January 20, 2008
Harmful Stimulants
Bush and even the Democrats are jostling to put forward new economic stimulus packages. I think it’s fairly foolish, and I’d even say that to the face of the candidates and politicians we like. We’ve bought so far into the myths of supply side economy, that despite years of failure to see the promised economic benefits, we still jump at it. It’s time to start biting the bullet, and accept the price of years of abuse of the financial system.
In medical terms, stimulants can be harmful because they put stress on the systems of the body, because they drain reserves of energy, preventing the body from resting. You build up debts in your systems, debts that could cause collapse of those systems.
Some stimulants work by encouraging the person's system not to sedate or inhibit itself. But even that, even that failure of inhibition can be unhealthy.
People are holding back on purchases, trying to cut spending because they are hurting, and uncertain about whether they'll have the resources to keep up these activities.
We've had an expanding economy for years now, but nothing like that lasts forever, or even should last forever. At some point, the bills come due. At some point, people become overworked, over-leveraged, and their necessities become overpriced.
The tax cuts that Bush has put forward have contributed to a weak dollar, to renewed inflation. His economic policies concerning interests rates have created a situation where people are being lent money they can't pay back. But the complexities of modern lending make it difficult for most people to judge that for themselves.
Moreover, part of the business he's drummed up has been business based on essentially driving up the prices of homes, energy costs, and pushing policies that while good for some industries, has driven up the price of others. Your gasoline's newest additive is driving up the price of your food.
The consequence of all this economic stimulus over the Bush years has been an economy running on fumes, growth dependent on consumer spending people are unable to afford without further debt they don't need.
Having worked against wages and healthcare, having encouraged a heavily credit based economy, and having based much of their strategies on tax cuts that lead to deficit spending, the Right's economic policies have essentialy turned America's economy into the equivalent of a twitching stimulant addict.
America needs to go to economic detox, not get a new dose of stimulant. We need to accept the inconvenient truth that our economy is in bad shape and that by treating the symptoms and not the underlying problems, we're only making the final reckoning worse. If we want to reduce our suffering, we need to come together to work out ways to ease the problems, to give people a chance to recharge their economic batteries, get the economic waste and corruption out of our system.
We don't need to go back to the policies of the 80's or 90's, because to be honest, many of those brought us to this unfortunate crossroads. We need to return to a sense that not everything that's good for profits is good for the economy, and that the reckless pursuit of economic growth without consideration of it's underpinnings and dependencies will only doom us to see less and less of it as time goes on.
It is not this coming (or already present) recession we must consider, but the pattern of our growth over the next few decades. Were I only approaching this in terms of politics, I could end here. But I can't.
We have to consider energy. Whether or not oil prices come down, we have to consider that we are near the end of cheap, plentiful fossil fuel energy. We used it for a reason: hydrocarbons represented low-cost concentration of energy. As that supply dwindles, and as the political and environmental hazards of our dependence become ever more evident, these will weigh in on the economy. Should we wait for market forces to do their work, or toss carbon taxes on top of everything and hope they work by themselves? The Republican economic policies, which included keeping CAFE standards relatively low for vehicles they turned around and gave tax breaks for, encouraged people to buy vehicles that were economic trouble waiting to happen. Worse yet, they let Detroit become dependent once more on gas-guzzlers for their economic bread and butter, a move that history should have told them was foolhardy. American can either become the victim of it's forced energy discipline, or it can become the beneficiary of it. We can either continue to prop up the economic engines of the past, or we can help create the engines of the future.
We have to consider wages. The only thing that's allowed America to continue growth without an equal rise in wages has been the credit card. But when we lose our jobs (much more common in today's Chainsaw-Al inspired downsizing environment) we're stuck with credit card bills we can't continue to pay. Worse yet, Credit Card companies actually target those who are in bad financial shape for additional credit, reversing the old notion that credit should only be given to those who could pay it back. Because of this, the market has been free to push prices beyond what people could pay if they could only operate on a cash basis.
Getting wages back to the point where people can live on the cash they have, is a critical step in halting our economic downturn. But the Republicans instituted an onerous Bankruptcy reform bill which essentially assumes now that the poorest half of those who file for bankruptcy are trying to cheat the system, presupposing a crime before it's been committed, of people who they have no evidence against.
The Republican's long war against the lucky duckies is part and parcel of our current economic problems. They've focused on banishing welfare queens and Earned Income Tax Credit cheats much more than they've focused on the big offenders, or saying no to the people who ask for all kinds of leeway in conducting their economic affairs.
The Republicans have held the banner and pushed the policies, starting with the Reagan years, for free market economics based not on staying out of they way of chosing winners or losers, but instead allowing companies to cheat on their figures, and vest themselves in conflicts of interest that make them and their friends money, but don't work to the benefit of the average investor. They've also allowed markets of all kinds, From media, to oil to consumer retail, to become much more consolidated, and therefore much less responsive to consumer and market forces. They've also gutted union protections, which while undoing one kind of constraints also prevents workers from exercising the upward pressures that are part and parcel of what keep wages an an appropriate market value, rather than underbid, which means people are on the bad side of inflation.
The economy is about more than taxes and giving corporations whatever they want. It's about our sustainable market activity. That tends to get abstracted when all economics boils down to is political and corporate self-interests. The broader view is necessary, and those who want to actually do some good have to work from that broader view, and recognize that there are real world problems that have to be solved before we can get back on our feet financially.
The time has come to leave the financial fairyland of the supply side.
Posted by Stephen Daugherty at January 20, 2008 11:24 AMStephen
I think we agree. Stimulants are stupid. The government should do the usual things Central Bankers do and let the rest sort itself out.
For example, the prices of homes needs to come down. Let it be.
Posted by: Jack at January 20, 2008 04:10 PMThe administration is using the problems that they have created to call for more of the voodoo economics that have caused the problems in the first place.
I do not understand how stricter bankruptcy provisions will do anything. Are they going to start putting people in prison for debt? It would make more sense to put the lenders in prison, but they are the ones buying the legislation.
Housing prices here are ridiculous. New condos cost double the price of existing condos. Part of the new price includes additional inside parking. It used to be that you could have one floor of parking for four floors of apartments, and two floors of parking would be enough for 5 to 8 floors of apartments. A new building is being built here with 3 floors of parking for 5 floors of apartments.
There are many small houses in suburbia that were built after WW2. These are being sold for high prices for the value of the property and either torn down or expanded upwards and outwards if the existing foundation is strong enough and the local zoning permits. An empty lot is actually worth more than a lot with a small house on it, especially a split-level.
Big, bigger, and biggest are substituting for buying what you actually need. Hummers, Escalades, and Denalis abound. I saw a funeral procession recently in which every vehicle was a truck or a van. A neighbor who was upset at his sons enlistment in the army after high school, drives 2 trucks almost big enough to live in.
All fueled by what? We buy the oil. They buy us, and our international relations are concentrated on making sure the oil keeps flowing. We put corn product in our fuel, and the price of food goes up, because why think anything out in advance when we have been putting corn products in everything we eat for decades, because we always had more of it than we ever wanted. Its time to go on the grapefruit diet.
Posted by: ohrealy at January 20, 2008 06:43 PMI find myself agreeing with this. Why should we run full steam ahead until something else puts the breaks on.
Let’s apply some breaks now, before we have another depression.
Let’s examine corporate-personhood. Let’s examine the election process. Let’s examine the federal reserve.
Let’s examine the way we educate our children.
When we can finally admit our findings to ourselves we can do something about them.
Short Term Fixes: That’s what you here now in one form or another from almost every presidential candidate. These “fixes” mostly include tax refunds and or breaks.
Okay folks I’m no economist but my ole brain starting looking at this the way most would look at personal finances. WoW I am so deep in debt now that I cannot even see the light at the end of the tunnel, damn what am I going to do? Hmm let’s see, ah I will give back part of the money folks have paid me already. Basically this is what the politicos are saying. It does not sound like a good plan to me.
As a last thought, if we still had a debtors prison the US government would have been incarcerated a long time ago.
PS: My father never bought anything that he could not pay cash for and Americans have got to get off the credit card binge they are on.
Posted by: TBM at January 20, 2008 07:18 PMBruce Bartlett, an official in the Elder Bush’s administration, basically says the one time tax rebate probably won’t do much good because people will either pay down debt with it or save it.
He also mentions that tax cuts were taken off the table because of the effect they might have on inflation. It’s instructive to recall that of the three Republican presidents that went for tax cuts, two of them, Reagan and Bush 41 ended up raising taxes all over again to avoid a fiscal meltdown.
You pay for what you want, or you pay for trying to get a free lunch you didn’t earn.
Posted by: Stephen Daugherty at January 20, 2008 10:14 PMTBM,
Your dad bought his house cash? If so, I’m impressed. Of course, it could have just been a doublewide. My sarcasm is meant to question your assertion, not your dad. He sounds like a smart person.
The error you are making is the same one many make when talking about economics.
Personal debt and the macro economic effects of deficits are not the same thing and do not behave in the same ways.
It would really be worth your while to take an Economics 101 course or read a basic economics book at the library. It was this kind of thinking that led us into the depression.
Posted by: googlumpugus at January 20, 2008 10:50 PMGooglumpugus,
I question your assertion as to the cause of the depression. I seem to remember it being caused by a near total collapse of the stock market caused by overstretched margins and excessively depleted capital market.
In regard to personal debt, my dad was a product of the Depression (born 1910), and he as well as most of his contemporaries was extremely averse to personal debt. He had a couple of credit cards that he treated as debit cards, paying off the balances every month, paying the house off 12 years early, etc. He never went in debt for other than long term items, house or car, and always paid off as early as possible.
At the same time, he was a yellow dog Democrat who voted a straight party ticket for 50 years and never complained about government spending.
I think a lot of our contemporaries have somewhat the same attitude, except deby is much more acceptable to them. It looks like we are paying the price for wanting everything now and paying with plastic. nd the price is going to be excessively high.
Posted by: Old Grouch at January 21, 2008 06:58 AMAfter almost 80 years, there still is no clear consensus about the cause of the Great Depression. We know that the New Deal programs did not end it (some of the worst years were 1937-8), but we still really do not know how to avoid or even mitigate such a big downturn.
