July 30 Sources: Getting Taxes Right

Predictions about taxes are always wrong, as recent unexpected surges in tax revenues again confirmed. Errors are not random. They systematically underestimate the beneftis of tax cuts and overestimate revenue from tax hikes. By ignorning economic dynamism, they predict a tax increase of a dollar will produce a dollar of revenue or that a dollar cut will reduce revenue by that amount. This is NEVER true. Starting in 2007, the government will begin to use dynamic analysis, lliterally changing the equation and improving accuracy.

Other sources are below.

All Fall Down
America & and War on Terror
American Support for Israel Unchanged
America’s External Balances
Belief that Iraq Had WMD Increases
Democrats Increase Lead
Dynamic Analysis
England’s World Cup Fans are Worst Behaved
Majorities in W. European Countries do Not Consider Russia a Democracy
Minimum Wage Workers Incomes Rise When Minimum Wage Does Not
Panelists See Need for Change in U.S. Visa Process
Sending in Peacekeepers is a Fool’s Game
What Broadband Problem

Posted by Jack at July 31, 2006 2:00 AM
Comments
Comment #172224

All the new tax revenue means little when Congress spends far more than it takes in. Without this ‘new’ revenue economists would be declaring a dire and looming recession.
Conservatives have yet to address that debt, they created, and cherry pick the ‘formula’ that works for that ideology.
Without debt payment, and not the debt since 2004, but ALL DEBT being paid down, the foreign trade deficit being significantly reduced, claims of added income mean very little.
Bush and the GOP Congress cannot claim any positive results unless that debt/deficit factor is always included in those numbers.
As Bush claimed a reduction in the budget deficit, it only showed how overestimating the original numbers led to that statement.
Real numbers are needed, not sound bites.

Posted by: Joe at July 31, 2006 7:50 AM
Comment #172228

Joe

This will give you real numbers.

Yes we have been spending too much since 2000. This analysis just helps us understand that if you raise taxes by $100 dollars, you will not get $100 in revenue. The rise will “cost” some amount in economic growth.

Re the trade deficit - it is probably more serious than the budget deficit, but harder to work with. Raising taxes would do nothing to change it except to the extent that it slowed the economy and lowered demand. Every time you buy a foreign made product, you add to the deficit. Of course every time you buy an American made product, you also add to the consumption problem. The problem is you and me. To the expent you are willing to decrease your consumption, you can solve the problem.

BTW - read the link on America’s external balances. I know it is fun to bash Republicans and blame them for all your troubles, but taking taking the time to understand the situation might be rewarding too.

Of course, you may have to sacrifice some of your anger in return for understanding.

Posted by: Jack at July 31, 2006 8:07 AM
Comment #172229

While the increasing tax revenues are good, does it concern anyone else that we are spending over $200 billion with revenues that exceed $2 trillion? Our revenues alone are in the top 5 of world GDPs and we still spend more than that? Both parties are guilty of heinous fiscal irresponsibility. I think its well past time that we the people demanded this of our politicians. We need to get rid of the graft and corruption so rampant and cut pork from our budget. And stop raiding Social Security, its bad enough already without having more money fleeced.

Posted by: 1LT B at July 31, 2006 8:11 AM
Comment #172244

1LTB wrote:

“And stop raiding Social Security, its bad enough already without having more money fleeced.”

————————————————————————

Just check the main link (i.e. the AEI analysis):

“The Treasury’s main analysis assumes that lower tax revenue will over time be accompanied by reduced spending on government consumption. But the report also shows what happens if spending cuts are not forthcoming. In this alternative scenario, a permanent extension of recent tax relief is assumed to lead to an eventual increase in income taxes.”

It seems like either Social Security etc. will have to go OR face an increase in taxes. Starving the beast Part II.

The basic assumptions are wrong as they assume as standard the recent unsustainable upturn in tax collections. Unsustainable as they are largely linked to the economy and the stock markets. Unsustainable as both the economy (GDP, housing confidence index off 50% etc.) and the markets seem to be cooling.

Posted by: Josh at July 31, 2006 9:34 AM
Comment #172262

Never mind that the current tax system is so perverted, abused, and unfair.
NOOooooo. Don’t ever do that.
Never do anything that makes too much sense.
Instead, invent and/or dwell on something else to distract from more important issues.

Our pathetic tax system has more tax loop holes than swiss cheese.

The tax system has been thoroughly perverted to benefit the wealthy. They like it the way it is. Of course, some one will immediately come along and tell you that the wealthy pay a lot of taxes, but do the wealthy pay an equal percentage of taxes. After all the deductions and loop holes, many don’t pay an equal percentage (of income) to taxes.

What we really need is a fair tax system.

But, like many badly needed, common-sense, no-brainer reforms, it’s all futile until a fundamental change is made first to give irresponsible, corrupt, bought-and-paid-for politicians an incentive to be responsible, transparent, and accountable too!

Posted by: d.a.n at July 31, 2006 10:37 AM
Comment #172277

“Starting in 2007, the government will begin to use dynamic analysis, literally changing the equation and improving accuracy.”

Oh my goodness, you mean we’ve officially stopped the single dimension “ME GOV’T WANT MORE MONEY SO ME GOV’T DEMAND MORE MONEY!” way of thinking? We now understand that lower taxes have the potential to create more tax revenues, and vice versa for higher taxes? Get outta town! I still don’t believe it.

Posted by: Ken Strong at July 31, 2006 11:40 AM
Comment #172278

______Getting Taxes Right_____

That’s laughable.

What is Dynamic Analysis to the U.S. government ?

Print more money, and borrow the rest ?

If tax revenues aren’t enough, just print and borrow more.

With a funny-money monetary system like that, why tax at all?

In year 1950, there was $150 billion U.S. dollars in circulation.
By year 2000, there was $6.9 trillon U.S. dollars in circulation.
Where did all that money come from?
It is printed out of thin air.
That is why we have ever-present, destabilizing inflation that erodes the value of currency every day, every minute, creating economic instability. It’s been going on for decades.

What cost $1 in 1900 costs $22.16 in 2005
What cost $1 in 1950 costs $7.75 in 2005
What cost $1 in 1980 costs $2.54 in 2005

Inflation helps to shrink government debt, but it erodes people’s savings.
Who benefits from all the printnig of all that money?
Who are the proponents, advocates, and perpetuators of this funny-money system?
Is it simply an unwitting blunder, or by design?

People need to start asking themselves some basic questions.

Are Democrats really for the working man/woman?
If so, what’s up with the minimum wage, and falling incomes for many years? Why does it take two incomes where one was once sufficient? What went wrong?

Are Republicans really for smaller government?
If so, why has government grown drastically in the last 6 year? Many of the jobs created (140,000 between 2000 and 2004) were in the federal government. How is that smaller government, when it continues to grow to nightmare proportions?

Could it be politicians of all parties really don’t care any more about the welfare of the nation?

Are incumbent politicians really concerned about the welfare of the nation? If so, why does it seem as though they are mostly interested in finding opportunities for self-gain, padding their golden parachutes, and securing their cu$hy, coveted seats of abused power?

Anyone who really wants change should stop pulling the straight-ticket voting lever, and stop re-electing (empowering) the very same irresponsible, bought-and-paid-for, incompetent politicians that keep fleecing them.

Taxes ?
The tax system is truly pathetic.
The millions of pages tax code are a testament to that.
The abused loop holes benefit who?
There is no shortage of decoy subjects to shift attention away from the core problem.

Posted by: d.a.n at July 31, 2006 11:42 AM
Comment #172282

We need a simplified tax system that provides better economic indications. There are some potentially good ideas in the “Dynamic Analysis” link and the link at the bottom of it, but I’m not convinced that the government is doing anything serious other than giving breaks to those fortunate enough to be able to heavily invest in stocks. I do like the social security reform ideas…there is no doubt that 65 is just not a feasable retirement age anymore, and health care costs are skyrocketing.

Personally, I’m all for a consumption tax system…possibly a weighted one that taxes good types at different rates. Also, I really dislike the idea that doctors who take an oath to do anything and everything to save a life are allowed to make spending decisions on behalf of the government. A backward looking policy that makes all procedures for obviously self-induced problems like obesity and chronic smoking, as well as procedures aimed at a small extension of life performed in the last year of life, should all be charged to the person’s estate or outright regulated. Having medicare pick up the tab is just fundementally unfair as it would allow for a few to get while the gettin’ is good and give all those who follow the bill and no benefit.

Maybe the elimination of taxation of corperate dividends does yield a net positive for the economy, but its not a magic bullet, and people should not get overly excited as even this analysis shows. Certainly the answer does not lie in the elimination of estate taxes on the most wealthy americans…I’m sorry, I forgot that Bushco unilaterally renamed it the “death tax” to scare stupid people into not liking it. One good idea out there, and in the article, is to make a progressive system for deducting mortgage interest so that there is no ability to use a huge house as a tax shelter. There should not be a benefit for buying an unnecessarily huge house.

The best long term solution is to pay down the national debt and cut spending. Not paying interest on that debt alone would reap much more benefit than all these tax cuts combined. The cuts might be a small step in the right direction, but my guess is these proposed ideas have very little to do with the noble intention of helping real people, and much more to do with helping the rich and big business. THEN they do the analysis to back it up. Business as usual.

Posted by: Kevin23 at July 31, 2006 12:00 PM
Comment #172298

Never heard where cost of inflation made prices go down. I always heard that inflation make prices go up.
d.a.n can you provide some link to show where you got your information from. I took a look and see gas prices(big item now) in 1950 was 40 cents a gallon, where today it is 2.90 (averages), so inflation has not brought down the price.

Taxes are a scourge and until both parties see that they are bankrupting our country(which is already), and make hard choices it’s not going to change. Due away with loopholes for personal and business taxes, set a straight 10% across the board for everyone. Cut welfare and assistances(within reason, still have it for only x amount of years like 3 at the most), cut the trade deficit if a country wants a product in here for free, we get into theirs for free.

Like 1lt B, said quit raiding Social Security, as it was not to be used for anything except what it was designed for.

My grandkids are going to have a terrible life as it is right now if the deficit/debt does not change because their money will go to pay the interest.

Posted by: KT at July 31, 2006 12:45 PM
Comment #172306

We have the most complicated tax system in the world. It is a book with millions of pages for millions of situations:

“If you earn $100,251 per year have 3 kids, 2 are under 4 years, and the remaining not a minor…” blah blah blah.

Let’s make paycheck tax 10%.

Lower class: you make $10,000 a year, govt takes a maximum of $1000.
Middle class: you make $100,000 a year, govt takes a maximum of $10,000
Upper class you make 1,000,000 a year, govt takes a maximum of $100,000

It works, the people have more money to spend everyone gets taxed the same rate, and our people can sleep more and stop working their lives away as much.

Posted by: stubborn conservative at July 31, 2006 1:09 PM
Comment #172315
KT wrote: Never heard where cost of inflation made prices go down. I always heard that inflation make prices go up. d.a.n can you provide some link to show where you got your information from. I took a look and see gas prices(big item now) in 1950 was 40 cents a gallon, where today it is 2.90 (averages), so inflation has not brought down the price.

KT,

Respectfully, I think you misunderstand. I don’t recall ever saying prices are falling. The prices are always rising (not falling) due to inflation (ever since the 1950’s). In fact, above, I show where prices have increased in time. Prices on specific items can vary (such as gasoline), but overall prices are always increasing due to inflation. What you may be confusing is the erosion of currency (falling value) with rising inflation. That is, the dollar buys less (i.e. has less value) as inflation increases.

Inflation is destabilizing because it erodes the value of currency, savings, retirement, and leads people to run around like chickens with their head cut off, looking for ways to invest so that inflation will not erode their savings. Thus, many turn to risky investments, many are scams. Stocks become over-valued (as in 1929, … , 1986, … , 1999, etc.). Then, when that bubble bursts, people flee to real-estate, or some other place to invest. Then that bubble bursts. That is how inflation is destabilizing. But, government needs inflation to shrink debt, and print more money.

Inflation can be calculated with westegg’s inflation calculator (or any of the similar inflation calculators like it).
See my d.a.n link below for more stats.

Taxes are a scourge and until both parties see that they are bankrupting our country(which is already), and make hard choices it’s not going to change.

KT,
You are right. But, equally bad (or worse) is the perpetual inflation caused by our dishonest, funny money monetary system. See below, where … … inflation took off in the 1950’s (after eliminating the Gold Standard) and grew at an even faster rate after the 1980’s and thereafter.
That is a result of a mismanaged, funny-money, voodoo economic, dishonest monetary system.
There was only $150 billion dollars in circulation in 1950. By year 2000, it grew to $6.9 trillion. And it has jumped again by trillions in the last 6 years. The Federal Reserve is a ponzi-scheme. Need more money? Just print some more. To hell with the erosion of the value of savings and retirement. Government doesn’t want you to save your money.

There is something either very stupid and/or very dishonest about the monetary system, the ever-present inflation caused by printing more and more money each year, and then borrowing that money too (from China and other nations). The U.S. very likely may be engineering (either by design or stupidity) the next world-wide Great Depression.

