impotent..errr, important? "Remember Socialist ideas always end up killing motivation to work." The Military, Police, Fire departments and schools are all socialized institutions. Do you feel this is true with these employee's of the state?
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Feb 19, 2008 21:43:38 GMT -5
Post by TimAckley on Feb 19, 2008 21:43:38 GMT -5
So what does this mean??? 40 is OLD?
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Feb 19, 2008 21:50:22 GMT -5
Post by Charlie on Feb 19, 2008 21:50:22 GMT -5
It sneaks up quick. Enjoy the rest of 39 while you can. Then go get some Viagra!
I was reminded last night whilst insisting I was still 39, "USAT say's you are 40"
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Feb 19, 2008 22:15:23 GMT -5
Post by watchman on Feb 19, 2008 22:15:23 GMT -5
The Military, Police, Fire departments and schools are all socialized institutions. Do you feel this is true with these employee's of the state? These are services to protect, they are not examples of wealth redistribution. Yet within these if those who excelled were held back and those who were inferioir were promoted then it would be true with them also. They function because those with the most talent and hard work are promoted not penalized. As you get older you begin to see all of what seems so important is really more impotent, so you are correct. Who needs viagra! mike
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Feb 19, 2008 23:11:05 GMT -5
Post by Aussie Rob on Feb 19, 2008 23:11:05 GMT -5
Just curious, would you consider me brainwashed Mike? I am after all only 25.
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Feb 20, 2008 8:52:45 GMT -5
Post by watchman on Feb 20, 2008 8:52:45 GMT -5
Just curious, would you consider me brainwashed Mike? I am after all only 25. I would have to talk to you directly first. Remember first first comment I said most I did not say all. The problem when you are younger is" you do not know enough to know what you do not know so you end up thinking you know more than you do. " As you get older, as you learn more you begin to see how little you knew when you thought you knew everything. An important point is those who have been brainwashed or had been influenced by misinformation would not think that they are. There is no shortcut from this it takes time and years. It is relative. Some take longer than others. I am sure you could find a 5 year old that is so certain about something that you being 20 years older can see right through and know it is false. That 5 year old might even be upset with you for telling him he is wrong but you know. Well this is the same. I am 20 years older than you and I do not care how much you have studied or think you know. There are some things that you will only see with time. The most important thing you can have when you are young ( I still think I am ) is to be teachable. Do not get to the place where you are so entrenched in a thought that you will not listen. From what I have read from Jack Carney, I sense some wisdon that has come for time. You would do well to listen to his thoughts. I have been where you are Rob. You have never been where I am . Someday you will agree and probably quote this to that 5 year old when he is 25 and you are 45. mike
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Feb 20, 2008 9:04:03 GMT -5
Post by benmiralia on Feb 20, 2008 9:04:03 GMT -5
Interesting analogy Watchman. The three governments you mentioned as taking all our wealth are either communist, socialist, or a monarchy. Three situations where government is the only answer. Every aspect of daily life is planned by and executed by the government. Health care and retirement benifits are supplied solely by these governments. Perhaps Japan would have been a better choice.
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Feb 20, 2008 9:22:27 GMT -5
Post by watchman on Feb 20, 2008 9:22:27 GMT -5
Interesting analogy Watchman. The three governments you mentioned as taking all our wealth are either communist, socialist, or a monarchy. Three situations where government is the only answer. Every aspect of daily life is planned by and executed by the government. Health care and retirement benifits are supplied solely by these governments. Perhaps Japan would have been a better choice. China has grown as it has adopted capitalistic thinking. Its social services are nothing compared to ours, its growth is in spite of socialism. It has a massive resource of cheap labor. Would you like to be paid 1/ 10 of your current pay? Saudi Arabia has a small number of people controling the massive wealth from Oil. Most do not benefit. Would you like to move there where you are told what you can think, say or do? Oil is the only reason for its prosperity. Europe is in its postion because it has not relied on debt like we have and as it unites it is benefitiing from centuries of wealth that has been hindered by the division of the countires. As they become one ( Untied States of Europe) they will dwarft he United States of America. Most are taxed 3/4 of all income. The issue is that we are being reduced and those who are inferior are in a positon to take advantage of us. This is not showing that the others systems are correect it shows how foolish we have become. mike
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Feb 20, 2008 9:40:25 GMT -5
Post by benmiralia on Feb 20, 2008 9:40:25 GMT -5
Ummmmmm, I think that was my point. Despite all our faults we are still the standard bearer for free people everywhere. No matter how many blemishes we have we are still a better people and a better government than any you have mentioned. If our wealth is flowing in that direction the answer is to become more of what we are, not be concerned with stooping to the level of other countries whose brutal policies should be decried from every corner of the free world. It is a hard road and a daunting task, but our history is filled with similar difficulties and we have never wavered yet. Perhaps if our current resident of the white house showed some of the fiscal restraint our party has long been known for we would not be having this discussion.