Politicians just like to spend money and give tax cuts. That is why they are jumping on the bandwagon. Government action like this is usually a bad idea. In fact, government action during the Depression probably deepened the downturn. But it gets votes.
Posted by: Jack at January 21, 2008 07:12 AMJack-
I agree that some of the New Deal programs may not have been all they were cracked up to be, but some served their purpose, including regulations that took investing and made it a much safer enterprise. Unfortunately, some people developed the theory that anything that kept people from making the money they’d like to make was an interference in the free market.
While, of course, giving tax cuts and running deficits was not. Not once have such tax cuts matched the magnitude of the revenues they lose with the revenues they gain. But of course, politics being what it is, nobody could resist throwing that nice counterintuitive, but oh so tempting promise out there, that you could have your cake and eat it to.
Not be to be too derogatory, but that’s been the basic means by which the whole Republican Economic policy has been sold. You folks said that if we let it, the market would police bad behavior, raise wages, raise benefits, solve healthcare, and so on and so forth. The market didn’t. Instead, it worked against people, and though it’s taken some time for people to really feel the effects, due to the vast availability of easy credit, they’re feeling it now.
That is why few people really ever bought your rosy forecasts. Wealth has an insulating quality to it, and its easy for wealthy policy makers and upper class citizens to write off the early signs of economic exhaustion, because they don’t feel things until the companies start suffering for the economic damage done to the middle and lower classes.
The rest of us have faced the rise in food prices, in gas and electricity prices head on. We dealt with the consequences of easy home equity loans, and subprime mortgages, of being laid off. It used to be that 40 hour work weeks and coming home in time to have a nice time with the kids was the norm, that it would be an extraordinary thing if you didn’t get a check-up from the doctor on a regular basis. People of my generation, particularly, have seen these declines in motion, and it angers us to be told that things are better than they use to be. We know better.
Things have gotten screwed up, and the lack of confidence from the average consumer is not the result of some abstract downturn, but a very real crisis of sustainability in our system. People are working too hard, for too little, with too many potential pitfalls like ill-health being able to entirely de-rail folks economically. As your generation ages, the wear and tear that this system imposes will only cause more problems for the economy.
Posted by: Stephen Daugherty at January 21, 2008 09:55 AMThe assertion that we do not know what caused the depression frightens me. There has been a concerted effort by politically conservative types in recent years to rewrite Keynesian economics.
It is sad that people are so far removed from the 1930’s to not understand the consequence of such BS. It IS well understood, by anyone with even basic economic understanding that the depression was caused by a serious monetary contraction. It was resolved by the massive spending and thereby increased money supply created by WWII.
Attempts to return to Taft or Hoover’s policies is unsound economics. Pure and simple.
Those that believe balancing the budget is a sound response to a contraction, simply do not understand macroeconomics.
This does not mean that sound fiscal or monetary policy is unrestricted spending.
Applying personal fiscal virtues to a macroeconomic policy is simple ignorance. Keynes is not the answer to everything, but he did understand the Depression, and created Macroeconomics. Please educate yourself, this kind of ranting is dangerous. Foolishness such as this WILL recreate the conditions for a depression.
Posted by: googlumpugus at January 21, 2008 10:33 AMStephen
The New Deal was an essential building block in the American character. Those programs united our country and probably made winning WWII possible. My father was in the CCC. He told me how they brought boys from all over America into the military style discipline and when he was drafted into the Army in 1942, he was immediately given a leg up because of his CCC experience.
The New Deal policies, simply, did not address the problems of the economic downturn. The economy was in as bad shape in 1937, after five years of New Deal, as it was in 1929. We also have a mistaken view of Hoover. Hoover was an interventionist by the standards of the times. He deployed government resources to address the problems of the economy too and spending grew rapidity under his administration.
What solved the Great Depression was WWII. Even the great liberal economist John Kenneth Galbraith quipped that Hitler solved the depression in Germany and then exported the recovery.
We made some good choices in the late 1940s, embracing free trade and enacting regulations appropriate for the times But nothing lasts forever. By the middle 1970s, the system conceived in the Depression and enhance in the post-war recovery was just running out of steam. We had outgrown many of the regulations.
We have just become so fantastically richer. The Economist magazine had a good article re pointing out the average wage earner in 1941 had the buying power of someone at today’s poverty line. That is how far we have come.
We can no longer lift people out of poverty because hardworking people have already lifted themselves. Our problems are now those of affluence. Our poor are overweight; our middle classes are burdened with big screen TVs and late model cars.
Googlumpugus
A monetary contraction. That is a lot like saying a guy died because he stopped breathing. What led to this monetary contraction and why didn’t it end for more than ten years?
Do you understand what caused the Great Depression and what made it persist until the advent WWII? Do you think it was the stock market crash in 1929. Was it (as Keynes thought) a consequence of the Treaty of Versailles and reparations? Did it come from the overproduction and subsequent collapse of the farm economy in the 1920s? Maybe it was because the Fed did not create liquidly and let banks fail. How did the gold standard affect international trade and how why did all that gold end up in the vaults at the Federal Reserve of New York? Did the Smoot-Hawley tariff really deepen it? Did the rise of fascism exacerbate the downturn? Did the extraordinarily bad weather of the middle 1930s keep it going?
And if you want to educate yourself and me, tell me which of the New Deal programs recreated a growing economy?
If you really know what caused the Great Depression, you are the only one who does and you might do the world a favor by enlightening us as to the definitive cause and the solution to our economic woes in general.
You also do know, of course, that the economic policies of Taft and Hoover were very different. Hoover’s economic policies were a lot like Roosevelt’s, just less expansive. Taft was only Vice President during the Panic of 1907, when the stock market fell by almost 50%. The Federal government didn’t do much of anything about that. I suppose that was the Taft policy. Maybe that is why the country recovered the next year.
The Panic of 1907 helped create the conditions for the Federal Reserve in 1913. In 1929, the Fed did not do its job right. They are responsible for the monetary contraction part of the equation. Today the Fed is adding liquidity. This is good and probably sufficient to handle the current unpleasantness. If the politicians get into the give away mode, we will have troubles.
This is the aricle from “The Economist”. As usual, it is thoughtful and a little iconoclastic. Maybe a little too iconoclastic and thoughtful for those who know it all already and are just looking for supporting arguments.
Posted by: Jack at January 21, 2008 12:13 PMOur poor are overweight; our middle classes are burdened with big screen TVs and late model cars.
How I love glittering generalities. What hogwash.
Posted by: womanmarine at January 21, 2008 12:25 PMwomanmarine,
Not glittering generalities, just unpleasant truth. Check out the data on personal debt by income level and the NIH/CDC report on the growing obesity crisis in the US.
The smirking chimp told us to give all our money to the rich!!!!!!!!
They will take care of all of us!!!!!!!!!
We did what he said and now everything is great!!!!!!!!!
It does not get any better than this!!!!!!!!!
The wing nut economic policies always get the same results!!!!!!!!
Remember the roaring 30s and 80s!!!!!!!!!
Even my stocks are doing great in this wing nut boom!!!!!!!!
My house is worth less now than when I bought it!!!!!!
Now is the time to live it up!!!!!!!!!
Jack,
I do know. It was the monetary contraction.
It doesn’t matter what caused the contraction, When dying of a heart attack, it doesn’t matter if the cause was a big scary monster or too much butter in your diet.
What matters is expanding the money supply.
The New Deal did not restore the economy, because it was too little, too late. It did have some moderating effects. What fixed it, and finally convinced the world that Keynes understanding of aggregates was correct, was the war effort.
Jack said, “You also do know, of course, that the economic policies of Taft and Hoover were very different. Hoover’s economic policies were a lot like Roosevelt’s, just less expansive. Taft was only Vice President during the Panic of 1907, when the stock market fell by almost 50%. The Federal government didn’t do much of anything about that. I suppose that was the Taft policy. Maybe that is why the country recovered the next year.”
Huh? Jack you are confusing a number of things here. The most significant is that the stock market crash caused the depression or any depression, and that Hoover and Roosevelt shared economic policies. They both were capitalists, other than that, I have no idea what you are talking about.
I’m beginning to understand why conservatives have been such failures in economics.
Posted by: googlumpugus at January 21, 2008 03:46 PMBTW, Jack,
It’s not a secret that monetary contractions and expansions are what create the business cycle. It’s what most central banks spend all their time analyzing and why we’ve had unprecedented expansion and stability of economies around the world.
I know it’s not popular in conservative circles to spread little facts around like that, it’s much better to blame anti capitalist legistlation and socialist policies and those “loose” morals on economic woes. It fits in with their propoganda.
Posted by: googlumpugus at January 21, 2008 04:00 PMWhat fixed it, and finally convinced the world that Keynes understanding of aggregates was correct, was the war effort.
No, what fixed it was the relaxing of international trade and attacks on business. The war effort just got us to where we could get beyond the problems that were created.
Even though Keyes was proven wrong, its still amazing that he is so widely listed has right. His view was that the massive deficit spending was needed, but he also said that the reason for this was because we could not expand economically anymore, that we had hit a wall.
His prediction, based on his views, that we would fall back into a depression once the war was over was WRONG. His views were WRONG.
Had the trade barriers and attacks on business still been around after the war, he would have been right and we would have fallen back into a depression because those were the things keeping us from recovering, not the inflationary practice of deficet spending.
A lesson we refuse to accept today, one we will repeat by continuing to spend ourselves into bankruptcy.
Posted by: Rhinehold at January 21, 2008 04:59 PMPerhaps the eloquent words of Thomas Jefferson best sums up the founder’s outlook toward corporations. . “I hope we shall take warning from the example of England and crush in its birth the aristocracy of our moneyed corporations which dare already to challenge our Government to trial, and bid defiance to the laws of our country ”
http://www.spiritone.com/~gdy52150/corplaw.htm
One of the most damaging acts to ever occur in this country was the case of Santa Clara County v. the Southern Pacific Railroad Company in 1886, in which the Supreme Court gave corporations many of the rights and protections of an individual, but not the responsibilities of an individual. This has paved the way for untold greed and exploitation.
http://www.riinsrants.info/culture/
..in 1978 the Supreme Court ruled in First National Bank of Boston v. Bellotti that corporations have a First Amendment “right” to influence ballot initiatives and other political campaigns.
http://www.pbs.org/now/politics/corprights.html
As Ishmael’s pupil asks when Ishmael has informed him that those who want to save the world from destruction by humanity are unable to do so because they cannot find the bars to their cages: “What do we do next?” While the agenda for action in arenas we the people define is long, complicated and still unfolding, a good place to begin is to take away corporate personhood. That means working toward the reversal of Santa Clara, and for those who say it cannot be done, I would remind them that for half a century “separate but equal” was established judicial doctrine.