And, look at the out-right plundering of the Social Security system. Some people actually think there are surpluses in the Social Security system. Little do they know that the cash surpluses have been replaced by worthless government bonds. There are no surpluses no more than there are reserves in the Federal Reserve. Who will make good on those bonds? The Federal Reserve will. Just print more money, ofcourse. The Federal Reserve (on average between 1950 and 2000) prints $135 billion of more money each year! The Federal Reserve is a money tree.

I can’t wait to hear the “In Party” spin, twist, obscure, cloud, and lie to explain or rationalize it all. Even some in the “Out Party” will too. That’s because both are fiscally and morally bankrupt.

This can last indefinitely. It can last for many decades (perhaps even centuries), but eventually, the debt can only be reduced or eliminated by printing more money. And that is the plan, exactly. Erode the debt with inflation and printing money. Never mind how it destabilizes the economy. And, the added benefit is a place for the wealthy to lend their money to reduce the erosion of their money. They really don’t care, because they have massive assets of other kinds too (not just money).

Social Security is $12.8 trillion in debt.
The National Debt is $8.4 trillion.
Medicare has many trillions of unfunded liabilities (it’s in deep trouble).
The PBGC is $450 billion in the hole.
Personal debt nationwide is over $20 trillion.

We are in deep [explicative].
It’s gonna take a lot of money printing to get out of this mess. The inflation will essentially make the debt disappear.

It’s a very, very irresponsible way to operate a government. And the manipulations of the economy are very dishonest too. But, most people don’t have a clue. And, despite the obvious facts, they will call all of those conclusions part of some crazy consipiracy theory. But, ask yourself “Why should government have any control over inflation, interest rates, etc.”? Why should the government be able to print $135 billion (or much more, lately) of new money every year. Why can the government and Federal Reserve merely print and borrows the money for what ever it wants? And it wants a lot, too, as government continues to grow, and grow, and grow to nightmare proportions. It seems unstoppable. And voters empower it, growing ever more dependent and brainwashed by government, coming to accept inflation, legal plunder, abuse of eminent domain laws, spying, etc., etc., etc., … evidenced by their continually re-electing those very same incumbent politicians that are using and abusing them.

Posted by: d.a.n at July 31, 2006 1:30 PM
Comment #172320

Thanks d.a.n for the info, and I probably did misread the message.

Posted by: KT at July 31, 2006 1:51 PM
Comment #172328

stubborn conservative,

I strongly support a flat income tax rate as you recommend (above).

10% would be great, eventually.

It may need to start at 17% and decrease later, because of the $12.8 trillion of Social Security debt, $8.4 trillion of National debt, trillions of unfunded Medicare liabilities, and $450 billion of PBGC debt.

The 17% is based on what government spends (with a 5.6% reduction in spending too), receives in revenues. The government gets about $2 trillion in revenues (annually). Interest on the $8.4 trillion National Debt is costing one fourth of the $2 trillion in tax revenues.

The tax system is far too complicated.
But, that was by design.
The first step to abusing anything is to overcomplicate it.
That way, it’s easier to abuse.
And, abused it is.
The wealthy take advantage of the tax loop holes.

However, a 35% tax bracket (as now) is theft (in my opinion). Just think, it used to be 90% . Can you believe that crap? What kind of piece of greedy [explicative] ever thought government should take 90% of anyone’s income in taxes? !
Nobody needs to ever pay more than 17%.

P.S. I have studied the Flat Sales Tax, and I have some issues with it. For one thing, it creates more questions than any other proposed solution. The FairTax.org also recommends a 23% sales tax rate (23% inclusive, but actually, a 30% tax on the price of the item purchased). Well, that is really too high. That will almost guarantee more blackmarkets, because there is less transparency of sales taxes collected, versus income (especially if you consider the number of sales to the number of people with income). Less transparency will breed more corruption.

OBJECTIVE: design a tax plan where all pay the same percentage of income ( except the poor, which pay nothing ), and satisfy the following:
(01) has a sufficient probability of actually taxing income equally;
(02) retains Social Security and accounting for it (currently 12.4% on first $90K gross income);
(03) retains Medicare and accounting for it (currently 1.9% on gross income;
(04) defines the tax collection methods;
(05) has a sufficient probability of compliance;
(06) does not increase tax evasion;
(07) does not increase black markets;
(08) does not driveup the cost of all products and exports;
(09) does not tax the poor and truly needy;
(10) resolves question of whether corporations should be taxed?
(11) adequately integrates and/or replaces old systems with new systems;
(12) does not double tax: for example, with the fairtax plan, the vastly wealthy get double taxed, since they already paid income tax on much of their money? That will go over like a lead balloon.

The obvious question, is: since the objective is to tax income equally, (except the poorest below the poverty level), how does the fairtax plan prove that income will be taxed equally ?

Also, here’s a very interesting point. One question about any tax system that is continually asked is:


Will everyone (excluding the poor) pay their fair (or equal) percentage of tax related to income ?

Interesting isn’t it? What does that tell you? It seems many people still want the end result of any tax system to be that everyone pays their fair (or equal) percentage of income (excluding those below the poverty level, which would pay zero tax).

So, if we’re continually tasked with proving that any tax system, in the end, must fairly tax income the same percentage (excluding the poor who pay zero tax), then why not simply retain the income tax, except make it a flat tax rate of 17%, eliminate all loop-holes, deductions, subsidies, which will also mean little or no changes for accounting for Income tax, Social Security tax, and Medicare tax.

Any tax system may be hampered by the possible necessity to drag portions of the old tax system along too (i.e. Social Security, Medicare, Medicaid, etc.).

One thing is for certain. It’s not easy for everyone to live at the expense of everyone else.

But, like many badly needed, common-sense, no-brainer reforms, it’s all futile until a fundamental change is made first to give irresponsible, corrupt, bought-and-paid-for politicians an incentive to be responsible, transparent, and accountable too!

  • Stop Repeat Offenders.
  • Don’t Re-Elect Them !
Posted by: d.a.n at July 31, 2006 2:21 PM
Comment #172337

Taxes will never be got right or fair as long as our elected officials (our employees) are selling their souls to special interest and are more interested in spending more money than they take in. And they’ll keep messing things up until the voters(their employers)take the responsibility and fire every last one of them. There ain’t a one of them that deserves to keep their cu$hy jobs.

stubborn conservative
I’ve long been a proponent of a flat rate tax with no deductions. 10% is a good round number to shoot for. But first we would need it a around 20% half going to pay down the national debt. When the debt is paid down to 0 taxes can be lowered.
But I believe that before we could even hope to get a flat rate we need to get spending under control. This is one of many reasons I support the Balanced Budget Amendment.
We need to force the President and Congress to only spend what is taken in or less. This includes paying down the National Debt.

Posted by: Ron Brown at July 31, 2006 2:53 PM
Comment #172344

A flat tax for all except for the poor, no everybody pays a tax no matter what. These poor would be the one who uses most of the services and pays nothing. A flat tax for all no matter what your income is, if you don’t make a x-amount of income then you can put in for assistance for a x-amount of time.
Party of the problem is welfare, the more kids you get the more money you get, no reason to improve yourself, free/near free medical, food stamps, School(to include college). These items are a big draw upon the national debt. Oh for those intersted, I vote mainly Democrat, but believe that we(the government) give toooo many hand outs asking for nothing in return.

Posted by: KT at July 31, 2006 3:12 PM
Comment #172354

KT,

I agree on all except foodstamps and W.I.C. These programs aren’t giving cash handout but insuring folks that are poor (some due to disabilities, mental problems, elderly, etc) get basic food stuffs they or their dependents need.

Welfare certainly needs to be reformed. I don’t think it needs to be eliminated but certainly reformed. Put a cash limit or time limit on it or something.

Jack,

Tax revenues are up….almost to the levels they were at prior to GW. WOW!!

Don’t get me wrong. I also think tax cuts (to a certain extent) stimulate the economy. Unlike many right wing hardliners, though, I realize it wasn’t Reagan that first introduced tax cuts to stimulate the economy but JFK. Both had some decent ideas but taxes can be lowered only so much before the economy suffers just as they can be raised only so much before the economy suffers. What’s the magic number? I think it is dynamic and depends on where the economy is to begin with…

Posted by: Tom L at July 31, 2006 3:33 PM
Comment #172355

KT:

By giving things to people, we sometimes hinder their learning curve. Two examples:

1)US policy has often been to give money to small island countries (Haiti, Dominica etc). Instead of helping them, we end up with them becoming dependent on the handouts, rather than learning to use them to better themselves.

2) Nursing homes have increasingly been making residents make their own beds, get up to get their own meals etc. They’ve found that if the staff does too much for the residents, the residents end up losing the ability to do for themselves. Use it or lose it is a cliche, but is a cliche for a reason—-it has a lot of truth.

I like the flat tax because it takes from everyone, but in differing amounts according to ability to pay. But it takes the same percentage. Now there will always be some who have no ability to pay, and for those, we need to help them better their ability to pay as much as possible. The goal should be to get every one on the tax rolls, by making them capable of being a “giver” instead of just a “taker”.

We need to build in the expectation that even the poorest among us has something to offer in return. Sometimes it is time, sometimes a skill, etc. Sometimes it might be taking a class to help them develop a skill. Once we do that, we will be enabling people to better themselves, and everyone should be in favor of that.

Posted by: joebagodonuts at July 31, 2006 3:37 PM
Comment #172360
Ron Brown wrote: Taxes will never be got right or fair as long as our elected officials (our employees) are selling their souls to special interest and are more interested in spending more money than they take in.

That IS the most important ISSUE

Voter Education is badly needed.
Government is FOR SALE.
Bought-and-paid-for incumbent politicians ignore our growing list of pressing problems, continually refuse common-sense and no-brainer reforms.
They spend most of their time trying to secure their cu$hy, coveted seats of abused power.
That is why no one can name 10, 20, 50, 100, or even 268 (half of the 535) in congress that are responsible and accountable. Every time someone tries, it is all too easy to pull up their records to show otherwise.
But, we the voters programmed them to be that way.
Politicians don’t really think much of voters, and why should they?
We really do have a government Of / By / For the sheople.
We keep re-electing them ! ?

I just got an E-Mail from Frist (trolling for money). Here’s my response …
________________________________________________
You won’t ever get one red cent from me ever again.

I was a Republican for 28 years. No more.

I guess the growing rampant government corruption helped open my eyes.

Are Republicans really for smaller government?
If so, why has government grown drastically in the last 6 years?
Many of the jobs created (140,000 between 2000 and 2004) were in the federal government. How is that smaller government, when it continues to grow to nightmare proportions?

Personally, I think it may be a good idea if the number of Democrats and Republicans is more equal, since we have seen what happens when the “In Party” has too much of a majority.

Besides, 83% of all donations only come from a mere 1% of the U.S. population. No need for me to help fund more bought-and-paid-for incumbent politicians.

To be honest, the whole bunch of you make me ill.

All too many of you really only care about gettin’ yours, fillin’ your own pockets, trollin’ for big-money-donors, peddlin’ influence, lookin’ for new opportunites for self-gain, carrying the water for your big-money-donor puppeteers, and making your cu$hy, coveted
seats of power ever more secure.

d.a.n@cocmast.net

Stop Repeat Offenders. Don’t Re-Elect Them !
__________________________________________
——- Original Message ——- From: Bill Frist, M.D. (VOLPAC) To: d.a.n@comcast.net Sent: Monday, July 31, 2006 1:41 PM Subject: Frist: Only Hours To Go

With only hours to go until the midnight deadline, I wanted to reach out to you one last time. We are $2,452 away from our July goal.

We must close the difference.

If you have not contributed to our fundraising goal of $20,000 raised in July, I ask that you make an immediate contribution of at least $6 towards our goal.

To make an immediate online contribution please click here.

Thank you to everyone who has already contributed. Your support is critical to our efforts to support Republican candidates and continue the progress we have made these past years.

If the Democrats gain control of the Senate, “today’s environment” will seem mild compared to what we’ll have to endure in 2007 and 2008 – total gridlock for the Presdent and for the country. I see the tactics of Harry Reid and Ted Kennedy and John Kerry and Hillary Clinton every day…allowing them to gain control of the Senate will be devastating for the next 2 years and beyond.

We cannot let them succeed.

Please support my leadership committee VOLPAC’s efforts to elect Republicans, by making an immediate contribution of at least $6 in support of our efforts.

To make an immediate online contribution please click here.

Or, if you can afford to, contribute $24.52 to reach our goal. If 100 people contribute this amount we will ensure that we have met our July goal.

Elections matter. The Democrats vision of higher taxes, litmus tests for President Bush’s judges, retreat in the War on Terror, continued energy dependence, porous borders and rising healh care costs fueled by predatory trial lawyers is wrong for America.

We both know this is true. So, if you can afford to, please invest in VOLPAC and our efforts to support Republican candidates today!

Bill Frist, M.D.
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__________________________________________

Can you believe the audacity of the statement above about porous borders ?
What a [explicative] lie.
Right this very minute, my own Senator (Sen. Kay Bailey Hutchison) is trying to get a guest worker program (with Mike Pence) passed (which is really just another amnesty like the one in 1986, which quadrupled the problem).
How can that pretend m to care about homeland security when the borders and ports are wide open? And what’s the crap about surrendering. Most Democrats have gone along for the most part on the war in Iraq. The truth is, incumbent politicans of both parties are irresponsible.

