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June 29, 2010

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Boehner has never known when to shut his mouth.

I'd like to hear one of these Republicans who support raising the retirement age also explain just how they're going to ensure that these older workers remain hireable? It's hard enough to find a job for a 40-year-old. What chance does a 50- or 60-year-old have?

Well, there is what debbie said. Sixty somethings can't find work like thirty somethings. Worse, though, is just what Boehner said: cut SS to pay for Afghanistan? Is douche bag a violation of the posting rules?

What worries me is that I've been listening to Republicans say stuff for years and years that seemed, to me, to be such transparent farging looniness that I expected them to be either laughed off of the stage or pelted with rotten tomatoes.

Hasn't happened yet.

Right now there are lots and lots of folks on the far side of middle age who no longer have jobs and aren't going to get jobs. Or at least jobs that pay a living wage.

Seriously, who's going to hire a 58 or 61 year old engineer, or school teacher, or insurance adjuster, or accountant? For sure, who's going to hire a former general contractor who's business went under, or a machinist, or a factory line worker, or a dental hygenist?

Who's going to hire them full time, for what they were making a couple of years ago, fully loaded with health and life insurance and whatever else goes into a professional middle class compensation package?

Lots of them are reasonably healthy, healthy enough to live another ten, twenty, or thirty years. But their unemployment bennies are going to run out in 99 weeks or less, Medicare won't kick in until they're 65, and now whatever piddling SS they may have coming is going to go away.

All of you 30 and 40 somethings better get your guest rooms vacuumed and dusted. You're gonna have company.

Panetta mentioned the other day that there are probably 100 Al Qaeda in Afghanistan. That's 100, max. We have 100,000 US troops there at a million a year apiece.

That's 1,000 US troops, and a billion bucks a year, per AQ operative.

Seriously, I hope this becomes the new Republican talking point, because maybe, just maybe, it will be the tipping point and folks will finally wake up and say to themselves, "These guys are out of their freaking minds!"

We'll see.

Is douche bag a violation of the posting rules?

If it is, we'll make an exception in this case.

"These guys are out of their freaking minds."

Boehner needs either a wood chipper or a crocodile to explain rationality to him.

Head first.

I love hearing about raising the retirement age from folks whose working lives consist almost entirely of sitting on their plush backsides in air-conditioned offices and air-conditioned conference rooms. Are they seriously proposing that coal miners should stay in the ground until they turn 70? Because we haven't killed enough wogs yet?

(I say that as someone who works in an air-conditioned office and whose backside is a tad bit plusher than I'm entirely comfortable with.)

Who's going to hire them full time, for what they were making a couple of years ago, fully loaded with health and life insurance and whatever else goes into a professional middle class compensation package?

Glibertarian golden boy of the moment Rand Paul has an answer for you:

"As bad as it sounds, ultimately we do have to sometimes accept a wage that's less than we had at our previous job in order to get back to work and allow the economy to get started again," he said. "Nobody likes that, but it may be one of the tough love things that has to happen."
Love, love, LOVE the use of "we" in that quote. As if.

Boehner might as well come out and say it: the US exists to serve its military, not vice versa.

--TP

It's hard enough to find a job for a 40-year-old. What chance does a 50- or 60-year-old have?

Well, their employer can count on getting 5 more years out of them than previously, I guess. Does that make them more attractive?

It's hard to imagine that really flying in any sort of physical labor. Yes, we're living longer and staying healthy longer than we used to, but even so there's a point at which someone cannot plausibly put in a full day of exhausting work.

As with russell, I am constantly amazed by the continuing popularity of the Republicans even when they regularly say things like this. If Social Security is the third rail, these guys must have rubber-soled boots cause they keep peeing on it and they're still standing.

(BTW the link in the post is broken.)

There's another good (i.e. insane) quote there:

"If you have substantial non-Social Security income while you're retired, why are we paying you at a time when we're broke?"

Er, perhaps because you've been paying Social Security taxes your whole life?

I know why they're desperate to kill it - because they know that the time is rapidly approaching when general fund revenues that come largely from the wealthy need to start repaying those T-bills that payroll taxes have been buying for 25 years - but it's a spectacularly unrealistic goal. You might as well declare your party platform as requiring the sacrifice of a kitten every day on live TV. It's not going to happen.

The ideas are not all bad. Consider:

Get the hell out of Afghanistan now. We have invested enough of our soldiers' lives and health and enough of our money to demonstrate that we, like the last several hundred years of invaders cannot change Afghanistan.