Our political democracy is indeed mythical; we live instead in a plutocracy in which the rich with wealth accumulated more often than not through corporate mechanisms are effectively dominating, if not controlling, the electoral process. Reversing Santa Clara will not restore our democracy overnight, but getting corporations of all kinds — large and small, profit and non-profit — out of politics will go a long way toward doing so.
“What if…,” asks Jane Anne Morris of Democracy Unlimited in Wisconsin, who may be the only corporate anthropologist at large in North America:
**corporations were required to have a clear purpose, to be fulfilled but not exceeded.
**corporations’ licenses to do business were revocable by the state legislature if they exceeded or did not fulfill their chartered purpose(s).
**the act of incorporation did not relieve corporate management or stockholders/owners of responsibility or liability for corporate acts.
**as a matter of course, corporation officers, directors, or agents could be held criminally liable for violating the law.
**corporation charters were granted for a specific period of time, like 20 or 30 years (instead of being granted “in perpetuity” as is now the practice.)
**corporations were prohibited from owning stock in other corporations in order to prevent them from extending their power inappropriately.
**corporations’ real estate holdings were limited to what was necessary to carry out their specific purpose(s).
**corporations were prohibited from making any political contributions, direct or indirect.” (Rachel’s Environment and Health Weekly, #488, April 4, 1996)
Posted by: Weary Willie at January 21, 2008 05:07 PMMy understanding of the Great Depression comes from my own family. They always said that the depression preceded the stock market crash when banks started closing, and ended when Roosevelt became POTUS and straightened out the banking system. Jack has already mentioned the other factors involved. I always thought we needed to go back to having a Bank of the United States.
Several years after WW2, Ford Motor Company was basically bankrupt, but they were not allowed to go under because bankers did what needed to be done to keep them in business. A lesson was learned from the depression. It is only since that generation has started dying out that we are forgetting it again.
Posted by: ohrealy at January 21, 2008 06:12 PMWWII:
1) boosted American industrial productivity.
2) reduced the available supply of consumer goods.
3) vastly increased American saving.
4) weakened the European industrial base.
5) destroyed or weakened the European colonial empires, which were protectionist economic environments.
6) And perhaps most importantly, gave millions of Americans the opportunity and wherewithal to attend colleges and trade schools.
And that is by no means an exhaustive list of what WWII did.
What the reforms of the Great Depression did, though was scare people into defining the trustworthiness, and not merely the current profitability of a business as a virtue. It also inspired people to put the ball in their own court, rather than leave policy the province of special interests. Businesses seeking the profit of their short term interests can often do things that are foolish or inordinately risky over the long term.
clarancec-
I think your argument boils down to “don’t listen to Steve because he’s a smartypants who thinks too much of himself”.
The best way to show me up as just some kid spouting off ivory tower academics, though, is to argue my points on the facts.
If you can’t, then why should people reject what I’m saying, and embrace your sensibilities?
Posted by: Stephen Daugherty at January 21, 2008 07:55 PMHow many Watchblog Solutions have been seen in policy or debate?
1. I spent an entire weekend on this computer formulating a response to one question:
When is the President of the United States allowed to be a dictator?
I surched and copied and pasted until I had a response.
Monday, the next night, on C-span, I see Arlen Specter and his counter part debating this very issue and the debate was very near verbatim the discussion on Watchblog.
I,wink, Watchblog does make a difference.
Rhinehold,
Of course you are completely right. That is why monetarism is completely dead. No central banks believe money supply has any significance whatsoever. Keynes was really an idiot. No, really.
What a load of BS.
You are engaging in exactly what endangers our economy and fosters a repeat of the Depression.
Yes, trade policies and economic ebviroments matter…but that doesn’t cancel out money supply or supercede it.
Keynes wasn’t wrong or proven wrong. There WAS NO contraction of money supply after WWII. Keynes wasn’t a political prognosticator. He wasn’t someone with a solution to everything. He WAS an economist who created Macoeconomics.
Of course we’ve had no restrictive trade policies in the ensuing 60 years since WWII, and no business cycles. There have been no liquidity crunches and no Federal Reserve responses.
Voila, Rhinehold has proven Keynes wrong and solved economic theory. It’s all about restrictive trade. Well that and the Constitution violations. You’re a genius and savior. How come the Central Banks don’t agree with you?
Wow, googlumpugus, you’ve certainly given my statement a lot more weight than intended…
I said that Keyes was wrong about the notion that money supply is all that is needed to fix the depression. His notion, which was wrong, was that we had reached the end of capitalist expansion, that we would not see growth anymore unless it was done through defecit spending.
Are you saying that was a correct statement?
That doesn’t mean that EVERYTHING he said was wrong, or that the field of economics is 100% mistaken, etc. Only that the idea that we can just spend ourselves out of harsh economic times, which is what our current administration is suggesting again, does not SOLVE anything. It just gets us along to a point where we can solve the issues.
Of course we’ve had no restrictive trade policies in the ensuing 60 years since WWII,
None like we saw during the Hoover and Roosevelt administrations, no. No where near.
As for the ‘Central Banks’ not agreeing with me, let’s look at a quote:
The United States currently has the highest combined statutory corporate income tax rate among OECD countries. Bill Archer, former head of the House Ways and Means Committee, asked Princeton University Econometrics to survey 500 European and Asian companies regarding the impact on their business decisions if the United States enacted the FairTax. 400 of those companies stated they would build their next plant in the United States, and 100 companies said they would move their corporate headquarters to the United States. In addition, the U.S. is currently the only one of the 30 OECD countries with no border adjustment element in its tax system. Proponents state that because the FairTax is automatically border adjustable, the 17% competitive advantage, on average, of foreign producers would be eliminated, immediately boosting U.S. competitiveness overseas and at home.
Our trade deficit is disturbing and definately a factor in what is going on in our economy. It is simply cheaper to send our jobs overseas than to keep new plants here in the US. If we would address this issue I believe that our economy would expand much more than it is now, and I don’t think I’m alone in that, “Eighty economists, including Nobel Laureate Vernon L. Smith, wrote an open letter to the President, the Congress, and the American people, stating that the FairTax would boost the United States economy.”
So you can act like a spoiled child that someone questioned the INFALLABILITY of Keyes, but yes he was wrong in some of his assumptions.
Posted by: Rhinehold at January 22, 2008 12:54 AMYou are engaging in exactly what endangers our economy and fosters a repeat of the Depression.
How so, exactly? Am I suggesting the implementation of another Smoot-Hawley Tarriff? Am I suggesting we allow banks to fail or not be insured?
What exactly am I ‘engaging in’ that will set us into another depression, other than daring suggest that Keyes isn’t all-knowing?
Posted by: Rhinehold at January 22, 2008 01:19 AMOK I give would somebody please educate me here. Why is it lately that every time a post is made on the current economic conditions and the repubs role in causing these conditions since the ‘80’s we end up on how the dems lengthened the duration of the depression?
Is it some kind of bait and switch thing or am I missing something here?
Rhinehold-
First, what makes you think you’re escaping Keynesian economics? The tax cuts are basically a variation on that theme, intentional deficit spending meant to stimulate the economy, prime the pump. The main difference is that people like you are told that somehow things will magically balance themselves through increased growth. The only difference between you and a Keynesian is that you’re being unrealistic about where the money’s coming from.
I don’t think that our problem in this country is that people are overtaxed. I think our problem is that people are underpaid, and overbilled, that easy credit has allowed prices to rise faster than people’s ability to pay them without going into debt. The other problem is that we’ve made it more difficult to get an accurate reading of what this is doing to the economy. We’re focusing on high-end numbers that have more to do with investors and their sentiments than the conditions among what is supposed to be the foundation stones of our economy, the middle class.
The “FairTax” stuff is questionable at best. The rates are advertised to be exactly at the percentages that the focus groups found people would support. That, however, is not necessarily a revenue neutral number. Either the so-called “FairTax” increases, which would have a greater effect on the poor and middle class, with their greater need for the money they got, or you deficit spend, in which case you start building up debt that threatens inflation or tightens the money supply by raising interest rates.
The “Fair Tax” is trying to get something for nothing. It’s trying to replace taxes biased towards the middle class and poor with those biased towards the rich, and sell people on a fairy tale that as it’s never done before, such a tax “relief” will stimulate the economy into record growth.
America needs to resolve the problems underlying its current economic decline, not create new ones by piling on further debt to satisfy radical tax-dodgers.
Posted by: Stephen Daugherty at January 22, 2008 09:17 AMWeary Willie “One of the most damaging acts to ever occur in this country was the case of Santa Clara County v. the Southern Pacific Railroad Company in 1886, in which the Supreme Court gave corporations many of the rights and protections of an individual, but not the responsibilities of an individual. This has paved the way for untold greed and exploitation.”
Weary, truer words were never spoken.
what makes you think you’re escaping Keynesian economics?
When did I say I was?
The main difference is that people like you are told that somehow things will magically balance themselves through increased growth.
People like me? I’m the one on here not calling for tax cuts, wanting us to focus on decreased spending and cutting our debt. I guess one of us confused to what I am saying…
The “FairTax” stuff is questionable at best. The rates are advertised to be exactly at the percentages that the focus groups found people would support.
What a load of crap that you simply can’t back up. It was determined by research by competent economists. The documentation is available to anyone to read, though most often it doesn’t get read because talking points and partisanship is more important to some people.
The “Fair Tax” is trying to get something for nothing.
No, it’s trying to find a less onerous way of funding our national government by taxing something that people have a choice in and don’t require them to provide information to the government that they don’t need. It is a way to help people avoid some taxation when they are in hard months so that they can take care of their family on their own and make up for it when they get back on their feet. It is a way to help eliminate the problem with embedded taxation that we all pay but can’t see accurately. It is a way to actually eliminate the tax burden of the poor, something an income tax is incapable of doing because of those embeddeed taxes.