One thing is for sure. Neither party will ever get a cent from me, and no irresponsible incumbents will ever get my vote either.

Posted by: d.a.n at July 31, 2006 3:43 PM
Comment #172376

Tom L

Reagan always gave credit to JFK and used to claim that it was the Democrats who forgot their own roots.

The fact that you can raise as much money (and this year more) with lower tax rates is interesting news. It also shows that the origin of the problem is spending.

If you look at graphs of spending, you find it went way up in 2000 - before 9/11 and before Bush. Bush did worse, but the point is that the government cannot realistically maintain a surplus. Politicians will find ways to spend it. If we tax to cover it, we ratchet up taxes. We should probably look for the Feds to spend around 18% of GDP. We could talk about exact percentage, but they should tax to cover that - no more and no less. I don’t think we need worry about them spending too little, but we need to keep from spending too much.

Posted by: Jack at July 31, 2006 5:13 PM
Comment #172386

Dan,

I admit I’m not a financial whizz but since the Fairtax Plan is a consumption tax I don’t see how it would affect the rich or super rich unless they tried to spend all their money before they died, and I haven’t checked but I don’t think that’s the trend.

I think the Fairtax Plan is a great idea from what I’ve heard. I would encourage everyone to google it and check it out. I think it would satisfy all your requirements as outlined above.

Posted by: tomd at July 31, 2006 5:47 PM
Comment #172389

d.a.n
I got a similar e-mail from one of my Senators. Don’t remember which one I deleted it. I found it amusing as neither Georgia Senator is up for reelection. What blatant groveling. I’m surprised they only want $20,000 in July.
I haven’t ever contributed to either major party. And don’t intend to. I’m not much on contributing to parties. I prefer to contribute directly to the candidates I’m willing to vote for. And I haven’t seen one of them from either party for more years than I care to remember.
I called myself a Republican at one time and was registered as one. But I doubt if I ever really was one. Even though I was 13 I didn’t like Nixon in 1960. And didn’t like him in 68 the first Presidential election I was able to vote in. I didn’t vote for either major party candidate that year. I liked him even less in 72. But begrudgingly voted for him because every one else was worse. I quit calling myself a Republican shortly after that and have been registered as an Independent sense.
I generally try to find an Independent or third party candidate I like but they’ve been getting to find lately too. Seems like the ones running on third party tickets or as independents these days are recycles from the major parties that didn’t get their way in the primaries or conventions. Kinda like Lieberman is threatening to do.

Posted by: Ron Brown at July 31, 2006 5:50 PM
Comment #172422

Another viewpoint on dynamic analysis

Six months later, Treasury’s first dynamic analysis of the president’s policies is out. It belies the claim that the Bush proposal to make his tax cuts permanent will either pay for itself or galvanize the economy.

Link:
http://www.slate.com/id/2146868/

Posted by: Woody Mena at July 31, 2006 8:41 PM
Comment #172425

D.A.N.-

“Besides, 83% of all donations only come from a mere 1% of the U.S. population.”

You keep repeating this misquote. It’s “83% of donations over $200” that come from a mere 1% of the U.S. Population. If you count ALL the donations given the % of donations at the top 1% of population will be lower.

Second, who cares? Since babies don’t usually donate to political campaigns why should they be included in the quote?

This is a truth that is a lie.

What really counts is what % of those who vote donate money. But that doesn’t even count… individual contributions SHOULD BE THE ONLY CONTRIBUTIONS.

Individual contributors defines, in part, our right to free speech. Its the PAC and business and labor union moneys that mess up the system.

1)Make it individual contributors only.

2)Limit the TOTAL amount of money an individual can contribute to political campaigns in any year to $10k.

3)Limit candidates to receiving contributions ONLY in the year of the election.

4) Limit how much a candidate can contribute to his own campaign.

5)Do not allow political parties to contribute to individual races.

Then see whether incumbants have more advantage or whether candidates are “bought-and-paid-for”.

—-
Now to topic:

I’m for a simplified tax that has no loopholes, nothing special for this or that special person. It is about the money you make, not the family you have, the ages of your kids, the house, etc. Tax the income, tax the increase in investments if you want. Just don’t double tax because someone died. If you want to give to charity, give. Stop funding students going to college, stop giving deductions for this or that.

It’s about time our people became responsible for themselves. If you want to send a kid to college, don’t make every other taxpayer pay for it. If you want to give to charity, give; but don’t make every other taxpayer pay for it. If you have a hefty mortgage, pay for it, but don’t make every other taxpayer give you a deduction because your interest is so high. The tax system we have now is STUPID. And taxpayers are stupid for putting up with it.

Posted by: Don at July 31, 2006 8:51 PM
Comment #172427

No Don,

You keep misunderstanding.

Please note the subtle but important distinction.

Less than one tenth of one percent for donations over $200 came from 83% of the U.S. population.

But, a whole one percent of ALL donations come from 83% of the U.S. population. That is corroborated by the statistics showing donations under $200 come from 17% of the U.S. population, and 100% - 17% = 83% .

See the difference?

If you have proof to refute it, please show it to us. Do you understand the difference between 0.10 % and 1 % ?

As for our tax system being STUPID, I agree completely.

Here’s a tax plan I would support.

Posted by: d.a.n at July 31, 2006 9:04 PM
Comment #172435

d.a.n
Thanks for the link. I could support a plan something like that. Except that all that math for income levels sounds like graduated tax levels to me. And gets to complicated.
I’m more in favor of everyone pays on all income regardless of income.

Posted by: Ron Brown at July 31, 2006 9:38 PM
Comment #172443

D.A.N.-

I don’t misunderstand *(your statement or the difference between .1% and 1%). You are saying 18% of the U.S. population make political contributions and 83% of the money in those contributions comes from the top 1% of the U.S. population. Yet every link you give for this statement says what I say.

Yet,(and here’s the clincher) IT DOESN’T MATTER! It is UNIMPORTANT what percentage of people contribute what. And it is NOT VERY IMPORTANT to the point you try to make with it.

In a typical campaign, hundreds (if not thousands) of BIG DONORS contribute. A congressman could NEVER pay them ALL back for their contributions. Some, of course, will be paid back in legislation that benefits them. (Some of the legislation that benefits them might have been passed anyway whether they contributed or not). Many people contribute because they AGREE with the candidate, not to get something in return. Their reward is having the candidate they agree with win. After all, what is the money used for, if not to win. AND, it is also important to realize that half of those who contribute large amounts (if all things were even and fair) can expect NOTHING in return, because their candidate LOST! If you add in the REWARD that PACs and Business and Unions expect, a candidate who wins really has a lot of mouths to feed! It just isn’t possible to “feed” so many mouths.

As I said, individual contributions should be the ONLY contributions because it is part of our free speech, although it should have limits (as does all free speech).

Posted by: Don at July 31, 2006 9:59 PM
Comment #172448

Sorry,
I meant: 83% of all donations of all amounts come from 1% of the U.S. population.

Don wrote: This is a truth that is a lie.

No Don,
Respectfully, you are confused.
There is a difference between:
(a) 83% of $200+ donations from one tenth of 1% of the U.S. population.
(b) and 83% of ALL donations of any amount from 1% of one tenth of 1% of the U.S. population.

What part of 1% and one tenth of 1% do you not understand ?

And, the fact that babies don’t vote does not invalidate the statement. That is a completely irrelavent point. So? Who ever said babies vote? Why do you keep repeating that?

Posted by: d.a.n at July 31, 2006 10:37 PM
Comment #172450

Don,

I have already showed you the reports and links and www.crp.org to support the 1% and one tenth of 1 percent. I also already showed you that donations under $200 make up less than 17% of total money donations.

If you had any evidence to refute it, show it to us.

You mind is firmly set.
Like well mixed concrete.

Posted by: d.a.n at July 31, 2006 10:55 PM
Comment #172455

What you have shown me is a mix of apples and oranges.

17% of contribution monies are received from contributions of less than $200 is NOT the same as saying 17% of the U.S. population gave donations.

Flawed logic and misused facts.

I keep talking about babies don’t contribute. I said nothing about them voting, but they don’t. The point is that population numbers include people who can’t give contributions, so why include them in a factoid about what percentage of the population contributed?

You see, the top 90% of beer drinkers come from only 60% of the population. But babies and children don’t usually drink beer. We don’t allow them to drink beer. So, the fact may be true, but twisted.

Posted by: Don at July 31, 2006 11:23 PM
Comment #172465

D.A.N.-

You probably wonder why I am picking on this point so much.

Because you use it so much.

Now let me help you (I don’t have to, but I will)…
If you repeat something often enough people may start to believe it… or they may start to resist.

I started checking your links that you were using to “Prove” your points. I found some of the links did not agree with the points you were making, I found that you had misquoted some, I found that some of your links were duds. And some times they were good proofs.

Then I started to resist.

Point: Make sure you read your link pages carefully before you quote them.

Use your little quote if you want. I think you’re wrong and it doesn’t help your case, but use it if you want.

Posted by: Don at August 1, 2006 12:00 AM
Comment #172466

Don,

I never said 17% of the U.S. population gave donations under $200.

I said 17% of ALL money from donations was from donations of less than $200.

83% of all donations of $200 or more came from 0.1% of the U.S. population (source: www.crp.org)

83% of all donations (any size) came from 1.0% (that is one percent) of the U.S. population (source: see below)

Notice that donations under $200 are great in number, but small in total dollars … about 16.25% of all federal campaign dollars received.

That corroborates the value of 17%. Total dollars from small contributions are only 17% of all revenues received.

Don wrote: Flawed logic and misused facts.

I agree, your logic is flawed (and set in concrete).

I’m waiting for your proof to disprove it.
You keep trying to reword what I wrote, but that won’t cut it.

Also, you call my other links into question?
Which ones? Which facts. Prove it.

Posted by: d.a.n at August 1, 2006 12:09 AM
Comment #172468
If you repeat something often enough people may start to believe it… or they may start to resist.

I started checking your links that you were using to “Prove” your points. I found some of the links did not agree with the points you were making, I found that you had misquoted some, I found that some of your links were duds. And some times they were good proofs.

Then I started to resist.

Sounds like a personal problem.
I can’t help you with that.

Posted by: d.a.n at August 1, 2006 12:17 AM
Comment #172470

D.A.N.- said

“That is corroborated by the statistics showing donations under $200 come from 17% of the U.S. population, and 100% - 17% = 83% .”

and

“I never said 17% of the U.S. population gave donations under $200.”

and

“Sounds like a personal problem.”

I agree.

Posted by: Don at August 1, 2006 12:31 AM
Comment #172471

You don’t get it!

The pie charts you include in the above include money from PACs, big donors, and small donors.

The small donors in the pie charts contributed 17% of all money received from PACs, big donors, small donors and the candidate’s own pockets. It is NOT a pie chart of big and little donors only.

I don’t know why you don’t get this. Stop. Think. Re-think. Use a hammer if you have to. Your “facts” are wrong.

Posted by: Don at August 1, 2006 12:41 AM
Comment #172474

So, to answer your question about faulty links that do not agree with your assertions… See the above post.

Posted by: Don at August 1, 2006 12:47 AM
Comment #172478

Jack, I’m glad you brought up taxes. The evil NYT had this frontpage story
Glad there is no wealthy class in America that thinks it is privileged and above the ordinary bounds of the law.

I’m not sure about this dynamic economic model…sounds like accounting tricks to me. Don’t like the numbers? Change the way we report ‘em. That’s the dirt under the rug method of problem solving. Some might even whisper facism.

JBOD,
Are you serious? The problems in Haiti and Dominican Republic are caused by us giving them stuff? You think a history of a Slave owning and controlling Landowner class that holds grip through repressive militaristic regimes has anything to do with their issues? To quote John Stossel, “Gimme a break.”

What does giving purpose, regimen and physical activity to seriously ill seniors have to do with giving stuff?


D.a.n.,
Your post about the removal of the gold standard leading to inflation leaves one little bit of info out. The period from 1800 to 1933 was marked by serious economic downturns called depressions. There haven’t been any since then. A gold standard is quaint economics, but hardly something that solves economic problems.


Posted by: gergle"the deaniac" at August 1, 2006 1:35 AM
Comment #172486
Don wrote: 17% of contribution monies are received from contributions of less than $200 is NOT the same as saying 17% of the U.S. population gave donations.
d.a.n wrote: “I never said 17% of the U.S. population gave donations under $200.”

The government and Fed have been printing money like crazy, and running up astronomical debt ever since

Oopps. I did say that once, and can admit a mistake. That is wrong.

Let me restate (the following is for the federal level only).

83% of money from donations of $200 (or more) are from 0.1% of the population. I think we agree on that.

That means 17% of money from donations under $200 are from 99.9% of the population. Right?

From the pie charts, about 17% of all money received are from small donations under $200.
But, that is not very accurate.

But, there was another article that stated that 83% of all donation money (of all amounts) came from 1% of the U.S. population.

That means 17% of all donation money came from the remaining 99% of the population.

While the number of donations under $200 is very large, the total money from it is only about 17% of the total money received. That is also based on the other article that said 83% of all donations of all sizes come from 1% of the population (i.e. 100% - 83% = 17%).