Cut back on SS benefits for those who have sufficient wealth as to not need them. One need not entirely eliminate benefit for those, simply cut back on some formula.

Make the retirement age more flexible, say from 55 to 75, depending upon the worker's choice. I chose 58 for retirement and 62 for SS.

I know that none of our glorious political leaders will take such steps since that might cost some votes and potentially limit their number one priority (REELECTION). Instead, I expect to see continuation or even expansion of the waste in Afghanistan and increased benefits for SS whether needed or not.

The link at the top of this article is broken. I would like to read the original article.
That quote about "wonderful war" makes me think this is a hoax. At least I hope it is. Could any leader say that the mess in Stan land is "wonderful"? If so,we need to take a look at his meds

Link is fixed.

That quote about "wonderful war" makes me think this is a hoax. At least I hope it is.

Um, yeah, that part was my tongue in cheek paraphrase of the possible messaging. You can tell this because it's not blockquoted (like the actual excerpts from the article), and I kind of signal it as such. But this part was an actual excerpt:

Ensuring there's enough money to pay for the war will require reforming the country's entitlement system, Boehner said. He said he'd favor increasing the Social Security retirement age to 70 for people who have at least 20 years until retirement, tying cost-of-living increases to the consumer price index rather than wage inflation and limiting payments to those who need them.

It seems to me that the "wonderful war" comment was Eric's paraphrase of Boehner's position. Boehner's not metropolitan enough to say "Amirite?"

Bizarre.

From the prior thread, in response to cleek's "what's plan B?, I'd written (but abaondoned):

Tax cuts, cuts to Social Security, and more war. The death god must be fed.

I appear to have forgotten tort reform.

I know why they're desperate to kill it ... but it's a spectacularly unrealistic goal. You might as well declare your party platform as requiring the sacrifice of a kitten every day on live TV. It's not going to happen.

I lay even odds that it'll be, not gone, but significantly cut back within 10 years. Maybe gone in all but name in a generation.

All it will take is to put one good crack in it, enough so that it's no longer the near-universal reliable backstop for retirement.

Once it's not for everyone, or once folks who paid into it can no longer rely on getting anything out of it, it's a dead man walking.

Divide and conquer. Works every time.

Mark my words.

You gotta admire the chutzpah of the whole plan. Deregulate to cause a crisis, use the crisis to argue for less regulation and attack Social Security, and then justify the attack on Social Security with a war that's only gone on so long and so badly because of the complete ineptness of your own party.

It's... definitely something. Next stop, Feudalism!

Boehner misses THE point. The people are not fed up with just Obama and crowd, they're fed up with corruption. The Dems case of it is just a bit more obvious than that of the GOP. We need an ammendment with two parts: 1) limit all campaign contributions to individuals, NO groups of any kind allowed. This preserves freedom of speech for us all.. and does and should deny the formation of groups to hide contributors identites... 2) term limits, two to a congressman and two to a senator. Who's going to spend bug bucks buying off a lame duck?

and, John, lets phase out SS and at the same time phase in unlimited exemption from taxation for all money put into savings. Convert our culture from one of borrow to have to one of save to have. Those savings, put to use, would provide enough capital to create all the jobs we need. Sure we hate the greedy.. like the Koslowski's of Wall Street that drop a million on their daughter's wedding, but who calls Warren Buffett greedy? The difference is not how much they have but what they do with it. Buffet's investments put prople to work. Taxes don't. Why tax income if its put to work?

Buffet's investments put prople to work. Taxes don't.

Right: taxes don't. But government spending does.

As for "Those savings, put to use, would provide enough capital to create all the jobs we need", here's more pedantry:

The whole point of "capital" is to eliminate "jobs". This is transparently obvious if "capital" means real, physical stuff like machinery. Lots of people (women, mostly) used to have "jobs" as telephone operators; automated telephone exchanges (real "capital") eliminated those "jobs".

Good thing, too. Manually connecting telephone calls all day must have been a tedious job. But maybe it was a decent position. The difference is, a "job" is a unit of work that needs doing; a "position" is a source of income. If everybody had a decent position, nobody would lament the loss of this or that job.

So Tom must mean that "Those savings, put to use, would provide enough capital to create all the positions we need." At least, I doubt he means that we whould put "capital" to use creating work for ourselves.