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Feb 20, 2008 9:49:24 GMT -5
Post by Aussie Rob on Feb 20, 2008 9:49:24 GMT -5
Just curious, would you consider me brainwashed Mike? I am after all only 25. I would have to talk to you directly first. Remember first first comment I said most I did not say all. The problem when you are younger is" you do not know enough to know what you do not know so you end up thinking you know more than you do. " As you get older, as you learn more you begin to see how little you knew when you thought you knew everything. An important point is those who have been brainwashed or had been influenced by misinformation would not think that they are. There is no shortcut from this it takes time and years. It is relative. Some take longer than others. I am sure you could find a 5 year old that is so certain about something that you being 20 years older can see right through and know it is false. That 5 year old might even be upset with you for telling him he is wrong but you know. Well this is the same. I am 20 years older than you and I do not care how much you have studied or think you know. There are some things that you will only see with time. The most important thing you can have when you are young ( I still think I am ) is to be teachable. Do not get to the place where you are so entrenched in a thought that you will not listen. From what I have read from Jack Carney, I sense some wisdon that has come for time. You would do well to listen to his thoughts. I have been where you are Rob. You have never been where I am . Someday you will agree and probably quote this to that 5 year old when he is 25 and you are 45. mike How incredibly patronizing. I guess i should just drop out of school and wait to get older.
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Feb 20, 2008 9:49:39 GMT -5
Post by watchman on Feb 20, 2008 9:49:39 GMT -5
Ummmmmm, I think that was my point. Despite all our faults we are still the standard bearer for free people everywhere. No matter how many blemishes we have we are still a better people and a better government than any you have mentioned. If our wealth is flowing in that direction the answer is to become more of what we are, not be concerned with stooping to the level of other countries whose brutal policies should be decried from every corner of the free world. It is a hard road and a daunting task, but our history is filled with similar difficulties and we have never wavered yet. Perhaps if our current resident of the white house showed some of the fiscal restraint our party has long been known for we would not be having this discussion. sorry I thought you were disagreeing and advocating the others. I agree. I am not all about Bush. He has some good traits. He is not perfect. There are some things moving toward a One World Government that his Dad was for. For it to happen there cannot be one nation above the rest. Our country is being reduced to level of the nations around us. Whoever is elected will fall in line with this whoever they are. We are done the day we turn our backs on Israel. We are the last friends they have. mike
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Feb 20, 2008 9:58:39 GMT -5
Post by watchman on Feb 20, 2008 9:58:39 GMT -5
mike[/quote] How incredibly patronizing. I guess i should just drop out of school and wait to get older. [/quote] you missed the point It is all about attitude. Just do not think because you have learned some things that you know everything. It is a character trait called humity. When I came on this site to learn about Triathlons I took the position that I know nothing so that I could ask questions and learn from the experts. I would be wrong to start telling Triathlon people that I know better than they do. We should have the same attitude no matter what we know or how old we are. Don't take it personal. Everything I told you applies to me. I like the people who are experts on triathlons and yet say they are still a newbie. Did you still want to meet my friend asbout Israel? mike
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Feb 20, 2008 10:19:33 GMT -5
Post by Aussie Rob on Feb 20, 2008 10:19:33 GMT -5
I don't claim to know everything, thats absurd! I just happen to have my politics, and they're based on what i DO know.