It’s trying to replace taxes biased towards the middle class and poor with those biased towards the rich
Really? Because I thought the income tax we had now was biased towards the rich already? Isn’t that what the Democrats tell us?
The FACT is that the poor will pay no tax under the Fair Tax unlike any income tax scheme. The rich will pay more as a result of purchasing new instead of used as the middle class may.
, and sell people on a fairy tale that as it’s never done before, such a tax “relief” will stimulate the economy into record growth.
No where have I said that the Fair Tax was ‘tax relief’ or that we should be utilizing tax relief? I am definately not saying that.
I think you are debating someone else…
But it would tax visitors and illegal aliens that are getting by with a free ride now, again something that no income tax scheme could do. And it would bring businesses back here instead of sending them overseas, which would boost our economy.
What is your suggestion to fix our economy other than ‘priming the pump’ ala Keynes? How on earth does that help our HUGE MOUNTING DEBT at a time when we are technically bankrupt!?
America needs to resolve the problems underlying its current economic decline, not create new ones by piling on further debt to satisfy radical tax-dodgers.
What? Seriously? {Content deleted to pass Watchblog standards}.
And as a result, you and your ilk are going to continue to run our country into the ground, which is already bankrupt, until we become citizens of New China. It will most likely happen by 2040…
Posted by: Rhinehold at January 22, 2008 01:11 PMhow the dems lengthened the duration of the depression?
It wasn’t the Dems, it was FDR. He had a lot of opposition in his own party and had the war not come about it is very likely he would not have won re-election in 1940.
The idea of attacking business and attempting to confiscate all new wealth at a time when there is such high unemployment is something that even most democrats can accept as bad practice…
Posted by: Rhinehold at January 22, 2008 01:15 PMRhinehold-
My Ilk? I’m sorry, but my party has been counseling fiscal discipline all along. We liked the balanced budget. We liked being the party that could keep a rein on its spending, not go on a reckless shopping spree. In principle the Republicans are the tightest tightwads, the champions of smaller government. In reality, the results have actually tended to move in the other direction. We paid down deficits, balanced budgets, even reduced spending. We would sometimes raise taxes, but you know something? Taxes are less of economic problem than inflation. With lower taxes, you might keep more of your money, but without getting people to agree to simultaneous spending cuts, which your natural allies never do, it’s irresponsible, and it ends up taking with the left hand of inflation what it gives with tax cuts.
The Fair Tax is not fair. When FactCheck.org Looked at it, they found the following:
1)Rates would have to rise to a real tax rate of about 34-39% This would be an increase in real tax rates for most people.
2)Everything would be taxed, even the interest we are charged. Taxation would intrude even in places once considered exempt. Any exemption would require an offset in the overall rate.
3)More of the tax burden would fall on the Middle Class, even by the Fair Tax proponent’s own admission.
4)The Fair Tax only works if it’s revenue neutral, and if it’s revenue neutral, nobody’s really keeping any more money than they already were. The only thing that would make all these goods and services cheaper are paycuts. Given the nature of the tax, it’s not a fair deal for Americans who currently pay less under the current system.
And let’s really examine what might make the current system seemingly unfair and over-complicated? Could it be years of tax shelters written into the law? Could it be all the different little tax breaks that Republicans use in the place of subsidies, or right along side them? The complications in taxations rise from the unwillingness of some of the well-to-do to pay the greater share, a greater share their incomes makes relatively painless.
The so-called Fair Tax only reinforces precisely what most people would think unfair about the current tax system: the lower share the rich pay.
As for getting rid of the IRS, tell me something: who’s going to manage the huge bureaucracy required to actually administrate this tax? I mean, this is not going to be easy in the least. How is the Federal government going to get a chunk out of just about every transaction every American makes, without some kind of centralized or distributed service of Bureaucrats.
If we go with your plans, things will likely go exactly as I’ve said: we will pile on more debt to satisfy radical tax dodgers.
You either raise taxes, with a greater burden falling on the middle class, and that money leaking from every pore of our economic lives, or you run huge deficits.
What we really need to do is get our current system revenue neutral, stop spending more than we take in. We need to dump the Iraq war, discipline spending in the Pentagon (which I think people have been just cowardly about) and start taking care of the real problems in our economy, rather than nursing grudges against the tax-man.
Posted by: Stephen Daugherty at January 22, 2008 02:38 PMWe need to decide what our economy needs to do…grow constantly or serve all our people…infinte growth has its consequences…do we need “more” or do we want to be “better”…do we need “stuff” or do we need family & community and clean air/water???
Posted by: Rachel at January 22, 2008 02:56 PMFactcheck.org got several things wrong and have been responded to (I noticed you didn’t mention or include AFT’s responses from the factcheck.org website), let me explain.
1)Rates would have to rise to a real tax rate of about 34-39% This would be an increase in real tax rates for most people.
This is based off of President Bush’s administration numbers. Something to take seriously, hmm?
AFT says this about that (god I love the Kennedy quote…)
Does the FairTax rate need to be much higher to be revenue neutral?The proper tax rate has been carefully worked out; 23 percent does the job of: (1) raising the same amount of federal funds as are raised by the current system, (2) paying the universal rebate, and (3) paying the collection fees to retailers and state governments. Unlike some other proposals, this rate has been independently confirmed by several different, nonpartisan institutions across the country. Detailed calculations are available from FairTax.org.
BTW, How did AFT respond to Factcheck.org, which you didn’t include?
FactCheck has also relied upon unnamed sources, as well as the discredited President’s Advisory Panel on Federal Tax Reform, to wrongly conclude that the FairTax uses unsound accounting principles to arrive at the FairTax rate. Those more familiar with the science (and art) of economics accept that all conclusions in economics are conditioned upon assumptions and that much debate surrounds each assumption. But FactCheck skips over the point and counterpoint of the debate on whether taxing the government, as just one example, is sound (as is currently practiced at the federal level with FICA taxes and every purchase) and accepts unnamed critics’ contentions that this (and other methods) is not only unsound but that the FairTax did not take the apparent (but illusory) required increase in federal spending into account when calculating the FairTax rate. Inexplicably, FactCheck rejected the assurance by our chief economist that both revenues and spending were carefully accounted for and, instead, posits that an “accounting trick” is employed despite the fact that this assertion has been vigorously proven wrong in debate and published study.
Oh, and http://www.beaconhill.org/FairTax2006/TaxingSalesundertheFairTaxWhatRateWorks061005.pdf for example.
Some people will not listen to a highly researched and heavily backed, be economists, plan as being valid and instead will look for anyone for contrary evidence. It’s a lot like the ‘flat-earthers’ that I hear about in the environmental arena of debate…
2)Everything would be taxed, even the interest we are charged. Taxation would intrude even in places once considered exempt. Any exemption would require an offset in the overall rate.
Yes, this is true. There would, and should, be no exemptions. Though I’m not sure why ‘interest we are charged’ would be taxed, as it is not a new good or service, but if it falls under those subjects…
3)More of the tax burden would fall on the Middle Class, even by the Fair Tax proponent’s own admission.
There is a lot in that statement that would need to be addressed by a very long reply, I’ll let AMT’s rebuttal stand for now but would welcome honest debate about the topic, if that is actually sought after.
Similarly, can a proposal that entirely untaxes the poor but also offers the elimination of the corporate income taxes and capital gains taxes be fairly described as “regressive”? FactCheck embraces one traditional view, wrongly applied in this case, that any tax proposal that does not impose higher rates on the wealthy can fairly be described as “unfair” or even “regressive.”In our view (and that of many economists), the true measure of the fairness of a tax is not what the rate may be but rather how much wealth each income segment, at different periods of life, has left to spend on itself after taxes are paid. By this measure, the FairTax is the only tax proposal that actually increases the purchasing power of every income segment while delivering the greatest improvement to the poor, the second greatest improvement to those in the middle class, and the smallest – but still significant – relative improvement to those at upper-income levels.
This calculation, unlike critics’ flawed descriptions of retail consumption taxes, incorporates the “progressive” benefit of eliminating the FICA taxes, looks more deeply at spending at different periods of a citizen’s life, and takes into account the elimination of not only the significant cost of compliance with the complexities of the income tax system but the FairTax effects of lower interest rates, elimination of downward pressure on wages, untaxing capital accumulation, investment, and growth. Although all of our $20 million of research was made available to FactCheck.org, the article relies on critics’ contentions to the contrary for its assessment of “who benefits,” largely without disclosing those critics’ assumptions or research. We flatly reject as flawed FactCheck’s narrow conclusions of who benefits under the FairTax.
BTW, the independant study backing this up (and d.a.n. refused to review) which finds “Compared with our existing federal tax system, the FairTax, as proposed in H.R. 25/S. 25, would significantly reduce marginal taxes on work, dramatically reduce marginal taxes on saving, and substantially lower overall tax burdens on current and future workers. Moreover, it would do this without limiting tax progressivity. Indeed, the FairTax would make our tax system more progressive.” is located at: http://people.bu.edu/kotlikoff/Comparing%20Average%20and%20Marginal%20Tax%20Rates%2010-17-06.pdf
4)The Fair Tax only works if it’s revenue neutral, and if it’s revenue neutral, nobody’s really keeping any more money than they already were. The only thing that would make all these goods and services cheaper are paycuts. Given the nature of the tax, it’s not a fair deal for Americans who currently pay less under the current system.
This makes almost no sense. Yes, it would be revenue neutral and no, people would not be ‘making more money’. The poor would be paying absolutely no taxes instead of now. I find it interesting that you are against this notion somehow…
And let’s really examine what might make the current system seemingly unfair and over-complicated? Could it be years of tax shelters written into the law? Could it be all the different little tax breaks that Republicans use in the place of subsidies, or right along side them? The complications in taxations rise from the unwillingness of some of the well-to-do to pay the greater share, a greater share their incomes makes relatively painless.
It also has to do with trying to do as you suggested in an earlier thread, use the government to ‘drive society’ into doing what you want it to do. THIS is what makes it the most complex IMO. Attempt to force behavior, people find a way around, attempt to fix that hole, people find a way around, etc. Instead of either taxing at a flat rate or not taxing income at all, what we have now as a result of both Democratic and Republican mindnumbing idiocy in regards to how people view taxes is a broken mess of oppressive taxation that accomplishes nothing for either side but promises enough to either side that they are both willing to fight for it to remain.