--TP

"provide enough capital to create all the jobs we need."
Having capital is only part of the problem. Too much capital, poorly invested, is what got us in the mess we are in.
Investment money was flooding in, so fast the smart guys didn't know what to do with it. They loaned it out to people for home loans that did not work out.

Couple things, one personal, one general.

1) I turned 65 today. No way can I retire in less than five years, and maybe not even then. I do a desk/computer job, so physical ability isn't an issue. But I didn't get into a good, employer-based retirement program (401k) until I was 50. And then, of course, it went all to hell in the recession. But I still have my job, and my plan, at least.

2) Unfortunately, craziness like Boehner's doesn't get out much into the wider world. A competent MSM, of course, would be putting it out there. Said competent MSM, sadly, is mostly but a memory. So the places which present it are mostly preaching to their respective supporting or opposing choirs. Much as I love ObWi or TP or Benen, the liberals are as much of an echo chamber as the wingnuts. Sad, but true.

Shorter Boehner:

"Guns, not butter"

Buffet's investments put people to work.

Some of them do. Some of Buffet's investments just generate income for the investor class through purely financial shenanigans, without creating jobs or goods, as insurance companies and Wall Street mostly do.

The supply-side nostrum that, invariably,
tax cuts => increased investment => economic expansion
is now pretty well disproven by the grand Reaganomics experiment we've undertake for the last three decades. (Poor Milton Friedman; almost alone among economists, his ideas have been seriously tried.)

Hint: demand precedes supply. If there is no demand, all the supply-side stimulus in the world won't produce jobs. See Bush, George W, presidency of, for details.

Buffet's investments put prople to work.

Buffet is a very astute investor, and knows a good buy when he sees one. But his buy and hold strategy does not, in any way, create jobs.

Buffet's investments put people to work.

Mr. Buffet also insists his own share of taxes paid is too low, and that the wealthy pay too little.

Why don't all the money-worshippers who revere him feel the same way?

Why don't all the money-worshippers who revere him feel the same way?

My guess: they're not as smart as Buffett is.
My evidence: they're not as rich as he is.

--TP

The solution should be obvious (to any GOPster at least): Incentives for (large only) companies to hire older employees including a significant compensation in case of death before age of retirement is reached. That should be two squirrels with one stone: 'compassionate' corporate welfare + an incentive for companies to more or less legally kill older folks before they can lay their dirty hands on the SS money that is so much better blown on wars and corporate welfare. As a bonus each employer gets free copies of the classic handbook "How to work your slaves to death while extracting the maximum amount of profit" by Cato the Elder (chapter 2 of De Agri Cultura)

Buffet is a very astute investor, and knows a good buy when he sees one. But his buy and hold strategy does not, in any way, create jobs.

Indeed. My own employer is a wholly owned subsidiary of Berkshire Hathaway. We were purchased four years ago. I can promise that, since then, we've made money for BH shareholders, but we have not added any net jobs to the economy.

Tom Beebe:

"limit all campaign contributions to individuals, NO groups of any kind allowed."

You'd have to include the national parties. They're no less corrupt than any other group.

If there are no donation limits, then it would still be a one dollar one (bought) vote system with the rich outcompeting the masses as individuals. Also companies have funnelled money through their employees, so it did not look on the surface like a (legal) bribe by the company but was disguides as 'individual' donations.
Btw, have there been cases on record of employees being discriminated against for donating to the 'wrong' party* (There were definitely at least rumors about threats against employess voting the 'wrong' way like with unionization)?

*except by the parties themselves of course.

Convert our culture from one of borrow to have to one of save to have. Those savings, put to use, would provide enough capital to create all the jobs we need.

This assumes that what is blocking job creation right now is a lack of capital.

If we convert our culture so that we're all savers rather than borrowers, we're going to have to change our entire economy.

To start with, we're going to have to find somebody else to consume all of the services (mostly) and goods (less so) that we produce.

It's a lovely idea, how do you suggest we get there?

It's a lovely idea, how do you suggest we get there?

Get a colony, destroy the local industry (except raw material production) and make yourself the sole provider of services (to be paid at or above market rates). Hm, what about Iraq? ;-)

Hey, look -- it's officially a GOP meme! Here's Harry Reid's opponent Sharon Angle:

What has happened is the system of entitlement has caused us to have a spoilage with our ability to go out and get a job...There are some jobs out there that are available. Because they have to enter at a lower grade and they cannot keep their unemployment, they have to make a choice now.