Since the other article stated that 83% of all donation money (of all amounts) came from 1% of the U.S. population, that means 17% (i.e. 100% - 18%) of all donation money came from the remaining 99% (i.e. 100% -1$) of the U.S. population.

Since I can’t find the article that states 83% of all money comes from 1% of the population, I will still assert (based on the www.crp.org report) that 83% of all money from donations of $200 or more come from only 0.1% of the population.

So, your beef is that you don’t believe that 83% of all money from donations of all sizes come from 1% of the population, but you do believe that 83% of all donation money of donations of $200 or more come from 0.1% of the U.S. population.

OK. I’ll keep looking for the study that stated that 83% of all money donations (of all sizes) come from 1% of the U.S. population (which is stated in the www.crp.org report).

Don wrote: The pie charts you include in the above include money from PACs, big donors, and small donors.

No. See the chart above again, and visit the site. The chart clearly says that it is from “small” donations from “individual donors”. Not big donors or PACs. See, so you made a mistake. Shame on you. But, can you admit it? And can you admit that there is a possibility that the 83% of all money from 1% of the U.S. population may be accurate? I’ve seen nothing to disprove it yet.
____________

gergle wrote:
D.a.n.,
Your post about the removal of the gold standard leading to inflation leaves one little bit of info out. The period from 1800 to 1933 was marked by serious economic downturns called depressions. There haven’t been any since then. A gold standard is quaint economics, but hardly something that solves economic problems.

gergle,

We still have economic downturns. The dark vertical bars (below) are recessions. Do you remember double digit inflation in the 1980’s. A recession occurs about every 2 to 11 years for the last 46 years. And notice the chart of inflation (above). There was very little inflation before the gold standard was eliminated. But, that may be beside the point. The current monetary system could work, but not if they keep printing an extra $135 billion per year out of thin air, and borrowing hundreds of billions more per year.

But, look what happened to inflation after 1933. It has been skyrocketing ever since. That can’t be good. It is destabilizing. I don’t know about “quaint” economics. But, I know a ponzi-scheme when I see one. That would be the printing of too much money (about $11.3 billion per month; printed out of thin air). The plunder of Social Security surpluses is another ponzi-scheme. They take the cash surpluses and replace it with bonds. Those are easy to print too. The amount of currency in circulation has increase from $150 billion to $6.9 trillion in year 2000. That is what causes inflation, erodes savings, erodes the value of the dollar, and destabilizes the economy. While a gold standard may not be absolutely necessary, printing new money out of thin air is not necessary, and erodes the value of the dollar from one day to the next. What’s quaint about that?

Posted by: d.a.n at August 1, 2006 2:23 AM
Comment #172487
The government and Fed have been printing money like crazy, and running up astronomical debt ever since.
Sorry. That first sentence at the top should have been at the bottom (addressed to gergle). Posted by: d.a.n at August 1, 2006 2:28 AM
Comment #172489

Excellent post Jack. After reading the Treasury Department’s report, I’ve become a believer in dynamic analysis.

Here’s an analysis of the report on Slate:

In place of a false choice of tax cuts magically paying for themselves and not costing anything, the Treasury offered a very real and painful one: The tax cuts need to be paid for by “either cutting future government spending or raising future taxes.” And even if you take the path of cutting government programs — which is not the path the country is on today — Treasury found only minuscule economic effects from the tax cuts: a mere 0.7 percent increase in the size of the economy after many years.

To put that number in perspective, averaged over 20 years, an increase in the economy of 0.7 percent is equivalent to a 0.04 percent increase in the average annual growth rate. So, instead of limping along at a mere 3 percent growth rate [actually, 2.5% in the last quarter - AP], the economy would charge ahead at a 3.04 percent growth rate.

Notably missing from the Treasury report was the variable of greatest public interest: revenues. Although Treasury’s model almost certainly estimated the degree to which the added growth helped pay for the tax cuts, officials there appear to have chosen not to report the number. But some simple arithmetic can fill in this gap: About one in every five dollars of national output is collected by the federal government in taxes. If that same ratio applies to the output added by the economic effects of the tax cuts, then the added revenues produced by the increased economic growth would be enough to offset less than one-tenth of the official “static” estimate of the tax cuts’ cost.

Furthermore, all these barely perceptible benefits rest on the assumption that starting in 2017, the tax cuts would be fully paid for with cuts of unprecedented depth in federal programs—totaling about a 50 percent reduction in all domestic spending other than entitlements like Social Security and Medicare. If such cuts were not made — and not even President Bush has proposed making them — then the resulting deficits, debt, and eventual tax increases would eliminate even these modest economic benefits.

If we believe that spending cuts of this magnitude are unrealistic, then the Treasury economists have another important finding: The sooner we get rid of the tax cuts, the better it will be for the economy. Specifically, they found that national output would be 0.9 percent higher in the long run if we let them expire in 2010 rather than allowing them to continue along, forcing us to face even bigger tax increases in the future to make up for all of the added deficits and debt.

The dynamic analysis shows what common sense says it should: If you cut taxes, you decrease revenue.

Sorry, Jack.

Posted by: American Pundit at August 1, 2006 3:00 AM
Comment #172495

D.a.n.,

My comment was about abandoning the gold standard as being responsible for inflation. It isn’t. The gold standard helped engender contractions and expansions of money supply that resulted in boom /bust cycles that were not mere recessions, but depressions. There’s a world of difference between the two.

Yes, loose fiscal policy in an expansion is inflationary. “What has any of this ranting got to do with the gold standard?” was my question.

The economic advances made after the 30’s was an understanding that money supply effects the business cycle. We live in a global economy. Gold standards have zero to do with anything regarding modern economics. Trade issues have to do with floating currencies. That isn’t a bad thing.

Posted by: gergle"the deaniac" at August 1, 2006 4:16 AM
Comment #172497

D.A.N.

I think my question was lost with your debate with Don so I will ask it again.

I admit I’m not a financial whizz but since the Fairtax Plan is a consumption tax I don’t see how it would affect the rich or super rich unless they tried to spend all their money before they died, and I haven’t checked but I don’t think that’s the trend.

I think the Fairtax Plan is a great idea from what I’ve heard. I would encourage everyone to google it and check it out. I think it would satisfy all your requirements as outlined above.

Can anyone else explain why this would be a bad plan?

Posted by: tomd at August 1, 2006 4:34 AM
Comment #172504

AP

I don’t have a problem with what you say. When you cut taxes, you do lose revenue. BUt you do not lose a dollar of revenue. Likewise when you raise them. The dynamic analysis is just a better, more accuarate, way to figure it.

We need to think about how much of our GNP the Feds should spend, whether in taxes or borrowing. It is now around 20%. We are taking in just above 18%, which is about average. Maybe we can compromise and cut spending to 19 and raise taxes to reach that level. The problem is that if you just raise taxes, government spends to meet that, and more. And each time it does, we lose some vigor and freedom.

Posted by: Jack at August 1, 2006 8:00 AM
Comment #172512

gergle:

I see that my point was unclear, since it evaded your comprehension.

When the US has GIVEN money to other countries, sometimes the result has ended up with those countries getting used to getting the money, rather than learning how to use the money properly. If they used it properly, they would reach a point where they no longer needed the handout. Its the same as giving welfare money to people without helping them learn how to get off welfare.

I showed the same point with elderly folks—-the point is that its human nature. It happens in many different aspects.

If i want my daughter’s room to be clean, but i always pick it up for her, she will learn that her room will become clean if she waits for it to be cleaned. If an elderly person’s every need is accomodated by staff, then the person stops doing for themselves. The end result is not what is intended, because the person actually loses abilities.

In foreign policy, in domestic policy and in our own lives, we need to make sure that we teach people how to fish, rather than just giving them a fish. That’s the concept I was talking about.
Our welfare system often does not do that, but it should.

d.a.n.:

Are you really Ross Perot in disguise. I haven’t seen such elaborate use of charts and diagrams since Perot’s presidential run. Hint: he started well, but people lost interest in the mass of information. :)

Posted by: joebagodonuts at August 1, 2006 8:59 AM
Comment #172513

The problem with dynamic analysis is that near-term economic effects can ripple outwards. It exhibits a lot of chaotic sensitivity to initial conditions.

All long term economic forecasts suffer from this and the fact that we don’t know what kind of factors, crises, or technological issues are going to stick their head up, especially when the time scale is decades.

Historically, tax cuts have not been the magnificent stimulus they’ve been advertised to be, at least not when taxes aren’t that onerous. In truth, they tend to have an opposite effect, because they are often accompanied by deficit spending, which is always a bad thing in terms of the economy.

In any investment, one is wise to keep costs low and dividends high. Tax cuts in times of deficit cost a great deal more than they give to the economy, and the dividends are low.

What does stimulated the economy is research and development. When America’s been on top, it’s been on top because it’s one of the biggest technological powers in the world. It’s time for America to be a brainpower as well as a superpower. That, not tax cuts, is going to stimulate the economy in the long term.

Posted by: Stephen Daugherty at August 1, 2006 9:09 AM
Comment #172522

jbd,

Whats funny, is the current political climate makes me miss Ross Perot. Everyone claimed he was crazy, but he realized where our financial situation was going if we didn’t do something about it. Wish he’d have been president.

Posted by: iandanger at August 1, 2006 9:54 AM
Comment #172524

This thread looks amazing. I couldn’t help though going straight to the bottom and posting my own simple observation that the tax breaks have generall increased the wealth only of the richest 1% in this nation. This doesn’t seem healthy to me.

Posted by: Max at August 1, 2006 10:02 AM
Comment #172531
tomd wrote: Can anyone else explain why this would be a bad plan?

tomd,
I have studied the Flat Sales Tax, and originally thought it might be a good idea. But it creates a lot of questions and fails to answer several, so I have some issues with it:

  • the FairTax.org recommends a 23% sales tax rate (23% inclusive, but actually, it is a 30% sales tax on the price of the item purchased). That is, if you buy a $100 item, your tax is $30, which is 30% of $100. It is a bit dishonest to call that a 23% sales tax, when most people understand sales tax to be a percentage of the item purchased. Fairtax.org calls it a 23% tax by calculating $30 on the sum of $130 ($30 / $130 = 23%). Either way, 23% or 30%, it is very high sales tax.

  • Such a high rate (23% inclusive, 30% exclusive) will almost guarantee blackmarkets and tax evasion.

  • There is less transparency of sales taxes collected, versus income tax (especially if you consider the number of sales to the number of people with income). Less transparency will breed more corruption.

  • There is insufficient proof to show that all will be taxed equally (based on income). Since most people insist that the objective is to tax income equally, (except the poorest below the poverty level), how does the fairtax plan prove that income will be taxed equally ? That is a very interesting point. If the main question about any tax system that is continually asked is “Will everyone (excluding the poor) pay their fair (or equal) percentage of tax related to income?”, then what does that tell you? It seems many people still want the end result of any tax system to be that everyone pays their fair (or equal) percentage of income (excluding those below the poverty level, which would pay zero tax). Therefore, if we are continually tasked with proving that any tax system, in the end, must fairly tax income the same percentage (excluding the poor who pay zero tax), then why not simply retain the income tax?

In my opinion (but I can’t prove it), I think the FairTax.org plan will let the wealthiest evade more taxes than ever before. If the goal is to tax income equally (as most people want), then why complicate it by trying to place the tax on sales ? Also, I fear we will simply end up with both.
__________

gergle wrote: D.a.n., My comment was about abandoning the gold standard as being responsible for inflation. It isn’t. The gold standard helped engender contractions and expansions of money supply that resulted in boom /bust cycles that were not mere recessions, but depressions. There’s a world of difference between the two.

Gergle,
The elimination of the gold standard made it easy to print money. The U.S. is printing too much. That would not have been possible, had there been the gold standard. It is possible to do without the gold standard if the government and Fed had the discipline to not print too much money.

gergle wrote: Yes, loose fiscal policy in an expansion is inflationary. “What has any of this ranting got to do with the gold standard?” was my question.
See above. There is a correlation between printing too much money when there is no requirement to back it up with something of value.
gergle wrote: The economic advances made after the 30’s was an understanding that money supply effects the business cycle. We live in a global economy. Gold standards have zero to do with anything regarding modern economics. Trade issues have to do with floating currencies. That isn’t a bad thing.

That’s a string of non-sequiturs to cloud the issue and obscure the facts. The gold standard has plenty to do with the stability of a currency. To deny it is nonsense. Without the gold standard, there is no discipline, and the Fed and government print too much money, and the graph above corroborates that, and shows what happened to inflation after the gold standard was eliminated. The Fed is printing (on average) $135 billion per year ($370 million per day) of extra currency (out of thin air). From 1950 to 2000, the government and Fed printed 46 times more money than existed in 1950. That’s a funny-money monetary system. The government has $1 billion per day due in interest on the $8.4 trillion of National Debt. How is it OK to print 37% of that daily interest? That’s irresponsible, and IMO, dishonest too. It is also a cause of inflation. Are you saying that is OK with you (to print $370 million per day to pay the $1 billion due per day for interest on the $8.4 trillion National Debt)? Surely, you can see how that causes inflation? Why do that? Are you defending the ever-present inflation caused by the printing of so much money per year? How does a global economy and trade cycles justify printing so much money, or have more bearing on inflation than the elimination of the gold standard? Also, the debt problem is worse than many realize (i.e. $8.4 trillion of National Debt, $12.8 trillion Social Security debt, many trillions of unfunded Medicare liabilities, and the PBGC is $450 billion in the hole). Where’s all that money gonna come from ? Oh, right. We got a money tree (i.e. The Fed). Just print it. Or borrow it. Or both.

joebagodonuts wrote: d.a.n.: Are you really Ross Perot in disguise. I haven’t seen such elaborate use of charts and diagrams since Perot’s presidential run. Hint: he started well, but people lost interest in the mass of information.