As for getting rid of the IRS, tell me something: who’s going to manage the huge bureaucracy required to actually administrate this tax? I mean, this is not going to be easy in the least. How is the Federal government going to get a chunk out of just about every transaction every American makes, without some kind of centralized or distributed service of Bureaucrats.
Again, from the fairtax FAQ
Retail businesses collect the tax from the consumer, just as state sales tax systems already do in 45 states; the FairTax is simply an additional line on the current sales tax reporting form. Retailers simply collect the tax and send it to the state taxing authority. All businesses serving as collection agents receive a fee for collection, and the states also receive a collection fee. The tax revenues from the states are then sent to the U.S. Treasury.
Of course, then you remake your incindiary statement
If we go with your plans, things will likely go exactly as I’ve said: we will pile on more debt to satisfy radical tax dodgers
Those poor, trying to dodge taxation, they should be put in jail!
What we really need to do is get our current system revenue neutral, stop spending more than we take in. We need to dump the Iraq war, discipline spending in the Pentagon (which I think people have been just cowardly about) and start taking care of the real problems in our economy, rather than nursing grudges against the tax-man.
It has less to do with ‘nursing grudges’ than it does in trying to create an atmosphere where people see the taxation they pay and being able to actually eliminate the tax burden on the poor.
I know, you have no interest in this, but assigning machevlian motivces to people who are trying to do what they think is the best thing for the poor in this country, is little different than those you rail about who claim democrats are ‘tax and spenders’, which you cry and bemoan about.
The simple fact is that when the discussion gets to those tactics (ie, selfish, nazi, racist, etc) it usually means the one calling the names has run out of legitimate arguments…
As for the Democrats being the purveyors of fiscal responsibility, it’s almost as if I’ve walked into a twighlight zone… It has been the ‘backroom deals’ of the Republicans and Democrats that have put us into bankruptcy, it didn’t just happen overnight and it didn’t just happen in the past 6 years.
How do you expect to raise the pay of everyone in the US, offer healthcare for all (and pay the unfunded mandates that would result) and ensure that business doesn’t just pass that increased tax burden back down onto the poor and middle class exactly?
No? Didn’t think so…
Posted by: Rhinehold at January 22, 2008 03:43 PMRhinehold,
Your responses are much more reasoned than your original notion that Keynes had it all wrong. Keynes did have some things wrong, but mostly he was correct. I’m glad you haven’t rejected Monetarism entirely, which evolved from Keynes work. There are those among Libertarians who do reject it. They are dangerous, in my opinion.
I do not agree with your analysis of the Depression. It was largely increasing the money supply that reversed the contraction. We’ve argued this before. Yes, restrictive trade and business policies did contribute to the depression, as they acted to further restrict money supply. But the largest factor was the psychology of hope and stability that a stable money supply creates. Work is work. Product is product. Money is paper that should reflect a reasonable relationship between the two. None of these things acts in a vacuum, which is why markets aren’t so easily predictable or stable.
Keynes was correct about aggregates and the artifice of a monetary system. A deficit is meaningless when it is money owed to one’s self. That being said, there are psychological factors to economic cycles that do not follow these principles. My biggest fear with the balanced budget types is exactly the mistake I see many people in this thread and in economic discussions make, which is that they equate national budget discipline with household budget discipline. They are simply not the same animal and do not behave in the same ways. Hoover and even Roosevelt fell prey to these misconceptions. Many politicians use that metaphor to blast incumbents.
Keynes notions of spending your way out of a depression were dead on for his time. He had to overcome great resistance to this idea. It was a lack of understanding of this concept, that deepened and prolonged the depression.
We’ve thus far avoided another depression, inspite of bank runs and serious contractions because central banks have adopted Keynes ideas regarding money supply.
Restrictive trade is well understood as a barrier to expanding economies. The problem with trade though it involves parties of differing interests, and does not always result in win-win situations. Sometimes wars even happen, like WWII.
You are correct that irresponsible credit and hidden taxation through monetary policy are damaging to an economy, but it can be equally wrong to overreact when trying to correct these issues. Stability is in everyone’s interest.
I am disturbed by the obsessive belt tightening rhetoric I hear in politics today. A more appropriate dialogue would be responsible and moral leadership in business. A business that does not benefit the society it exists in, even more than it benefits it’s investors is a drag on the economy. This takes us back to Adam Smith’s ideas on Capitalism.
Posted by: googlumpugus at January 22, 2008 06:08 PMStephen, Rhinehold and anyone else who is interested in how our tax system is continually being rigged to only benefit the wealthy, I have a few book recommendations for you.
Two books from David Kay Johnston:
Perfectly Legal : The Covert Campaign to Rig Our Tax System to Benefit the Super Rich—and Cheat Everybody Else
And:
Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill)
The first book is about the inflow of tax dollars and of how our tax system takes from the middle class and the poor and funnels the majority of our money to the rich. The second book is about the outflow of money from the government — of how our government directs spending to benefit the wealthy. How they often do so without ever actually cutting a check that would make us all aware of exactly what they are doing.
Basically, the two books focus on a whole series of laws and rules and regulations (that most people know nothing about) that enable many corporations and the very rich to cheat us out of most of what we should be getting in exchange for our taxdollars. Often it is simply a clear-cut case of the rich blatantly stealing from us, raising the prices of everything on us, and giving nothing at all in return. A truly blatant example of this that many people are aware of is how Blackwater and Halliburton have been shamelessly stealing our taxdollars in Iraq.
Be aware however, if you are middle class or poor and you read these books, you are sure to become enraged. I know I did.
One book from Thom Hartmann:
Screwed: The Undeclared War Against the Middle Class - And What We Can Do about It
Thom Hartmann, as many on the left know, is a great radio talk show host and writer, and highly intelligent Liberal Democrat. Hartmann, just like Johnston in the other two books, is very much aware that all this cheating and stealing that has been going on is frequently a bi-partisan outrage. While the GOP is absolutely shameless about stealing our tax dollars to benefit the wealthy, a significant portion of Democrats are also guilty (because of course, these are people of their own class, and who donate large sums to their political campaigns). This is why, despite their claim of being the party that best represents the interests of the working poor and middle classes, a certain number of Democratic politicians will often be seen saying one thing, but voting right along with the Republicans in just large enough numbers to get legislation passed that is intended to benefit the wealthy or actually allow them to steal from us.
To become aware of who these politicians are, liberals need to ignore much of the rhetoric that spills from their mouths, and instead begin keeping track of exactly how these people vote on a whole variety of issues. This really is the only way to become aware of who is who among the Democrats since the rhetoric and the votes often don’t match up.
Btw, politicians (such as the Clinton’s) who have done things like champion NAFTA are exactly the kind of politicians who should not be trusted by Democrats who like to see our members of Congress voting to protect the interests of the poor and middle class.
I for one am a Democrat who would NOT like to see taxes be continually raised on the middle class in order to get the things that we need and want. I think we are already paying plenty, even though we are only getting a pathetic fraction of what we should be receiving in exchange. Therefore, I don’t think “raising taxes on the wealthy” is what it should be called, but rather taking our money back from the thieves who have been stealing from us for at least the last twenty years.
Posted by: veritas vincit at January 22, 2008 07:41 PMgooglumpugus:
Keynes was correct about aggregates and the artifice of a monetary system. A deficit is meaningless when it is money owed to one’s self. That being said, there are psychological factors to economic cycles that do not follow these principles. My biggest fear with the balanced budget types is exactly the mistake I see many people in this thread and in economic discussions make, which is that they equate national budget discipline with household budget discipline. They are simply not the same animal and do not behave in the same ways. Hoover and even Roosevelt fell prey to these misconceptions. Many politicians use that metaphor to blast incumbents.
I agree with much of your sentiment. Household budgets and national budgets are two different animals. For one thing nations have very long lives. They become young or old again depending on many things from birth rates, to immigration to plagues and war!!
I would not go so far as to say deficits are meaningless. Deficits effect the soul. It’s a measure of fiscal discipline. I am comfortable with our current debt load (USA). It would be fine with me if deficits were such that they were managed in such a way as to increase the debt/gdp in times of recession/depression/war, and then decreased as a percentage of gdp in expansions, and peace time.
One of the benefits I see in responsible deficit/debt management is a reduction in the standard deviation of the economy. Responsible debt management works like a shock obsorber by paring down the highs and lifting the lows.
On a larger scale I don’t believe our government borrowing has been nearly as irresponsible as our government spending. Spending and waste is an entirely different animial.
Posted by: Craig Holmes at January 22, 2008 10:19 PMRachel:
We need to decide what our economy needs to do…grow constantly or serve all our people…infinte growth has its consequences…do we need “more” or do we want to be “better”…do we need “stuff” or do we need family & community and clean air/water???
I think we are getting treated to one of the best campaigns in a long time. This is exactly the essense of what is beling debated.
Posted by: Craig Holmes at January 22, 2008 10:22 PMRhinehold-
The 34% number is not off of the Bush numbers, but off of the Fair Tax numbers, properly interpreted. As FactCheck explained it, The FairTax advocates figure the percentage this way:
23+77=100 means a 23% tax. They figure the percentage of the sales tax from its proportion to the final value.
But, nobody figures sales tax that way. If we figured the tax rate, as a percentage of the original price of the item added to it, the $23 of tax would amount to 34% of the original value. As for the higher number, that isn’t Bush administration, either. That’s Brookings Institution.
You bring out that item about 80 economists, and my first response is to ask how many economists currently live within our borders.
So let’s see: According to the Department of Labor approximately 15,000 people are employed as economists in this country. Assuming your numbers reflect actively employed and working economists, you’re citing the support of a little over half a percentage point of all the professionals in the business.
As for who would be given an advantage or disadvantage?
AFT’s Burton agreed that those earning more than $200,000 would see their share of the overall tax burden decrease, admitting that “probably those earning between $40[thousand] and $100,000” would see their percentage of the tax burden rise.
Not to quibble or anything, but those between 40,000 and 100,000 represent a big chunk of the middle class.