We're making them make a choice between unemployment benefits and going back to work and working up through the ranks of that job and actually building up a good wage again...

What we need to do is make that unemployment benefit go down, not just completely remove the safety net from them while they go out and go to work.


Lucky duckies and their handsome unemployment benefits . . .

"Have a spoilage with our ability to go out and get a job"? I wonder what her native language is.

I wonder what her native language is

Palinese

Palinese

Ah. Authentic frontier gibberish.

To those who questioned my assertion that Buffet's investments create jobs... yes, consider the withdrawel of capital by taxes. That's job creation denied. The government can create jobs by "stimulus", but those are one-shot expenditures. investments, by Buffett or by the persons who got money by selling stock to Buffet, should be encouraged by our tax policy to reinvest. Funnelling money through tax and spend decreases its effectiveness by the inefficiencies (and corruption) of government. One of you spoke of jobs lost to capital (automation). May I suggest this eliminates the jobs that would be sourced overseas? In turn, higher tech jobs to implement that automation elevate the wealth produced here in the USA. Last comment on this: I compared Buffet, the investor, to Koslowski, the big spender. Whose activity creates more jobs? That's my main point. Let me hear from any of you why borrowing is better than saving.

And about Ammendment XXVII for individual campaign contributions only... for brevity i omitted the requirement for certification that the money contributed was not supplied by or reimbursed by any other party (incliding groups). As to excluding parties, yes I had considered that too. Why not exclude them? There have been several storys lately of the party interfering in primaries on behalf of one candidate. Let the emphasis or party activty shift to issue advocacy and let candidates be chosen by open election, then elected by individuals, not parties, not corporations, not unions, not the Sierra Club, nor the NRA, nor even SPEBSQSA (if you know who that is). Just by the people! And don't give me crap about the "big goys" buying elections. They're pretty evenly divided between partys; check the contrbutions to date.

the system of entitlement has caused us to have a spoilage with our ability to go out and get a job

I can haz a spoilage?

Let me hear from any of you why borrowing is better than saving.

Not an argument on superiority/inferiority but an argument that they are, in fact, two sides of the same coin.

1. Private saving == public borrowing

If one person saves, then another must borrow. That's a very basic accounting identity.

2. Keynesian economics on excessive saving.

And don't give me crap about the "big goys" buying elections.

That's racist.

Funnelling money through tax and spend decreases its effectiveness by the inefficiencies (and corruption) of government.

Single-payer health care (such as the VA) is far more efficient than privately-owned healthcare.

Government-run retirement insurance (which is what Social Security is, kinda) is more efficient than privately-purchased annuities. (no salesmen, no commissions, no dividend payouts to shareholders, smaller executive compensation)

Government-run electrical utilities provide power less expensively than privately-owned-but-regulated utilities; that's one reason why PGE sponsored/bought a proposition on the recent CA ballot to make it difficult for municipal governments to set up municipal electrical utilities -- because PGE is less efficient and cannot compete

Municipal cable networks provide better service, more granularity of choice, and lower costs than private cable networks.

You assert things you know to be true that ain't. As someone who has spent thirty years working in Silicon Valley, I find your belief that the private sector is always and axiomatically more efficient than government to be risible. (To be sure, the best companies are very efficient, at least during the years that they flourish. Other companies not so much.)

Unless of course your measure of efficiency is the size of the CEO's bonus ...

And the idea that private concerns are less corrupt than government ... just who do you think it is presenting the bags of cash that corrupt government officials? Who is it that opens offices on K Street? George Soros? No, it's Enron, Monsanto, Goldman Sachs, Lincoln Savings and Loan, Halliburton, eLottery Inc, Massey Energy ...
the real problem is that private interests are inherently corrupt and are all-too-effective at corrupting government.

SPEBSQSA

[in four-part harmony]

Lida Rose, I'm home again Rose
To put the sun back in the sky
...

joel hanes writes something that very much reminds me of something I very recently read from elm's second link:

A Keynesian economist might point out that classical and neoclassical theory does not explain why firms acting as "special interests" to influence government policy are assumed to produce a negative outcome, while those same firms acting with the same motivations outside of the government are supposed to produce positive outcomes.

hsh: Clearly government involvement is bad because government involvement is bad. Don't you remember your hyper-simplified Reagan soundbites? "Government is the problem".

elm, private savings equals public borrowing only if you define private savings to make it so. On the other hand, if you define private savings (as I would do) as private income which is not spent on consumption, then public borrowing is only part of the equation. If I, as an individual, save some portion of my income, I might use it to buy government bonds (public borrowing). Then again, I might use it to invest in something (for example a business) which I expect to provide a future return.