People lost interest in Ross Perot because he self destructed. He was wishy washy. He was flaky. First, he was running, then he wasn’t, then he was. Few can tolerate that much wishy-washiness.

But, if people are so dis-interested, why was I addressed 12 times above?
It’s not about me though. It’s the issues.
__________

Max wrote: This thread looks amazing. I couldn’t help though going straight to the bottom and posting my own simple observation that the tax breaks have generall increased the wealth only of the richest 1% in this nation. This doesn’t seem healthy to me.

Max, you are absolutely correct.
The wealthy got most of the tax cuts.
Median income has been falling for the last 6 consecutive years. Also, the g a p between the wealthiest 1% of the U.S. population and the remaining 99% of the U.S. population has never been worse since the Great Depression of 1929. The public has been brainwashed to think inflation is OK. Even 4.5% inflation is bad, because $100 becomes $70 in 8 years. Anyone who thinks our government and the Fed are fiscally responsible is difficult for me to understand. They are not. The government and the Fed are both fiscally and morally bankrupt. Printing $370 million (new money) per day to help pay the the $1 billion of interest (alone) due per day is not responsible. Stealing surpluses from Social Security ($12.8 trillion in the hole) and replacing it with bonds is dishonest. Most Americans don’t understand any of this. But, those that do obviously are not OK with it. Like everything, education is required. No reforms will ever come about as long as an ignorant, uninformed electorate continues to keep re-electing the very same bought-and-paid-for, irresponsible incumbent politicians that are threatening the future and security of the nation.

Posted by: d.a.n at August 1, 2006 10:36 AM
Comment #172534
gergle wrote: D.a.n., Your post about the removal of the gold standard leading to inflation leaves one little bit of info out. The period from 1800 to 1933 was marked by serious economic downturns called depressions. There haven’t been any since then. A gold standard is quaint economics, but hardly something that solves economic problems.

So, how can you be so certain?
How do you find it so easy to ignore the fiscal picture. Are you trying to say there is no potential for an economic meltdown? Did you forget about the double-digit inflation of the 1980’s ? Did you noticed the increased frequency of recessions over the last 50 years? How do you justify the borrowing and printing of so much money to pay the interest on the debt?

It is exactly that type of thinking that will produce the next Great Depression.

Along with the fiscal irresponsibility of government, growing to nightmare proporations, and ignoring our growing list of pressing problems.

Recessions come and go every 2 to 11 years.
The last recession was about 5 years ago.
The following have the potential to change things drastically. These five main things could easily turn a recession into a depression:


  • FISCAL IRRESPONSIBITY: $8.4 trillion National Debt, $12.8 trillion of Social Security debt, $42 trillion of total nation-wide debt, decreasing options, lost opportunities, falling dollar (not backed up by real value), rampant borrowing printing money, rising inflation, trade deficits, and the failure stop the debt from growing ever larger, and increasingly corrupt government too incompetent to deal with it;

  • GENERATIONAL STORM: 77 million aging baby boomers (that all vote), making less, spending less, pay less tax, expecting to draw from already troubled, mismanaged, and plundered Social Security, Medicare, Medicaid, & welfare systems.

  • ENTITLEMENT SHORTFALLS: The looming Social Security, Medicare, Medicaid, & welfare deficits and short falls, and decreasing number of tax-payers per entitlement recipient, baby boomers earning less, spending less, paying less taxes, and expecting to draw entitlements from already fiscally bankrupt systems (i.e. Social Security is $12.8 trillion in the hole, and Medicare is many trillions in the hole).

  • LIMITED GROWTH & INCREASING FOREIGN COMPETITION: The limited capacity for growth due to declining quality of education, a generally less educated population failing to develop new technologies, coupled with a steady increase of foreign competition.

  • ENERGY VULNERABILITY: Of all the responsible, insightful things government could have done, they failed miserably to research and foster alternate energy sources, more energy efficient homes, automobiles, etc.

And, global warming should probably be on that list. I’m not an expert in this area, but should we be gambling with the possibility that we are screwing up our environment? Is is possible that it may not be too long (and unavoidable?) before all coastal cities are underwater (as the ice caps melt, and the sea level rises), not to mention the effect on weather, agriculture, etc.?

Posted by: d.a.n at August 1, 2006 10:51 AM
Comment #172549

Here’s one Bush “accomplishment”:

The number of Americans living in poverty has risen each year Bush has been president, increasing to 37 million in 2004 from 31.6 million in 2000. Overall, 12.7 percent of the nation’s population lives in poverty, which for a family of four means an income less than $20,000 a year.

The increases in poverty come after years of decline in the 1990s…

Posted by: Lynne at August 1, 2006 11:59 AM
Comment #172568

d.a.n.

I’ve read the FairTax book, and while I don’t have it here to reference, the rate would be only 23%. As far as it being high, the goal of the creators of the system was to have it be revenue neutral, so they based that number on the extimated cost of taxes passed on to the consumer. Sine if this passed everyone would know that that extra 23% was no longer being taxed from the corporations that produced the goods, the price is expected to drop making it price neutral as well. This should address the issue of black markets etc.

You are in error about the transparency issue as well. In the case of FairTax, the onus is shifted from the taxpayer to the retailer. Since they already keep reciepts of what they sell, it will be easy to look over their sales and compare it to the taxes. I really like this anyways for this reason. The income tax makes you a worker for the state, an asset to be documented and squeezed. The use of a sales tax takes the government out of my pocketbook, which is just fine with me. Also, because it was designed to be revenue neutral, ALL income taxes, to include Social Security and Medicare/Medicaid will be eliminated but still funded.

As far as everybody paying thier due, this is also ideal. The rich, who buy more stuff that’s often far more expensive, will pay more in taxes. As your myriad charts etc show, lobbyists are hard at work. One of the things they do is help to write the tax code such that the rich often don’t pay thier fair share. FairTax would eliminate that. It will also help to eliminate the shadow economy by having everybody who used to not pay taxes, such as undocumented workers paid cash under the table, criminals (who still tend to buy things) and even tourists paying into the Federal coffers.

Overall, FairTax represents what I think is an optimum way to rewrite our tax code in a way that is fair to everyone. Further, it will help end the offshoring of corporations for tax loopholes and bring huge amounts of private money back as well. It should also create an economic boom as we will have our own income to spend as we choose.

Posted by: 1LT B at August 1, 2006 1:08 PM
Comment #172573

And foreclosures have been climbing for 13 consecutive months.
And many of the jobs created were guess where?
Within government.
I thought Republicans were supposed to be for smaller government?
Seems to me, just based on their track record, they are for:

  • growing government to nightmare proporations

  • printing lots and lots of money (increasing inflation)

  • borrowing lot of money

  • growing debt (burdening future generations for the next century (or longer))

  • growing poverty

  • creating the biggest gap of the 1% wealthiest and the remaining 99% to the worst level since the Great Depression of 1929

  • increasing dependency on government

  • increasing entitlements

  • increasing alienation of allies

  • increasing spying on citizens

  • giving tax cuts to the wealthy

  • plundering Social Security surpluses

  • decaying public education

  • cheap labor; exploiting an under-paid under-class

  • abusing eminent domain laws for legal plunder

  • demonstrating the incompetence of FEMA

  • growing corporatism and corpocrisy

  • growing the corruption of bought-and-paid-for incumbent politicians

  • growing pork-barrel, waste, graft, corruption, and corporate welfare

  • giving pardons to convicted felons and fellow bought-and-paid-for politicians

  • imporing crime, disease, and poverty, and forcing states to accomodate illegal aliens

  • starting unnecessary wars

  • … etc …

Not to just pick on Republicans.
Too many irresponsible incumbents in all parties are the problem.

  • Stop Repeat Offenders.

  • Don’t Re-Elect Them !

Posted by: d.a.n at August 1, 2006 1:16 PM
Comment #172583
1LT B wrote: d.a.n. I’ve read the FairTax book, and while I don’t have it here to reference, the rate would be only 23%.

Not exactly. Re-read it.
There’s a little bit of dishonesty going on there.
Here is why …
In the fairtax.org plan, the tax on $100 purchase would be $30 .
What is that?
That is a 30% sales tax.
The FairTax.org tries to portray that as a 23% tax ( [$30 / ($100 + $30)] = 23%
See ?
I think fairtax.org hurts their cause with that bit of deception.

1LT B wrote: As far as it being high, the goal of the creators of the system was to have it be revenue neutral, so they based that number on the extimated cost of taxes passed on to the consumer. Sine if this passed everyone would know that that extra 23% was no longer being taxed from the corporations that produced the goods, the price is expected to drop making it price neutral as well.

There is an easier way to solve that. Stop taxing corporations.

1LT B wrote: This should address the issue of black markets etc.
1LT B wrote: You are in error about the transparency issue as well. In the case of FairTax, the onus is shifted from the taxpayer to the retailer. Since they already keep reciepts of what they sell, it will be easy to look over their sales and compare it to the taxes.

No, I don’t think so, because it is not simply the number of retailers. Total transparency also requires the analysis of all transactions (sales), and the magnitude of those transactions far exceeds the number of incomes (nation wide; i.e. far less accounting). By the way, sales tax as it exists today is a bad tax. It taxes the poor the heaviest.

1LT B wrote: I really like this anyways for this reason. The income tax makes you a worker for the state, an asset to be documented and squeezed. The use of a sales tax takes the government out of my pocketbook, which is just fine with me. Also, because it was designed to be revenue neutral, ALL income taxes, to include Social Security and Medicare/Medicaid will be eliminated but still funded.

Hmmmmm … I liked it too at first.
But I have not seen sufficient proof that the FairTax.org plan would tax income equally, which is what I believe to be the fairest, and most simple form of taxation (with no deductions, no corporate taxes, no loop holes, and a low-income exemption).

1LT B wrote: As far as everybody paying thier due, this is also ideal. The rich, who buy more stuff that’s often far more expensive, will pay more in taxes.
True, but that does not prove that incomes will be taxes equally.
1LT B wrote: As your myriad charts etc show, lobbyists are hard at work. One of the things they do is help to write the tax code such that the rich often don’t pay thier fair share. FairTax would eliminate that.
I’m not sure of that at all. They don’t pay their fair share now because of all the loop holes. Those loop holes need to be eliminated.
1LT B wrote: It will also help to eliminate the shadow economy by having everybody who used to not pay taxes, such as undocumented workers paid cash under the table, criminals (who still tend to buy things) and even tourists paying into the Federal coffers.
That’s a separate issue. And blackmarkets are how sales taxes are avoided, and I think a 30% sales tax (23% inclusive tax), will increase black markets.
1LT B wrote: Overall, FairTax represents what I think is an optimum way to rewrite our tax code in a way that is fair to everyone. Further, it will help end the offshoring of corporations for tax loopholes and bring huge amounts of private money back as well. It should also create an economic boom as we will have our own income to spend as we choose.

Repectfully, we’ll just have to agree to disagree.
Hopefully, the FairTax does not come to pass, but it may be better than what we have now.
I studied the FairTax plan closely, and even donated to FairTag.org once.
But, after looking at it more and more, I grew more and more concerned about it. It fails to prove to me that incomes will be taxed equally, which is what I consider to be fair. That is also the most common question of any tax plan. Will people be taxed the same (based on income)? So, why not retain the income tax, but merely get rid of the tax loop holes, and make it a flat 17% income tax, with a low-level-income exemption equal to the poverty level?

Here’s the plan I like :

  • It requires the least change.

  • It allows the easiest transition.

  • It eliminates the loop holes.

  • It taxes incomes all the same 17% (over the poverty level).

  • It eliminates the graduated scale. 17% of $100K is double 17% of $50K. That is graduated enough.

  • It still allows for the accounting for Social Security and Medicare.

  • It won’t place high sales taxes on exports.

  • It eliminates corporate taxes.

Posted by: d.a.n at August 1, 2006 2:03 PM
Comment #172585

iandanger:

There was a time when I thought Perot was gonna be really good. But he ended up being far to shrill for my tastes. I doubt he’d have been able to master the intricacies of politics with Congress, since he was used to being the man in charge whose word wasn’t often challenged.

I liked his business model though. And I hoped an outsider would make tough changes that need to be made—just like I hope John Bolton does at the UN. Change doesn’t come easily, and it makes many people angry, but it still is necessary.

Posted by: joebagodonuts at August 1, 2006 2:12 PM
Comment #172596
The problem is that if you just raise taxes, government spends to meet that, and more. And each time it does, we lose some vigor and freedom.

You mean like in the 90’s, Jack? :)

Seriously though, just like only Nixon could go to China, only Democrats can reform Social Security and Medicare. Nobody trusts Republicans with social issues and we saw the proof of that when Clinton reformed welfare where Republicans couldn’t. Even with a majority everywhere now, Republicans can’t reform the programs millions of Americans depend on.