As for my fourth point? It’s pretty simple: you can’t get something for nothing. If the Fair Tax replaces every dollar coming from some other tax with another dollar, you would end up paying the same in taxes. And no, the poor already pay no taxes on their income, if not negative taxes, due to the EITC. It’s funny that you’d find me against at notion that by definition I’m already for.
As for economic policies? What I’m big on is government as a force for clarification and disclosure, for keeping Businesses from employing byzantine schemes to hide assets or liabilities, for preventing them from getting into conflicts of interests, and for occasionally pushing technological development and scientific endeavors that are in the common interest.
I’m big on consumer protections, on environmental protections, on government protecting the people’s interests, rather than simply siding with corporations and molly-coddling them. But I believe the more elegant and simpler the law is within reason, the easier it is for the law to succeed at its goal.
There’s this woman named Temple Grandin, an Autistic who has helped to design about a third of the slaughterhouses in the country, and she put forward an interesting point of view: instead of drowning people in regulations, put together control points. She points to a maze of regulations about what kind of surfaces that could be used in slippery places in the slaughterhouse, and she says, that what they should really do is score the system on whether it succeeds or fails to do a certain significant thing. If a cow slips in a trough, the surface has failed. How the business solves the problem is up to them; that they must is not.
To me, it is no big deal to leave the means of meeting obligations up to the companies. But they should have certain obligations to the public, because the alternative is a conflict between business and society that ultimately ends in things being worse for both.
The conservatives have caused a lot of pain for themselves and for their special interests by allowing this state of affairs to go on; the injustices and greivances have soured an entire generation, not to mention the mood of the country, on the notion of giving corporations leeway on regulation and other things. People are acting in their interests, so long defered, and are angrier for the fact that they weren’t listened too or heeded earlier when things were better and the problems not so critical.
The tax situation is one example of where Bush did not listen. Most people were more concerned about the effects of excessive deficit spending than they were about unfair taxes. The average person is not that mad at the IRS. Sure, it’s an inconvenience, but most people don’t obsess over it, don’t display this hypersensitivity to not keeping every dollar they make.
As for your argument about the poor? See above, but I think you should be ashamed of chiding me about name calling when you’ve already decided to assume (wrongly, on the facts) that I believe in taxing the poor a lot. Currently they pay no income tax; payroll taxes are their main concern, and the Earned Income Tax Credit does a lot to make up for that.
As for the rest? We’ll think of something, but it will probably be better than this Fair Tax of yours. As a person who used to be a Republican, I can understand a dislike of high taxes. But the kind of tax phobia that’s developed over my lifetime within the party, and within some outside of it strikes me as kind of insane.
I mean, there’s got to be a balance. Pay for it one way or another. Pay as you go. If you drop a tax, drop the spending with it. raise the spending, raise the tax. Some folks, though, want to do radical rewrites of the laws, which all mysterious benefit the rich more than anybody else, and get slapped with monikers like “Fair” with the explanation being that if everybody’s taxed the same, it’s fair.
But that’s like saying handing fifty pounds to an adult and fifty pounds to a kid and expecting them to carry it the same is fair. For the kid, the burden is heavier, and he or she has less to lift it with. The adult has grown muscle and other resources to better manage the weight. Fairness in the placing of burdens must take into account the needs of the person faced with the burden.
The progressive tax system already does this. Those who can carry more without discomfort do so. Those who can’t carry much of anything, carry nothing at all, really. Those of us inbetween, carry an appropriate load.
We all have to carry the burden. Until we decide as a nation that we no longer will tolerate large government, it will remain, and it has to be paid for someway. If our attitudes remain on self-indulgent tax reforms, that will only serve to delay fiscal responsiblity.
Posted by: Stephen Daugherty at January 22, 2008 11:29 PMThe 34% number is not off of the Bush numbers, but off of the Fair Tax numbers, properly interpreted. As FactCheck explained it, The FairTax advocates figure the percentage this way: 23+77=100 means a 23% tax. They figure the percentage of the sales tax from its proportion to the final value.
No, the number in that case is 30%, and it is all completely and totally explained (and has been since day 1) on the website and in the FAQs.
And no, the poor already pay no taxes on their income, if not negative taxes, due to the EITC. It’s funny that you’d find me against at notion that by definition I’m already for.
Actually, that is not true.
Let’s say someone goes to purchase a gallon of milk. There are payroll taxes, income taxes, etc in many steps of the process of getting that milk to them (store workers, truck drivers, plastic companies, etc). Each of these steps will pass on that tax that they are paying, as a part of their price, to the next step. It has been calculated that about 30% (like that number?) of each dollar ANYONE spends contains tax offsets in them.
The result? The poor still pay taxes. A lot of taxes, an effective 30% tax rate.
You may like that idea, I don’t.
The conservatives …
You realize that you keep mentioning ‘the conservatives’ and yet you are debating a libertarian… It’s like watching a politician spending debate time attacking their other opponents as often as they can.
See above, but I think you should be ashamed of chiding me about name calling when you’ve already decided to assume (wrongly, on the facts) that I believe in taxing the poor a lot.
I think taxing them 30 cents for every dollar for things that they buy is a lot… Apparently you don’t?
If our attitudes remain on self-indulgent tax reforms, that will only serve to delay fiscal responsiblity.
Again, you find wanting to absolve those below the poverty line of all taxation while increasing the economy of the US by 10% each year for 5 years is ‘self-indulgent’. I’ll just let that go for what it’s worth.
Posted by: Rhinehold at January 23, 2008 12:27 AMCraig,
I agree completely and was alluding to the same idea when I used the words psychological factors.
Posted by: googlumpugus at January 23, 2008 05:58 AMRhinehold-
You talk about the hidden taxes, right? Well, those hidden taxes will still be there, just replaced by your new tax. It would have to do that, as well as compensating for the person’s direct taxation, in order to remain revenue neutral. That is, unless you want to take the taxes in a non-neutral direction. You can’t get something for nothing. Either somebody has to pay a much bigger bill to compensate for all the hidden taxes you magically took away, Nobody pays it and it becomes a cause of deficit spending, or everybody pays basically the same amount they did before, in taxes and in “hidden” taxes.
And who would enforce this tax? We’d still need something, because there’s a natural way to evade such a tax, one that’s popped up in ever country with a strong sales tax in place (which 34-39% qualifies as): smuggling and black market sales.
Or, why give up over a third of your money to the government when you can keep more of your own money! That’s another thing the FactCheck people pointed out: your calculations unrealistically assume that with this gargantuan sales tax, everybody will comply. What typically happens though, is smuggling and black market sales.
But of course, I’m just quibbling, I lack vision, I’m against the poor, I’m just some tax addicted Democrat… It doesn’t matter whether your people are using a very misleading, unorthodox way of calculating the rate, or that most of the middle class will see their taxes rise, even by the supporters own admission. It doesn’t matter that the rich will be the biggest gainers in this system(again by the supporter’s own admission), or that the poor already see compensation for what tax burden they do have, in addition to being some of the primary beneficiaries of the money paid out. Right? Facts don’t matter, allegation about my evil inclinations do.
Your tax is another variation of the same theme, the spoiled rich complaining about what a burden they’ve been given, though our income taxes are some of the lowest in the industrialized, and they themselves have more than enough economic wherewithal to pick up this burden. Your idea of fairness is to put a fifty pound pack on a child’s back and the same on an adult’s back, and call that even. Raw percentage doesn’t determine true fairness, though, the ability to carry the burden does. Your tax would increase the burden on most of the people who should be paying less, who spend most of their money on what they need, rather than what they want. You might talk about a gimmee to the poor, but how about the working class? Your tax lands right on top of them and makes things worse.
And it doesn’t do so because of any character defect on your part. You yourself have nothing to do with it. It’s this damn plan you’re supporting here. You haven’t examined the basics of it closely enough. You haven’t asked whether some people have let their ideology convince them that fudging the facts is worth the ethical quandaries. You haven’t really asked yourself how we will deal with the Black Market it will create (as all high sales taxes do), or whether this is really any different than Bush’s tax cuts for the rich.
But you also haven’t asked the fundamental question: can America afford more economic growth that comes from disadvantaging the working class? Already, the inequalities weight heavily on them, and more wealth is concentrated at the top relative to the rest of the economy than at any other time since the Great Depression. I don’t think the current economic troubles are coincidental with that condition. I think anytime you get artherosclerosis of the middle class economy, the rest of the economy gets a heart attack. We are a consumption-based economy, one that depends on a middle class with extra dollars to spend on top of fulfilling their needs. Do we need a new means of disadvantaging them, a tax system that can’t reasonably be adjusted to allow the tax burden to devolve more upon those who can shoulder a bit more?
The progressive tax system has the virtue of being adjustable. Sometimes that leads to an unjust distribution, like we have now, sometimes, though, it can lead to burdens being distributed according to strength. Thats the beauty of the current system, if you leave it alone.
Posted by: Stephen Daugherty at January 23, 2008 08:44 AMThe current deficit is $250 billion…the “rebate” will add another $100 billion to that figure…we’re robbing ourselves and putting ourselves into deeper debt…
Posted by: Rachel at January 23, 2008 10:22 AMYou talk about the hidden taxes, right? Well, those hidden taxes will still be there, just replaced by your new tax. It would have to do that, as well as compensating for the person’s direct taxation, in order to remain revenue neutral.
Yes, except we would be able to see them, know how much we are paying, and be able to have the poor not pay them. That is something we can’t do with the current tax system.
It doesn’t matter whether your people are using a very misleading, unorthodox way of calculating the rate
Only unorthodox if you are not comparing it against income tax, which is why AFT has from day one explained the different in detail so that people whould not get confused. As AFT says about the Factcheck article
The FairTax, in truth, represents a very different kind of federal tax proposal that defies common definitions because it entirely changes the paradigm of taxation at the federal level. Can a consumption tax be fairly compared to a tax on income, for example? An “apples to apples” comparison suggests that in order to do so, both must be expressed in either “inclusive” or “exclusive” terms (whether the amount of tax is included in the calculation of the total or excluded). This is a difficult challenge because sales taxes are almost always expressed in an “exclusive” manner, but income taxes are almost always expressed in an “inclusive” manner.Although 85 percent of the admittedly unscientific sample of letter writers noted in FactCheck’s article understand the difference, although explanations of the two calculation methods abound on the FairTax Web site, and although every other tax proposal (as well as the income tax itself) is described in “inclusive” terms, FactCheck unfairly spins even our ubiquitous notes on this distinction as somehow misleading the public. We would have preferred a more fair, neutral, and accurate description that “comparisons with income tax rates are difficult because…”.