I will say this. When discussing the nuts and bolts of economics, life experience pales in comparison to a few formal econ classes. How often does the multiplier effect, excess capacity, cyclical/frictional/structural unemployment, comparative advantage, increasing opportunity costs, GDP price index come up in conversation? Almost everyone i talk to about the economy only has a vague idea of a handful of concepts....be they 20 years old, or 60. Hell, people are walking around complaining about the rebate cheques when they clearly don't know the sound economic theory behind it. If you don't ever truly learn it, how can you debate it? Like you say, i would never argue with the seasoned tri vets on this board....because i don't know enough.
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Feb 20, 2008 10:41:43 GMT -5
Post by watchman on Feb 20, 2008 10:41:43 GMT -5
I don't claim to know everything, thats absurd! I just happen to have my politics, and they're based on what i DO know. I will say this. When discussing the nuts and bolts of economics, life experience pales in comparison to a few formal econ classes. How often does the multiplier effect, excess capacity, cyclical/frictional/structural unemployment, comparative advantage, increasing opportunity costs, GDP price index come up in conversation? Almost everyone i talk to about the economy only has a vague idea of a handful of concepts....be they 20 years old, or 60. Hell, people are walking around complaining about the rebate cheques when they clearly don't know the sound economic theory behind it. If you don't ever truly learn it, how can you debate it? Like you say, i would never argue with the seasoned tri vets on this board....because i don't know enough. Good point. With that, Jack's original analogy is still excellent. The most profound thoughts are those that take something complicated and make it simple. To state something very few understand and most who do cannot agree on is not profound. Any analogy breaks down if taken to an extreme but is usually made for one main point. The analogy Jack gave is to point out an attitude that exists and will hurt our country in the end. This is only one problem with our country and I personally think it is beyond repair. We are living on the blessings of the previous 2 centuries and we have left the founding principles in many areas. This is minor compared to some of the others. mike
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Feb 20, 2008 13:23:41 GMT -5
Post by Brandon on Feb 20, 2008 13:23:41 GMT -5
Oh man, spend some time away from this board and I miss a good political argument! Watchman, I appreciate your points of view, but I'm not so sure you are so open to others points of view on these political topics, as you say you are.
The original analogy is clever, gets a personal opinion across, and has no true economic merit. It is a representation of the divide between social classes in the U.S. and nothing else. The idea of a linear trickle down of money, or trickle up for that matter, doesn't happen because money does not flow in a linear fashion. The flow of money is simplistically explained as a circle. So, when money is either earned or redistributed to the lower classes, the upper classes (business owners) get it back through their purchases. My gripe about politics these days is that the candidates just play on emotions....and that is what is showing here. A few facts I found last night reading up on our social programs a bit:
The year of the Lewinski scandal (1998) welfare spending as a percent of GDP was lower than it was last year under W. Bush.
Cash handouts through govt. programs have dropped over 70% since the 90's due to Clinton's welfare reform.
Last year all social welfare programs comprised ~1.9% of Federal government spending as a percent of GDP. The top 3 expenditures were pensions, followed by defense, and then health care, which when combined, totaled ~15% of federal spending as a percent of GDP. Income is not redistributed through taxes to the extent some of us might think.
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Feb 20, 2008 14:25:04 GMT -5
Post by watchman on Feb 20, 2008 14:25:04 GMT -5
Brandon
I am very open to facts not just sound bites from the news or internet.
I like what you wrote. It has some very good points. I am not completely against Clinton and not completely for Bush. They are men and are both flawed. I only no of one who was not.
The original analogy did reveal an attitude that exists.
also do you remember who wrote the welfare reform Bill Clinton signed? What congress that was?
As far as % of GNP. This issue is the direction we are headed and what principles got us this GNP.
This housing bust can bring it all down very quickly. Our GNP has depended on debt spending. The air is being let out now.
For the first time in 50 years you are better off renting than buying and also many owe more than they can sell their house for.
Advice . get out of debt and stay out of debt. If you cannot pay off credit card bill each month cut it up.
just some thoughts
mike
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