Social Security and Medicare aren’t going away — that’s obvious — and nobody trusts Republicans to do the right thing. So if you want spending reform, you have to elect Democrats.

Posted by: American Pundit at August 1, 2006 3:26 PM
Comment #172597

All flat taxes give advantages to the rich and take them from the poorest of those with tax liabilities. There is much more buying power in 83% of a six figure income than there is in such of a lower income Any rises in taxes would come with greater effect out of poorer pockets than richer.

The Progressive tax works on the principle that life is being very fair to those who earn more, and would be fairer to them if increases were made on their end, than it would be to those with lesser income, were they to be uniformly socked with the burden.

In fact, in order to deal with that unfairness, proponents of the fair tax put an exemption for the first few thousand, essentially turning the system into a binary progressive tax, and validating the progressive tax system by doing so.

The real cause of the complication of the tax code is not the progressive system but all the tax breaks, tax shelters and tax incentives that both Republicans and Democrats have written into the law, especially the GOP’s habitual use of tax breaks in lieu of the politically radioactive subsidies that these supposedly free market individuals are not supposed to support.

Whatever course we take, what makes a tax fair or unfair is how difficult it makes folks lives. For those rich enough, taxes are mere inconveniences, and a person would have to be greedy to object to today’s moderate tax rates.

Posted by: Stephen Daugherty at August 1, 2006 3:26 PM
Comment #172600

Jack:

Here’s adding to your tax information (from http://www.washingtonpost.com/wp-dyn/content/article/2006/05/07/AR2006050700924.html:

“Well, now it has been discredited. Rauch cites William Niskanen, an economist who worked in the Reagan White House and now chairs the Cato Institute. Niskanen has crunched the numbers between 1981 and 2005, testing for a relationship between tax cuts and government spending, and controlling for levels of unemployment, since these affect spending and taxes independently. Niskanen’s result punctures his own party’s dogma. Tax cuts are associated with increases in government spending. The best strategy for forcing cuts in government is actually to raise taxes.”

Tax cuts produce MORE government spending, not less.

Posted by: Paul Siegel at August 1, 2006 3:35 PM
Comment #172609

Stephen Daugherty,

I disagree, but I won’t go into it, because we beat that dead horse far too much already.

I’ll just offer this: What we have now is almost flat, except the wealthy are not paying their fair percentage if it were based on a flat income tax rate (due to all the loop holes).

So, wouldn’t a flat income tax like this be an improvement over what we have now? The simplifications would save a lot of money, and decrease complexity which would decrease corruption and tax evasion.

Then, we could determine if we need to increase the rates on the wealthy later ? Eh?

Posted by: d.a.n at August 1, 2006 4:10 PM
Comment #172611

D.A.N.,

Your main argument against the Fairtax plan seems to be that people won’t be taxed equally based on income. This is true. The Fairtax is based on sales and will do away with income taxes altogether. That is one of the beautiful things about it. The government won’t even know how much money you make and that sounds like a wonderful idea.

The only reason I can see to tax income when a better plan is avaliable is to punish the rich.

I personally don’t know or care ho much my boss makes. We negotiated my salery when I went to work with him and that is what I get paid if he makes a dollar or a million dollars, as it should be.

As you said the 23% is inclusive and if computed exclusively it comes out to 30%. However, the income tax rates we pay now are also computed as inclusive. To compare any other way would be apples and oranges.

Posted by: tomd at August 1, 2006 4:49 PM
Comment #172614

I’m glad d.a.n. pointed out the “inflate or die”-theme over at the Federal Reserve. What do when the economy starts stagflating? I.e. economy tanking while prices continue to rise, forcing the Fed between a rock and a hard place: Either upping interest rates to battle inflation - quite unpopular but highly necessary -, or let the imbalances grow even further up to a point that one major financial institution/central bank holding megazillions of US$ debt blinks and starts selling aggressively.

First choice is a lot of pain. Second one is armageddon:

“The Keynesian economics practiced by governments and central bankers
depends on deception. As more money and credit is introduced into the
economy - as “stimulus” - it is mistaken for real wealth. Consumers think
they have more money to spend; businessmen think they have more customers;
investors think they see more profits. Deceived, they happily expand the
economy. As time goes on, however, prices catch up to the funny money and
the consumer wakes up to the fact that he or she is no better off than
before. The businessman finds that though he has more customers, he must
also pay his workers more. And his supplies cost more, too. The investor
sees that he did not really make any money; profits disappeared as costs
rose and the gain on his stock barely equaled the general loss of
purchasing power of the dollar.

So, gradually, the old trick stops working. Money and credit may pour in,
but no one is fooled. Instead, prices rise, while the economy goes limp.

This was what Paul Volcker faced when he stepped into the Fed back in the
late ’70s. He had to whip inflation - or more precisely, inflation
expectations - before any further monetary stimulus would work. And this
he did, by pushing lending rates up over 15% and bringing about the worst
recession since the 1930s. People were so upset with him they burned him
in effigy on the capital steps.”

(http://www.dailyreckoning.com/Issues/2006/DRUS073106.html)


Posted by: Josh at August 1, 2006 4:56 PM
Comment #172625

The ONLY reason tax revenues are up with lower tax rates is currency inflation by the Fed and deficit spending by Congress. If the Fed did not continue to metaphorically print paper dollars and (Republican-controlled) Congress did not continue to deficit spend, tax revenues would be down due to lower tax rates. It’s just that simple. And for you, Jack, to try to somehow spin it any other way is at best a demonstration of your shocking misunderstanding of economy.

Posted by: Crazy_Joe_Divola at August 1, 2006 6:01 PM
Comment #172636
tomd wrote: D.A.N., Your main argument against the Fairtax plan seems to be that people won’t be taxed equally based on income. This is true.
That’s where we differ. It’s an honest difference of opinion.
tomd wrote: The Fairtax is based on sales and will do away with income taxes altogether. That is one of the beautiful things about it. The government won’t even know how much money you make and that sounds like a wonderful idea.
Yeah, but I don’t think it will be fair to everyone. I think the wealthy will get a huge tax cut, and most taxes will end up being paid by the less wealthy.
tomd wrote: The only reason I can see to tax income when a better plan is avaliable is to punish the rich.
tomd, I don’t want to punish the rich. I’m not a progressive tax scale proponent either. I just believe everyone should pay the same percentage of income (excluding those in poverty) per this tax plan. If there are less cheaters, the load on everyone will be less. A flat 17% rate income tax seems the most fair to me. That would produce about 94 % of all needed revenues. The 6% shortfall can come from less spending by government.
tomd wrote: I personally don’t know or care how much my boss makes. We negotiated my salery when I went to work with him and that is what I get paid if he makes a dollar or a million dollars, as it should be.
I would not argue with that at all, nor have no grudge or envy of people more wealthy than me, nor try to disguise envy or jealousy as claims for equality. IMO, a 17% flat rate income tax seems most fair. More fair than now, where there are too many loop holes, and taxes rates vary all the way from 0 to 35% . To me, a graduated tax scale is not fair either. IMO, the fairtax.org sales tax plan will hammer the midddle class and the poor the most, even with the allowance provided by the fairtax.org plan.
tomd wrote: As you said the 23% is inclusive and if computed exclusively it comes out to 30%. However, the income tax rates we pay now are also computed as inclusive. To compare any other way would be apples and oranges.

Actually, the confusion is introduced when fairtax.org calls their tax a sales tax, which most people understand to be a percentage on the purchase (not a percentage of the sum of the taxes and item price). Where have you ever seen a sales tax that was based on the percentage of the item price and the tax? I never have. Therefore, it is a bit dishonest in my opinion for the fairtax.org to state a 23% sales tax, when they should more accurately call it a 23% inclusive sales tax (meaning it is 23% after you add the tax and item price together). But, regardless of what they call it, guess what the calculation is when someone buys something and they want to know how much tax they will pay? The will multiply it by guess what?

They will multiply it By 0.30

Therefore, why not conform to the most broadly know definition of a sales tax and call it a 30% sales tax?
_______________

Josh, Crazy_Joe_Divola,

You two are the first persons I’ve seen on watchblog (lately) to question the Fed and government printing too much money.

It is a bad monetary system.

Irresponsibly printing too much money out of thin air (on average from 1950 to 2000, $135 billion in new money per year; that’s $370 million per day) is destabilizing. It erodes the value of the currency. Only 4.5% inflation erodes $100 to $70 in 8 years.

And the replacement of Social Security surpluses with government bonds is another ponzi-scheme. Social Security is now $12.8 trillion in the hole (source: CATO Institute). The National Debt is $8.4 trillion. The PBGC is $450 billion in the hole. And Medicare has several trillions in unfunded liablities in the next few years.

All together, that is over $22 trillion. Where is all that money going to come from? Where else? Borrow as much as possible, and print the rest. That’s why we have perpetual, destabilizing inflation? And this little scheme will implode eventually, because the debt will get out of control (if it isn’t already, with federal debt of over $22 trillion).

Posted by: d.a.n at August 1, 2006 6:32 PM
Comment #172650

To compare income tax to a consumption tax you have to use the same method. I understand that figured exclusive it will amount to about 30%. You have no argument from me there, however if you figure a 25% income bracket exclusively doesn’t it come out to somewhere around 33%?

“tomd wrote: The Fairtax is based on sales and will do away with income taxes altogether. That is one of the beautiful things about it. The government won’t even know how much money you make and that sounds like a wonderful idea.
Yeah, but I don’t think it will be fair to everyone. I think the wealthy will get a huge tax cut, and most taxes will end up being paid by the less wealthy.

I don’t see how this could happen. The rich buy more goods and more expensive goods than most people so they would be taxed the most. The middle class will be able to control their tax rate to a large extent based on their spending habits. I don’t see how the rich will be getting such a huge tax cut or how the middle class will get soaked

I am against a flat tax because it leaves too many loopholes that can be taken advantage of and leaves too much power in the hands of the government.

Posted by: Tom D. at August 1, 2006 7:28 PM
Comment #172660
I don’t see how this could happen. The rich buy more goods and more expensive goods than most people so they would be taxed the most.
Are you sure about that? I used to say the very same thing. I was wrong.

I also used to be for the fairtax.org plan.
After careful study, I had to abandon it for many reasons. Have you really checked out this plan?

It is the one that has the most simple changes, but greatly simplifies the system (eliminating the loop holes, corporate taxes, and graduated tax scale).

Also, here’s a very interesting point.  

One question about any tax system that is continually asked is: Will everyone (excluding the poor) pay their fair (or equal) percentage of tax related to income ?

Interesting isn’t it?
What does that tell you?
It seems many people still want the end result of any tax system to be that everyone pays their fair (or equal) percentage of income (excluding those below the poverty level, which would pay zero tax).

So, if we are continually tasked with proving that any tax system, in the end, must fairly tax income the same percentage (excluding the poor who pay zero tax), then why not simply retain the income tax, except make it a flat tax rate of 17%, eliminate all loop-holes, deductions, subsidies, which will also mean little or no changes for accounting for Income tax, Social Security tax, and Medicare tax.

Posted by: d.a.n at August 1, 2006 7:55 PM
Comment #172667

D.A.N.

I have briefly looked over the plan you suggest and I like it a hell of a lot better than what we have now. The main problem I see with it is that it doesn’t take any power from the politician. Lobbiest will still be a major influnce. The beautiful thing about the Fairtax is we control our money and the amount of taxes we pay. Isn’t that a great thing?

I’m going to bed now and will be back in the wee hours of the morning, but I’ll take a longer look at your proposal.

BTW. At 23% inclusive or 30% exclusive it’s still no more than we are paying now and in most cases a lot less.

Thanks for a reasonable non-partisan debate.

Posted by: Tom D. at August 1, 2006 8:14 PM
Comment #172707

Tom D.,

Thanks. Of course, tax reform, or any reforms of any kind, are unlikely until congress has some incentive to pass reforms. For some time now, too many bought-and-paid-for incumbent politicians have been rejecting lots of common-sense reforms, and pressing problems aren’t getting solved, because problem solving has taken a back-seat to bought-and-paid-for politicians merely getting re-elected.

Tom D. wrote: The beautiful thing about the Fairtax is we control our money and the amount of taxes we pay. Isn’t that a great thing?

Yes, as long as the less wealthy don’t get stuck with the majority of the tax bill. I haven’t seen a good study yet that shows that the tax burden will be fairly distributed.

Posted by: d.a.n at August 1, 2006 10:52 PM
Comment #172746

d.a.n., I have no problem with your idea that printing money beyond the ability of GDP to expand money supply is causing inflationary pressures and trade deficits causing a sinking dollar.

The problem I have is your apparent belief that a gold standard will solve these issues. Requiring a precious metal to back up treasury notes is a nonsensical idea, in my opinion. Precious metals are simply commodities. Money is an artifice to place value on items. Gold has no magic economic impact. Tied to gold, money supply would no longer be able to moderate the economic business cycle.

It sounds nice, returning to “good old days”. Thanks, but I’m not interested in returning to pre-antibiotic times and dying of simple infections or economic theories that helped create the great depression.

It was a contraction of the money supply that led to and sustained the great depression. It wasn’t a production problem, it was a credit problem.