So, they are misleading (only 85% of the people get it) and hiding the ‘real rate’ (even though they have had the details about it available since day one…
or that most of the middle class will see their taxes rise, even by the supporters own admission.
You again don’t want to talk about the different between marginal rates, effective rates, lifetime rates, etc. And the increase you mention is done without context, even Factcheck saw that the increase was, what, 1%?
It doesn’t matter that the rich will be the biggest gainers in this system(again by the supporter’s own admission)
I guess I’m not following this logic? If we eliminate the tax requirements of the poor completely instead of making them pay a 30% effective sales tax, change the middle class rate every so slightly (hard to say since it is partially up to the individual how much they pay) and not overtax the rich (the people who fund our economy) based on income (which even you admit they can easily avoid now) by getting them when they purchase, then the system is bad?
or that the poor already see compensation for what tax burden they do have, in addition to being some of the primary beneficiaries of the money paid out.
No, you simply choose to refuse the fact that they pay an effective 30% sales tax now. Then argue against the system because it doesn’t help the poor. I’m not sure how much sense that makes, but by all means if you don’t mind continuing to force the poor to pay that taxation and are ok with the current system as it is, then don’t support this one. But the least you could do is quit lying about it as you are doing now…
Right?
Nope, as I’ve explained.
Facts don’t matter
Apparently not since you simply ignore the ones I provide, several times, and continue to argue your old arguments.
allegation about my evil inclinations do.
Faint outrage, Stephen, since you started with the supporters of the fair tax being ‘chronic tax dodgers’…
though our income taxes are some of the lowest in the industrialized, and they themselves have more than enough economic wherewithal to pick up this burden
Right, that’s why we have one of the weakest dollars I’ve seen, a bankrupt country because we can’t collect as much as we spend and are entering a recession?
And you further again ignore the fact that most corporate income taxes are passed on to the consumer, and the fact that The United States currently has the highest combined statutory corporate income tax rate among OECD countries which pushes our companies to send jobs and new plants overseas…
We’re doing GREAT.
You might talk about a gimmee to the poor, but how about the working class? Your tax lands right on top of them and makes things worse.
The Beacon Hill Institute at Suffolk University concluded in a 2007 study on distributional effects that “replacing income and payroll taxes with the FairTax would make the United States federal tax system more progressive than it is now and would benefit the average individual in almost all expenditures deciles.
In a study on tax base and rate, the Beacon Hill Institute concluded that the FairTax would offer the broadest tax base and increase the federal government’s net base to $9.355 trillion from $7.033 trillion of taxable income, which allows the FairTax to have a lower tax rate than current tax law.
A study on marginal and average tax rates by Kotlikoff concluded that the FairTax would reduce most households’ average lifetime tax rates. Economists from Boston University and the Centre for European Economic Research concluded that the long term effects of the FairTax would reward low-income households with 26.3% more purchasing power, middle-income households with 12.4% more purchasing power, and high-income households with 5% more purchasing power.
Yeah, hurt those workers by increasing the economy and their overall spending power…
And you fail to address the fact that this tax is more stable than income tax through the good times and bad.
Posted by: Rhinehold at January 23, 2008 11:52 AMRhinehold-
First, this is supposed to be some kind of uber-sales tax, so it’s deceptive to describe the rate as if it’s removed, rather than added. Income taxes are described that way because the tax rates remove money from the income stream, rather than adding it to purchase prices and service fees.
Second, the expansive definition of what can be taxed is just out of this world. Interest can be taxed. Medical services can be taxed. Religious donations, and other charitable acts can be taxed. Where do the taxes stop? And who pays for this magnificent system to track every transaction in America, to ensure compliance?
Your language is of an orthodox religionist speaking to a heretic. But you see, I don’t believe this tax will do what is promised. If the basic math doesn’t balance, if the expectations are unrealistic, and nobody’s figured out the costs of actually getting the damn thing to work, or what the economic effects of having the government get a cut of just about every transaction in America are, then all your emotional appeals are just so much browbeating.
Thank you, no. and the stability of the tax is not a virtue. The progressive tax, with its multiple rates, can relieve pressure from the poor and middle class fairly easily. The fair tax, by comparison, is spectacularly rigid. You adjust one rate, or nothing at all.
Spectacularly rigid also describes the attitudes of many supporters of this measure. I’m naturally wary of unproved dogmatism, and this smacks of it. You don’t answer questions, you just keep on going as if nothing had happen, or as if the person had just not rubbed together enough of their few brain cells to actually get the idea. The current system is far from perfect, but imperfection is relative, and relative to the current system the Fair Tax is a poor substitute.
Posted by: Stephen Daugherty at January 23, 2008 03:59 PMFirst, this is supposed to be some kind of uber-sales tax, so it’s deceptive to describe the rate as if it’s removed, rather than added. Income taxes are described that way because the tax rates remove money from the income stream, rather than adding it to purchase prices and service fees.
And it is described both ways. When comparing with an income tax, the 23% is used. When defining how much would be taxed, the 30% is used. Again, you can say it is ‘deceptive’ all you want, but I think most people, as the unscientific poll done by the Factcheck people proved, can read beyond a 5th grade level for now.
Second, the expansive definition of what can be taxed is just out of this world. Interest can be taxed. Medical services can be taxed. Religious donations, and other charitable acts can be taxed. Where do the taxes stop? And who pays for this magnificent system to track every transaction in America, to ensure compliance?
First, with an income tax, all of these things are ALREADY TAXED. It is just not seen because you see a final price, not a detail of what taxes are passed on. There are places that are actually starting to require that people put that information on their products, I would be happy to see this start to be the norm, then perhaps it wouldn’t be like pulling teeth to get progressives to understand this simple fact.
And it can be ‘paid for’ by putting some of the money spent on the IRS to do this. The prebate ‘business’ can be sold to the highest bidder (Visa, Mastercard, etc) who would easily be able to handle the payments and would want this business to get their card to be the one of choice used.
To be honest, Stephen, you really sound more like a conservative (resistant to change) than a progressive here… I know, being a progressive requires that you have to fight this kind of change because income measurment is the best way you think you can distribute wealth, but I just find it amusing that you are sounding like a republican talking about climate change…
Thank you, no.And that’s all you have to say. Instead, you attempted to make incorrect, inaccurate statements about the plan that you display you really know nothing about.
The progressive tax, with its multiple rates, can relieve pressure from the poor and middle class fairly easily. The fair tax, by comparison, is spectacularly rigid. You adjust one rate, or nothing at all.
Except, it doesn’t change that easily, does it, or we wouldn’t be having knock down, drag out fights that end up with us entering a recession, would we?
The Fair Tax adds in ‘flexibility’ by not taxing used goods. If you can’t afford, individually, to pay as much this month because of personal reasons that are your own and no one else’s business, you look to purchase used goods instead of new. THEN, instead of relying upon a bureacracy that is slow and ineffective, you get immediate relief as you determine you need it, not a rich politician on the payroll of large business determines it.
You don’t answer questions, you just keep on going as if nothing had happen
I think everyone reading this exchange will see that I’ve attempted to answer every single ‘question’ you’ve rasied to the best of my ability. Please, if you have something that isn’t getting answered, ask it now and I don’t then perhaps your projection will stick. Otherwise, all you’ve done is question motives and morals of those who support changing a system that is oppressive, unfair and does not work as evidenced by the current state we are in…
Posted by: Rhinehold at January 23, 2008 04:22 PMRhinehold-
I like things to be present plainly, honestly, and openly. I like to see my government leaving less to chance and getting its ducks lined up in a row. I don’t like chronic policy screw-ups.
I also have no love for plans and policies which are defended by emotional appeals, unscientific polls, semantic ambiguities and all that other happy horses***. Not to be too crude about it.
Take a look at my arguments. Function is important to me. Discipline is important to me. result matter a lot. Dogma to me is dispensible, in no small part because I don’t put my trust in what people think, but rather what can be established factually.
You’re not establishing facts. You’re defending how you came to facts that I don’t think deserve the name. You’re defending lousy inferences and tricks of language and accounting.
Right off the top of my head, I see the issues of slowed spending, as you essentialy add income and payroll taxes on top of products. I see Americans all of a sudden finding items like food and medical services, not typically taxed out of pocket rising sharply in cost. Gas costs a dollar more, so on and so forth.
Most people never see the money that goes to income and payroll taxes. It’s gone before it reaches their hands. Sales Tax, particularly in my neck of the woods, becomes an issue. You buy a $10 movie, you can expect to tack on an extra 80-something cents. Same goes for any meal. All of a sudden people feel the pain, and they react. Buying used items means productivity would be discouraged.
You folks aren’t thinking systematically. You’re assuming certain things must happen a certain way. That’s what got us into this current economic mess: tax policy based more on wishful thinking and desired consequences, than informed theory and predictable response. Nothing inherent in the progressive tax has caused this problem with the deficits; that’s entirely caused by those who are more interested in getting out of their taxes than keeping accounts in Washington straight.
I’m not going to support a plan so ill-thought out. I expect people to know what they’re doing, and take real-world conditions into consideration.
Posted by: Stephen Daugherty at January 23, 2008 09:40 PMI like things to be present plainly, honestly, and openly.
I’m not sure how much more plain, honest and open the AFT can be. The amount of research and information available on their website is immense, it just needs to be read. Most of the ‘questions’ you have rasied are answered in detail, explained much better than I most likely can. Remember, this is not what the people who developed the plan went into with. Their question to the economists they hired was to develop a new tax plan from scratch, this is the result of millions of dollars of initial research and millions more in supporting research being done. That you call it ‘ill thought out’ is hilarious to me, to be honest.
I also have no love for plans and policies which are defended by emotional appeals, unscientific polls, semantic ambiguities and all that other happy horses***. Not to be too crude about it.
Everything has emotional supporters. Should I get into the attacks and comments from progressives on YOUR side of political spectrum? Do we want to judge progressives on that?
Take a look at my arguments.
I have, and I’ve answered them, and you’ve blown them off without addressing them. Which is ok I suppose, but then to come to me and say that I don’t answer your questions is insulting.
Function is important to me. Discipline is important to me. result matter a lot. Dogma to me is dispensible, in no small part because I don’t put my trust in what people think, but rather what can be established factually.
And I’ve been dealing in facts and economics research. Again, it’s like you are simply assuming that I’m doing something and arguing against it. Perhaps if you tried actually addressing what I’ve said it would help things out?
Sales Tax, particularly in my neck of the woods, becomes an issue. All of a sudden people feel the pain, and they react. Buying used items means productivity would be discouraged.
If added on without the removal of income (and other) taxes, yes I would agree. But remember, they are no longer going to have those to pay. The net cost each month for what they bring home compared to what they will buy will nearly the same, with a prebate given to them to offset the taxes paid on essential products. It’s how free markets work, I’m sure you agree that if a product no longer costs as much as it used to and the market has active competition that the price of the final product will go down. We see that in the IT industry every day, how much are computers now compared to 1990?
You folks aren’t thinking systematically. You’re assuming certain things must happen a certain way. That’s what got us into this current economic mess: tax policy based more on wishful thinking and desired consequences, than informed theory and predictable response. Nothing inherent in the progressive tax has caused this problem with the deficits; that’s entirely caused by those who are more interested in getting out of their taxes than keeping accounts in Washington straight.
Then this system is not for them, because everyone, except the poor, still pay taxes! what a stupid argument, Stephen, I really expect better than that from you. Here are a couple you could start with, if you are really interested…
http://www.fairtax.org/PDF/FairTax-Fundamentals_and_facts-070122.pdf
http://www.fairtax.org/PDF/MacroeconomicAnalysisofFairTax.pdf
I’m not going to support a plan so ill-thought out. I expect people to know what they’re doing, and take real-world conditions into consideration.
The plan that you call ‘ill-thought out’ has been researched and peer reviewed for over a decade. There are years worth of research and factual evidence backing up the research, all looked at by economists and is supported more every day by more and more of them. Resarch done by Harvard, Boston University, Suffolk University, etc. All of it made available, unedited, for everyone interested to see.
Those who aren’t interested in having their questions about the system actually answered I imagine would never go look at it.
I’m beginning to think that perhaps you are in that category. Which again, is fine, but the hautiness and contempt that you throw at me just for daring dirty your side of the blog with ‘this’ is not appreciated.
Posted by: Rhinehold at January 23, 2008 11:09 PMBut, nobody figures sales tax that way.
BTW, I just wanted to point out that this is correct… Well, except for all of those countries that do not…
Tax rates can be presented differently due to differing definitions of tax base, which can make comparisons between tax systems confusing. Some tax systems include the taxes owed in the tax base (tax-inclusive), while other tax systems do not include taxes owed as part of the base (tax-exclusive). In the United States, sales taxes are quoted exclusively and income taxes are quoted inclusively. Value added tax (VAT) countries display this tax inclusively; however, Goods and Services Tax countries do not. For direct rate comparisons between exclusive and inclusive taxes, one rate must be manipulated to look like the other.Posted by: Rhinehold at January 24, 2008 01:06 AM
Rhinehold-
An emotional appeal is an argument that bases it’s premises on what people are supposed to feel, rather than supporting it by proving the point factually and logically. One example: we must stay in Iraq because otherwise we’re abandoning the Iraqis. Well, doesn’t that just make you feel bad? And some people might just take it as self evident fact.
Just not the people you’re trying to convince. They might instead look, say, at the fact that many Iraqis want us gone. That complicates things, since the concept of abandonment centers on an obligation one is supposed to fulfill. Also, there are many strategies that don’t require us to remain in Iraq militarily to stick by these people and help them out. Also, there’s the whole argument of whether we’re helping at all. If we’re not helping, and they don’t want us there, then an argument that suggests we’re abandoning the Iraqis by leaving is weakened.
Similarly, arguments concerning the “Fair” Tax suffer the same problem. One obvious problem is the use of the IRS as a boogeyman. An argument from hatred and dislike of the agency itself and government in general is problematic, because whatever tax you put forward, somebody’s going to have to handle the money, somebody’s going to have to enforce the law, and somebody’s going to have to measure compliance.
And nobody’s going to do that for free, much less be able to do it for free. Do we put the burden on the taxpayer to write up the forms, the businesses, the state agencies? Why should the state take up the expense and the trouble of doing this, with their own problems to take care of?
The Rate also assumes that nobody’s going to cheat. Everybody cheats, though, especially when sales taxes get involved. When you get above ten percent, you will see a black market develop, where people bypass the compliant businesses and buy and sell without the tax involved. Don’t assume that in a day and age where millions download music and movies with virtual impunity, that such will not happen.
It’s not that nobody cheats on the income taxes we currently have, mind you. No, it’s that the proponents of this bill base their low rate on an ideal situation which will never exist, especially as the rate of this uber-sales tax rises. The rate given is unrealistic, especially if revenue neutrality is the goal.
If it is not, then let me point you towards the last ten years as a reliable indication of what happens when you try to “starve the beast”. It’s like trying to starve a dog by not giving him food, a situation he remedies by digging under the fences and then rooting through somebody else’s garbage.
Personally, I have no love for deficits. They’re universally acknowledged to be bad for the economy, when they’re structural and permanent.
The high rate required to recover money lost through tax avoidance and maintain revenue neutrality itself would add on to the costs of many items and services. This would exert a slowing effect that would very likely dilute if not eliminate growth generated by freed money. Additionally, if neutrality is not sought, then the freed money from that end would be haunted by the effects of inflation and/or high interest rates, both of which would drive up the prices of goods and services, a problem that would be further compounded, literally you could say, by the fact that the “Fair” Tax would tax interest and would respond to the increase of the price of consumer goods with increases of its own.
This, of course, assumes that this tax is manageable. Assuming that, we would have a tax whose rate would have to rise considerably from the promised low rate in order to be revenue neutral, and that would weigh heaviest on those whose spending is supposed to drive this consumer economy. Namely, the Middle Class.
This is a tax that has no flexibility to deal with different socioeconomic classes differently, to institute temporary taxes that can be abolished or renewed by themselves. It essentially puts all the eggs of revenue in one basket, and doesn’t respect the load bearing capabilities of those it imposes its burden on.
Simplification is a good thing, but nothing says we can’t simplify and set right the current tax code. There’s a reason most states don’t try and run things off of consumption taxes. It tends to scare business off. I know that I have a tendency to get very guarded about purchases when they’re really expensive, because all too often, the tax on the item would make what would otherwise be affordable too much for the money I have.
You can’t get something for nothing.
Posted by: Stephen Daugherty at January 24, 2008 12:06 PMSimilarly, arguments concerning the “Fair” Tax suffer the same problem. One obvious problem is the use of the IRS as a boogeyman. An argument from hatred and dislike of the agency itself and government in general is problematic, because whatever tax you put forward, somebody’s going to have to handle the money, somebody’s going to have to enforce the law, and somebody’s going to have to measure compliance.And nobody’s going to do that for free, much less be able to do it for free. Do we put the burden on the taxpayer to write up the forms, the businesses, the state agencies? Why should the state take up the expense and the trouble of doing this, with their own problems to take care of?
Nobody said that it was going to be done ‘for free’. .25% of the collected tax would stay with the states to help with collection and compliance. But, the new tax system would be lowering the number of collection points from every single business to retail stores only. Of course, this information is made available on the AFT website, if you wanted to know it instead of making assumptions, which is what you seem to like to do.
http://www.fairtax.org/site/PageServer?pagename=about_faq_answers#25
The Rate also assumes that nobody’s going to cheat. Everybody cheats, though, especially when sales taxes get involved. When you get above ten percent, you will see a black market develop, where people bypass the compliant businesses and buy and sell without the tax involved. Don’t assume that in a day and age where millions download music and movies with virtual impunity, that such will not happen.
Again, more assumptions. No one at AFT is saying that there will be no cheating, in fact this has been figured into the rate and code of the bill and thought about ahead of time. Figuring that in with the fact that instead of having to check all of the individual tax returns AND business returns, we would be eliminating the individuals, that frees up a lot of the busy work that we no longer have to contend with and can focus our efforts on the smaller number of businesses that would be reporting retail taxes.
http://www.fairtax.org/site/PageServer?pagename=about_faq_answers#44
http://www.fairtax.org/site/PageServer?pagename=about_faq_answers#48
http://www.fairtax.org/PDF/FairTax-Fundamentals_and_facts-070122.pdf
You can’t get something for nothing.
No one is trying to, other than you trying to state things about that plan that aren’t accurate and stating them as fact when they can be easily debunked by just looking for the information before assuming the assumptions are valid.
Do the work, it took me all of 5 minutes to read the FAQ section of the website and get the answers to the assertions you’ve made. Or, continue to argue against something without having even checked the validity of your arguments if you want, but it makes one wonder what the REAL driving force behind your aversion to the system is…
Posted by: Rhinehold at January 24, 2008 02:45 PM“but it makes one wonder what the REAL driving force behind your aversion to the system is…”
Maybe because people will start paying attention and asking questions?
Take tax money before you give it to a slave and he learns to forget about it and does not question.
Take it from him after it is in his hands and he starts asking questions and demanding answers.
Or, maybe its because the Fair tax does not promote class warfare like the current system does? And we all know who plays that card every chance they get.
Posted by: kctim at January 24, 2008 03:19 PMRhinehold-
These are among the newly taxed transactions:
Purchases of new homes
Rent
Interest on credit cards, mortgages and car loans
Doctor bills
Utilities
Gasoline (30 percent in addition to current taxes, which would not be repealed)
Legal fees
Additionally, Among the replaced taxes would be the Corporate income tax, the Estate Tax, among others. purchase between businesses and corporations would be exempt.
And of course, people making over 200,000 would see their actual real tax decline.
I see in the documentation that the Fair Tax people ask themselves the question of whether the Fair Tax would be fair. My, aren’t they a disinterested party in the answer to that question! I’m sure they wouldn’t be biased.
I’m also sure, though, that most people would disagree with their assessment. An overwhelming percentage of Americans think the Rich and corporation pay too little in tax