You are right to cite poor and shakey economic policies as dangerous. You are wrong to promote a gold standard as a solution to poor economic policies.

JBOD,

I understood your point. I don’t disagree that giving money irresponsibly is bad. I don’t agree that Haiti’s problems are based on that. I don’t agree that keeping the elderly focused and ambulatory has anything remotely to do with that. Over applying good principles to situations that are not appropiate is equally as bad as giving money irresponsibly.

Posted by: gergle"the deaniac" at August 2, 2006 7:44 AM
Comment #172748

gergle wrote:

“It was a contraction of the money supply that led to and sustained the great depression. It wasn’t a production problem, it was a credit problem.”

——————————————————————-

Our current fiat money system NOT attached to some sort of standard (gold or other) will probably lead to a situation even worse given current imbalances.

“…,gradually, the old trick stops working. Money and credit may pour in,
but no one is fooled. Instead, prices rise, while the economy goes limp.

This was what Paul Volcker faced when he stepped into the Fed back in the
late ’70s. He had to whip inflation - or more precisely, inflation
expectations - before any further monetary stimulus would work. And this
he did, by pushing lending rates up over 15% and bringing about the worst
recession since the 1930s.
People were so upset with him they burned him
in effigy on the capital steps.”

That was the late ’70s. Now we are paying income taxes to enable the government to pay interest on its debt while expanding government and consumer debt like never before.

Fresh injections of newly-printed money will not do the trick anymore - as was in the ’70s -, only make it much worse. We should adhere to some standard, and raise rates significantly ASAP.


Posted by: Josh at August 2, 2006 8:18 AM
Comment #172751

PS: Governments have been creating “bad coins” to enlarge their currency supply and keep on spending (and enriching themselves) for ages. It has always failed in the end.

http://www.mises.org/story/1516

Posted by: Josh at August 2, 2006 8:22 AM
Comment #172789
gergle wrote: d.a.n., I have no problem with your idea that printing money beyond the ability of GDP to expand money supply is causing inflationary pressures and trade deficits causing a sinking dollar.

The problem I have is your apparent belief that a gold standard will solve these issues. Requiring a precious metal to back up treasury notes is a nonsensical idea, in my opinion.

gergle,
The gold standard, or a precious metal is not required if the government and Fed were responsible. But they are not. Now what? If money was backed up by something of value, regardless of what it is (gold, silver, platinum, etc.), it would make it harder to abuse the monetary system. Are you arguing the truth of that?

And, you can’t say it isn’t abused. Printing $135 billion per year of new money is abuse. It’s a funny-money system. Ask yourself who the winners and losers are? Just think if you could print all the money you wanted.

Lack of discipline is the real problem.

So, how are you going to fix that?

Backing up currency with something of value is one way. Before the elimination of the gold standard, there was essentially no inflation. And, implying that the gold standard caused recessions and depressions before the gold standard was eliminated is false.

Gergle, the printing of $135 billion per year of new money ($370 million per day) for that last 50 years is a funny money system. If you don’t think so, then we can simply agree to disagree and move on. If you do agree, then how are you going to stop too much printing of money ?

The current situation of printing too much money and massive borrowing at the same time is a recipe for disaster. The massive debt (and interest) can only be reduced by eroding it with inflation. Currently, the $1 billion per day of interest on just the $8.4 trillion of National Debt (not including the $12.8 trillion of Social Security Debt) is being paid by and printing 37% of it and borrowing the rest. Tell how that is OK.


gergle wrote:
Tied to gold, money supply would no longer be able to moderate the economic business cycle.

Nonsense. You are obviously from the school of thought that the government should manipulate the currency and money supply. Those theories all overlook one little problem. The human factor. Printing too much money. Lack of discipline. We have a bad monetary system. If you disagree, fine. We’ll have to agree to disagree.

gergle wrote: It sounds nice, returning to “good old days”.
More nonsense.
gergle wrote: Thanks, but I’m not interested in returning to pre-antibiotic times and dying of simple infections or economic theories that helped create the great depression.
More nonsense. Who said anything about infections? Such tactics are lame attempts to cloud the issues and obscure the facts. The gold standard was not eliminated until after the Great Depression had already started. Have you noticed what happened to inflation ever since? And, the Great Depression was not just a result of events in the U.S. The Depression began in Europe.
gergle wrote: It was a contraction of the money supply that led to and sustained the great depression. It wasn’t a production problem, it was a credit problem.

More nonsense. The causes are many, but the currency is not one of them:

  • Oversupply was part of the problem. Poor planning. Expansion, irrational exuberance, excesses in the 1920’s, and many other events led to the Great Depression of 1929. The problem had been growing for years. Then many things exacerbated the problem. It was the perfect storm. And we may now be creating the next perfect storm with massive borrowing and debt.

  • Part of the problem was economic problems in Europe in the 1920’s spread to the U.S., and created disruption of trade.

  • Part of the problem was simple supply-and-demand problems.

  • Part of the problem was an agricultural disaster (the Dust Bowl).

  • True, that lending (credit) was affected, but that does not mean there was a problem with currency itself.

  • I don’t buy all the theories of money supply. Never have and never will. Money is an inanimate object. It is not the cause of problems, and printing more money out of thin is dishonest and part of the problem and will only delay the consequences.

  • Greed was part of the problem. People are part of the problem.

  • Overvalued stocks was part of the problem. Bubbles like that are still occurring. Not just in stocks, but real-estate, precious metals, etc. Too many bubbles is also a supply-and-demand problem.

  • Debt was part of the problem.

  • Poor foreign and trade policy and trade restrictions was part of the problem. Political policies were part of the problem.

  • Too much government was part of the problem.

  • Poor planning and fiscal irresponsibility was part of the problem.

  • Corporatism and Corpocrisy was part of the problem.

  • The Federal Reserve (created ten years before the Depression) was part of the problem. Their policies failed because the Fed did not want to create the inevitable market crash as overvalued stocks climbed ever higher.

Lots of things helped create and exacerbate the problem, but currency itself in the U.S. is not one of them (provided the curreny supply is not reduced by destruction of printed currency). Pretend there was no money, and people still bartered. Are you going to then blame a depression on the goods being traded? Blaming the currency and the supply of that currency (money supply) is nonsense and a very near-sighted and incomplete viewpoint of the problem.

I constantly hear a lot of wannabe economists talk about money suppy, and one thing is clear. They have succumbed to a type of belief (brainwashing) that the money supply is something that needs to be manipulated. They look at their charts and ratios and draw conclusions based on a tiny view of the whole picture. Their manipulations (such as now, borrowing and printing too much money) are not well thought out. I’m not sure if it is all rooted in dishonesty or stupidity. Probably both. But, what the government and Fed are doing now (growing the $21.65 trillion of debt ever larger to nightmare proporaitons, and printing (on average) $370 million per day to just barely keep up with the $1 billion per day of interest due only on the $8.4 trillion of National Debt) is a recipe for disaster.

gergle wrote: You are right to cite poor and shakey economic policies as dangerous.

Well, as least we agree on something. Printing $135 billion per year ($370 million per day) and borrowing the rest to merely meet the $1 billion of interest on the $8.4 National Debt (not even including the $12.8 trillion of Social Security Debt, $450 billion of PBGC debt, and trillions of unfunded Medicare liabilities).

gergle wrote: You are wrong to promote a gold standard as a solution to poor economic policies.
Not really. As stated above, the real problem is lack of discipline and greed, which leads to fiscal irresponsibility and printing to too much currency. Backing up the currency with something of value (such as the gold standard) would reduce the ability to abuse the monetary system by printing too much money. If there is another way to obtain fiscal responsibility without a gold standard, then fine. Use it instead. How ever that discipline is accomplished, the excessive printing of money should be eliminated. It may take many decades, but the massive borrowing and printing money will eventually have consequences. Playing with the currency is a bad and dishonest monetary system. Perpetual inflation is a bad and dishonest monetary system. And inflation has skyrocketed ever since the government and Fed were allowed to toy with the money supply. Inflation can create bubbles too. It helps create stock market, real-estate, and other bubbles, as people try to escape inflation. Inflation is destabilizing, and erodes the value of currency, savings, retirements.

Of course, it’s all futile since our government is FOR SALE.
Bought-and-paid-for incumbent politicians don’t care and many don’t understand any of it anyway. They think the fiscal picture is OK. They are not concerned about the debt, ever-present inflation, etc. And, it won’t improve as longs as voters keep re-electing them.

Posted by: d.a.n at August 2, 2006 10:40 AM
Comment #172794

Agreed, D.a.n., Lack of spending discipline is the problem and printing money not supported by GDP is a problem.

What you clearly don’t understand is money supply and periods of contraction. We would have already had several Depressions since the thirties had it not been for liquidity created by the Federal Reserve. Your understanding of macro economics is muddled at best. In periods of contraction, spending tied to sound economics IS NECESSARY to stop a downward spiral. This is precisely what Hoover did wrong. Roosevelt stumbled into the solution through the WPA, TVA and other programs, helped largely by the efforts of Jesse Jones, who understood the use of credit. Of course, WWII reversed the tide completely, as the military build up began.

My earlier point was we had several SERIOUS DEPRESSIONS in the 1800’s that you avoid completely. Laissez Faire economics don’t work either.

Inflation is a problem, but not nearly as serious as economic collapse. Wihout the ability to provide liquidity in 1987, the FED would have stood by and watched us sink into a massive depression.

Irresponsible and inefficient spending and corrupt ion are serious issues and need resolution. GOLD STANDARDS will not accomplish this. Please take some time and read some Galbraith or even Freidman (who is too Laissez Faire, in my opinion) before promoting this idea. It’s been considered ridiculous for over a half century, and justifiably so.

Posted by: gergle at August 2, 2006 11:06 AM
Comment #172796

Gergle,

Please do read http://www.mises.org/story/1516 (regarding the creeping danger that is inflation), check out TRUE inflation here ( http://www.shadowstats.com/imgs/chartSGS01-16.gif ) and http://www.mises.org/story/2257 (on the Fed becoming a Central Planning Bureau, cfr. under Communism).

Don’t shoot the messenger, read the message.

Posted by: Josh at August 2, 2006 11:15 AM
Comment #172798

gergle,

While you challenge others understanding of economics, you merely repeat what you’ve been programmed to believe. You are clearly a funny-money proponent. I’ve read some of those, and they all talk about playing with money supply. You believe that is OK. And, it might be in small doses. But that’s not what happens. The monetary system is abused and dishonest. If you don’t think so, then (to use your own words) “you clearly don’t understand”.

Posted by: d.a.n at August 2, 2006 11:18 AM
Comment #172836

My tax proposal would be a success. Get rid of Medicare completely and replace it with something else. Putting money in savings banks and then taking it out during retirement is a great way to survive the retirement-til-death era of your life. Buying items (except groceries) would help reduce national debt because they get taxed.

Taxes to me are penalties for being successful. Everyone needs to be treated equally. It’s not your fault that some people don’t succeed.

You do not want to be wealthy in Europe. France taxes the rich over 70%! Just think. Every 100 euros you would make, the Frenchies would take 73!!!!!! If we want to stop that from happening here, then it is time to let people take care of themselves.

The best way to reduce taxes is to reduce the welfare state 1st. If I were a Senator, I would get rid of Welfare. If I succeed at that, Welfare wouldn’t disappear right away, that would be cruel. It would disappear in 5 years. That would be enough to get many people off of drugs and booze and into the real world.

Posted by: stubborn conservative at August 2, 2006 2:37 PM
Comment #172839

gergle,

I agree it would be difficult to return to a gold standard (or a standard of some sort where money is backed up by something of value).
I even admit that it may not be necessary, if there is monetary discipline.
The gold standard helped limit inflation and rampant money printing.
The agrument that depressions and recessions before the 1920’s is a result of the gold standard is unsubstantiated.

We could probably get by without a gold standard (or something similar), if there was sufficient discipline and good monetary system management. We don’t have that, obviously (i.e. printing on average, $135 billion of new money each year from 1950 to 2000; that’s $370 million per day; and it is much worse now in year 2006; but the amount of currency, printed out of thin air, grew from $150 billion in 1950 to $6.9 trillion in 2000; it’s grown by trillions more in the last six years).

Also, the argument that money supply is the problem prior to elimination of the gold standard in 1933 is unsubstantiated. There were many reasons for recessions and depressions, and always have been.

But blaming it on money-supply is a severely myopic viewpoint.

That’s like blaming war on bullets.
That’s like blaming spoons for Rosie O’Donnell being fat.
That’s like saying cars make people drive drunk.
That’s like saying pencils miss spel wordz.

That’s pure, unsubstantiated nonsense.

Some wannabe economists have been looking at their 2D money supply charts much too long. They arrogantly believe they understand any large economy, and believe that they believe they can toy with the money-supply to cure our economic woes. That is truly arrogant (and myopic).

Personally, I believe there are more selfish (dishonest) motivations for some who want to toy with the money-supply. But, what ever the motiviations, they are either all bad (arrogant, ignorant, selfish, or greedy).

So, the real problem is a lack of discipline, irresponsible government, and voters that empower those that are causing it.

It has resulted in:

  • fiscal and moral bankruptcy

  • a bad monetary system,
  • printing far too much new money,

  • borrowing too much money,

  • spending too much money,

  • growing the interest burden ever larger on the debt,

  • growing government to nightmare proporations,

  • growing corporatism and corpocisy,

  • growing corruption, irresponsibility, and unaccountability

Freidman and Galbraith promoted the funny-money system and preached that (free market) + (fiat money) + (specific rule of money stock expansion of 3-to-5% per year) will save mankind. What a crock of utopian [explicative].

It is nothing more than a sort of dishonest ponzi-scheme.
It is a dangerous, utopian like experiment.
Both are both, IMO, wrong.
They both promote free market, but also promote a funny-money system?
They both think toying with the money-supply is acceptable.

BTW, Friedman later abandoned his funny-money views. Others would be wise to do the same.

Posted by: d.a.n at August 2, 2006 2:43 PM
Comment #172903

d.a.n, The only point we disagree on is your rather loose use of the word funny money and the idea that the gold standard solves that issue.

Money supply expansions and contractions and funny money are not the same thing.

RESPONSIBLE manipulation of the money supply is a necessary tool to moderate the business cycle. The thing I don’t like about Fiedman is his absolution of the “free market” and minimization of the effects of “dislocations”

Herd instinct leads to wild cylces of expansion and contraction that a responsible government must intervene in. Laisse Faire may work for local economies, but not large scale economies.

I have no problem with a responsible control on printing money, but Trade issues and the fact that other economies are not tied to Gold, and the fact that money supply goes up and down in unrelated cycles to the price of gold makes a Gold Standard a bad idea. Jesse Jones was one of the heroes of the Depression. He was from Houston and though not well known nationaly, his use of responsible credit had a large impact on the recovery from the Depression. I wish he were around today. He would not say that Washington is using credit responsibly.

We may indeed once again experience a great depression. I don’t think it is around the next corner, but a credit crisis could be larger than one country could manage.

The dust bowl was real, wars are real. Money is an artifice, as are depressions. Governments create them both. In reality, we can feed , clothe, and house every American and feed nearly the entire world. The one thing I worry about is energy independence. We need a leader to wake up and take that issue seriously. In a crisis, we have plenty of coal, and can create motor fuels from that, but we need to look ahead not back. I believe most Souhern households could be made energy independent. A means of recycling water is also something that needs to be addressed. If you build a nation that doesn’t need a massive electrical grid or water supply, you have a much more stable and defensible country as well as a low eco-impact. We need a visionary.

Posted by: gergle at August 2, 2006 7:57 PM
Comment #172932

OK. However:

  • I never said the gold standard was the solution, but believe its elimination was a mistake;

  • I believe the elimination of the gold standard in 1933 paved the way for rampant printing of new money, because there was no longer any requirement to back up the currency with something of value, and runaway inflation followed as shown below. And proponents of the fiat monetary system amplified the problem. Notice how little inflation there was prior to 1933 (see below).

  • Also, I said (above) that a gold standard was not necessary if there was sufficient discipline to restrict the rampant, irresponsible printing of too much new money.

Still, our fiat funny-money system (where money is not backed by anything of real value) and the rampant printing of too much new money, represents nothing more than a dishonest form of hidden taxation. When the government can print money at will, and does so irresponsibly (which it does), it is no different than a counterfeiter who illegally prints currency.

Our fiat money system especially hurts savers and those on fixed incomes, who find the value of their dollars steadily being eroded by the Fed’s irresponsible, non-stop printing presses. At only 4.5% inflation, $100 becomes only $70 in eight years, which is why the double-digit inflation of the 1980’s was devastating.

To really understand why the dishonest fiat monetary system is so popular among some economists, the business community, bankers, and government officials, you need to understand how it gives them the power and influence to put money in their hands, first, early in the circulation cycle, before the currency loses its value due to inflation. This dishonest system shifts the loses to others that don’t understand how they are being used.

Most people are oblivious to all this. Many don’t even know how or why inflation is bad. Every new dollar created dilutes the value of existing dollars in circulation. People who worked hard, paid their taxes, and saved some money for a rainy day are hit the hardest when their savings is eroded by the inflation. Their dollars depreciate in value while earning interest that is kept lower by the Federal Reserve than the rate of inflation. The poor and those dependent on fixed incomes can’t keep up with the rising cost of living. Median incomes have been falling for six consecutive years (2000 to 2006), because the government is printing too much money, borrowing too much money, and spending too much money, proving beyond a shadow of doubt that they are fiscally and morally bankrupt.

Why more people don’t challenge and protest this dishonest fiat monetary system is a testament of their ignorance. Both political parties want the Fed to print even more money. Some polticians actually believe it the cure for all that ails our economy. The funny-money system and massive debt comes with a price, eventually. It may happen soon, or fall on future generations, but it is no matter which, it is very selfish, dishonest, and irresponsible. All of this (funny-money, debt, spending, and borrowing) proves how widespread the greed and corruption is within government, and how wrong the voters are for re-electing (empowering) the incumbent politicians that grow increasingly irresponsible, fiscally and morally.

Posted by: d.a.n at August 2, 2006 11:02 PM
Comment #172964

d.a.n.: “Why more people don’t challenge and protest this dishonest fiat monetary system is a testament of their ignorance. Both political parties want the Fed to print even more money. Some polticians actually believe it the cure for all that ails our economy.”
————————————————————————-

I completely agree.

According to (most) conservatives the free market does a much better job than government (government agencies, regulations, subsidies, other interference, etc.) in setting the true price of things.

It should make people wonder then why the most important price of all, the price of money, is not freely determined by the market but is in fact the most manipulated price in the world.

Why has the Fed recently stopped reporting a number of important liquidity measures we should know about in order to assess what is actually going on behind the scenes?

Why do people at the Fed (a quasi-government agency) want it to start investing in (private) company equity directly, becoming important activist shareholders with free money created by… the Fed itself… effectively crowding out “the free market”?


Posted by: Josh at August 3, 2006 3:48 AM
Comment #172965

And more on-topic. From a great op-ed in a leading Australian newspaper:

“The foreign debt is the elephant that is now so large that it can’t be removed from the room without wrecking the house.

The Government cannot acknowledge the extent to which economic growth over the past decade has been financed by foreign debt, or why the debt has been used to finance a real estate and share price bubble rather than new export and import replacement industries that could repay it.

Recognition of the problem would require the admission that it is the Government’s fault that interest rates are rising because foreign lenders are demanding bigger and bigger risk premiums to finance the debt.”

( http://www.theage.com.au/news/opinion/howards-plan-to-transform-the-economy/2006/08/02/1154198202420.html )

- Higher interest rates equal even higher interest payments on massive (and rising) U.S. debt.
- Bazillions of $ (and rising) needed annualy to fund our military machine.
- …

- Plans to lower taxes even further while current (insufficient but) above-average tax collections depend on the economy to remain very healthy, which it won’t when interest rates keep rising - which they have to.

Lowering taxes even further in the face of this would not only be illogical but disastrous. Redistribution of the tax burden, preferably (partly) reversing this Administration’s tax cuts that mostly benefit the wealthy, is needed to prevent even larger budgettary imbalances in the future.

Posted by: Josh at August 3, 2006 4:26 AM
Comment #173001

Josh,
Good link about Australia’s debt.

It is most significant for what it doesn’t mention: the [Australia’s] foreign debt that is now equal to more than 50 per cent of GDP and, in proportion to the economy, almost twice as big as the foreign debt of the United States. The reason? The foreign debt is the elephant that is now so large that it can’t be removed from the room without wrecking the house.

Compare that to our predicament …

The U.S. federal debt is:
$8.4 trillion National Debt (68% of $12.4 trillion GDP)
$12.8 trillion Social Security debt (103% of GDP)
$450 billion PBGC debt (3.6% of GDP)
$trillions of unfunded Medicare liabilities (10% to 30% of GDP)
$21.65+ trillion of federal debt

That means U.S. federal debt is over 177% of GDP !

Add the massive $20 trillion of personal debt, and the U.S. has $42 trillion of debt. We are swimming in a massive pool of debt that is 339% of GDP !

And, like Australia, a huge portion of the U.S. debt is from foreign investors.

That is dangerous. Not just for the U.S., but the rest of the world that has foolishly empowered us to be so irresponsible.

The U.S., before too much longer, may be the cause of a world-wide economic disaster.

Not only does the U.S. print too much money, we borrow too much money, spend too much, and waste too much. We are eroding the value of our currency with inflation. That is why China (and others) is rethinking the wisdom of investing so much in the U.S. debt.

Ironically, China’s Yuan is undervalued because it is tied to the American dollar, but the Yuan will jump when it is ultimately tied to the Euro. Soon, the Euro will become the new standard for exchange as it displaces the falling U.S. dollar on a majority of international money markets.

Each year, America suffers hundreds of billions in trade deficit with China. Right now, China is licking its chops as they sell us billions in goods but buy nothing from us in return. Why? Because we have lost our manufacturing base which means we have nothing to sell. We are also running up tremendous debt.

As for U.S. taxes, what first needs to happen is a removal of all the loop-holes, eliminate the corporate tax, exempt those below the poverty level, and make it a flat 17% income tax rate. That will require a 6% cut in spending. But, the current tax system is very costly in wasted energy and time, and the wealthy (who like it the way it has been perverted) are not paying their fair percentage due to all the loop holes and massive complexity.

Posted by: d.a.n at August 3, 2006 10:14 AM
Comment #173187

d.a.n.

Thanks for the discussion,I enjoyed it.

Posted by: gergle at August 4, 2006 2:25 AM
Comment #173273

gergle,

Thank you! I think we really both agree on the important thing. Too much debt and too much printing new money is bad. Too much debt can create pressure to print more money. But, without fiscal discipline to stop massive spending, the debt continues to grow, increasing the pressure to run the printing presses even faster. It’s a situation that can spiral out of control if we are not careful. Also, more education about all of this is needed. Too many Americans don’t understand how large the debt is. While the National Debt is $8.4 trillion, many do not realize that Social Security is in debt $12.8 trillion, there are several trillions of unfunded Medicare liabilities over the next few years, and the PBGC is $450 billion in the hole. Combine that with $20 trillion of personal debt (nation-wide), and its over $42 trillion of debt. That’s a problem.

The total $42 trillion of debt is 21 times annual federal tax revenues.

That is like someone who makes $50K per year buying a $1.1 million house. Your monthly payment would be $5300 per month (for a 30 year loan at only 4.5%). Unless you’ve already got the money for a huge down payment, do you think you’ll qualify for the loan? And a $5300 per month payment exceeds the $50K annual income by $13.6K .

The $8.4 trillion National Debt (not even including the $12.8 trillion Social Security Debt, trillions of unfunded Medicare debt, and $450 billion of PBGC debt) is so large now, it would take 139 years to pay off the debt if the federal government started now to (a) stop borrowing $1 billion per day, and (b) also started paying back $1 billion per day (slightly more the daily interest alone). And, that is only as long as the rate doesn’t exceed 4.5%.

It is irresponsible and immoral to be heaping that much debt onto future generations, and combined with other growing problems, it also has the potential for an economic disaster. At the very least, it is making recovery from the next recession (or depression) much more difficult and painful.

Posted by: d.a.n at August 4, 2006 11:12 AM
Comment #174006

Its unfortunate that the GOP understands the dynamics of tax policy and the concept of diminishing returns, yet seemingly uses those results to justify a little more spending in other areas, rather than addressing the looming disasters.

While the federal debt and social security are a mess, Medicaid is worse off….a true impending disaster. Despite this, they have cast the first domino in universal health care by setting a precedent of entitlement for free drugs.
The same demographic having the highest net worth and most likely to own their home, is now stealing money from me so they can have bacon and eggs on Sunday sans heartburn, have Saturday nights reminiscent of their youth, while curbing that troublesome Restless Leg Syndrome…

The GOP ammended the law to ensure that SS funds could only be used for paying down the debt rather than appropriations, however, we’ve played a shell game and arent paying off a debt sure to increase with rising interest rates and trade deficits.

In addition, the GOP leadership has been helpless to curb the various subsidies to farms and business, while introducing new ones. Hey there! Spend an extra $7000 on a hybrid car for an extra 10 miles per gallon. “We’ll give you back a few hundred at the end of the year when we’re done plundering the income of other americans!”

There’s the further expansion of government into airline industry…gotta look like you’re doing something!
There’s the increased spending for the sake of this Dept of Homeland security.
And on and on.

Bush has been very fortunate to have been doing this in a strong economy which is in great part supported an artificially inflated housing market.
The oppressive taxes involved in this housing/building/lending industry provide a huge part of this tax revenue as does the growing tax revenue from Americans transition away from 401K plans to ROTH plans.
When recesion hits, as they cyclically do, such revenues will not be so easy to come by. Furthermore, in the future, the Medicaid and SS obligations will rise dramatically, while revenue from current workers and taxed retirement plans will drop dramatically.

Sadly, when votes are at stake, politicians rarely consider the future except for the routine platitudes.

I would appreciate the GOP more if it didnt insist on this “Lipstick on a Hooker” approach to the tax revenues.

Posted by: Matt Goldseth at August 8, 2006 8:39 AM
Comment #194691

Sounds like we need to march to Washington and do not move until our grievances are addressed.

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and petition the Government for a redress of grievances.
1st Amendment

Posted by: G.R. at November 12, 2006 12:10 AM
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