Perhaps you meant net public savings equals public borrowing. But that is rather a different story. Our problem is not that net private savings is to low, but that for too many individuals personal savings is too low -- or, in many cases, negative.

First... great blog. I've seen more comments and more intelligent comment, though much of which I may disagree with, here than on other blogs. Second, may I beg readers to pick up the Hewitt book, "Where Keynes Went Wrong" ? Much of it consists of quotes from Keynes himself. These quotes alone will turn you off to his theories. BTW elm... I still feel "government is the problem". The tipping point for our economic collapse was Fannie Mae/Freddie Mac whose "mission statement" seeks to "democratize home ownership". Sounds like an invitation to banks to make unsafe loans... these guys will bail you out. Guess whose money they're using for bail.

wj: As the link describes, that accounting identity applies to net borrowing/savings. Clearly the government (public) need not be involved if private savings are matched with private borrowing.

The purpose of my post is to point out that Tom's insistence that saving is superior to borrowing is nonsense. If I want to save money -- in a bank, in bonds, in treasuries, or in stock, etc... -- then somebody must be willing to borrow that money. (Naturally, I could stuff it into a mattress, but that's not normally what people mean by "savings").

To address your post directly, I could be persuaded that U.S. households should save more on the average -- given some longer timespan. The inter-recession periods of 1991-2001 and 2002-2007 would have been good times for that.

By Keynesian principles, those spans would have been good times to maintain tax rates and run budget surpluses as well.

Tax cuts and regulatory loosening in inter-recession periods as well as wealth-effect spending likely contributed to bubble-formation and made the ultimate crashes worse.

*Now* is not the time for U.S. households (or government) to cut back on spending. My second link addresses that directly.

Tom Beebe opined:

The tipping point for our economic collapse was Fannie Mae/Freddie Mac

Paul Krugman disagreed and presented data to support his position

Tanta (on whose memory blessings) agreed with Krugman, with some reservations

Joe Nocera says that poorly-run private-sector firms such as Household, Countrywide, New Century, etc. made the bulk of the irresponsible loans, not Fannie or Freddie, and claims that vast data supports his conclusion.

Thank you for the book recommendation. Did you mean Where Keynes Went Wrong: And Why World Governments Keep Creating Inflation, Bubbles, and Busts by Hunter Lewis ? I can't find a book of that title by Hewitt ...

Rats. Pasted in the wrong URL for the link to Tanta's piece. The correct link is this one

Apologies.

Tom, I'm betting quotes can be tossed in both directions and end up accomplishing nothing constructive. After all, I've seen quotes from Alan Greenspan that Wall Street's too honorable to be abusive in a less-regulated market, and from Milton Friedman that corporations would never take undue risks.

I still feel "government is the problem". The tipping point for our economic collapse was Fannie Mae/Freddie Mac

C'mon man, you can do better than that.

I still feel "government is the problem". The tipping point for our economic collapse was Fannie Mae/Freddie Mac

C'mon man, you can do better than that.

Actually, I think that calls out the essence of the problem. Tom feels that "government is the problem". He doesn't have evidence of it.

Apparently he feels that austerity is the answer, in spite of Argentina's experience in 2001 or Irish austerity now.

I haven't read the Lewis book, but he starts out with "commonsense" Hoover/Mellon economics.

Lewis quotes a freshwater economist (Kehoe) on page 1: "if you postpone short-term pain, you end up with long-term pain... Unproductive firms need to die."

Compare with Andrew Mellon's advice to Hoover: "liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people."

For my purposes, I'll take Keynes, Samuelson, and Krugman any day of the week over Mellon, regardless of technical deficiencies in Keynes's original models.

Finally this website is letting me respond to the several comments on my previous postings, for which I am grateful. First, to elm, a protestation of innocence when I opined that the "big goys wre on both sides". This was a typo, meant to be big GUYS".
to Russell.. woud not the assurances of backing by the government owned (in part) FM twins lead bankers to make questionable real estate loans, and did not those loans "tip' the economy? No one is blameless, but government irrseponsibility is certainly a key component of "the problem. I rarely agree with Krugman but to the extent I note above,,, no one is blameless.. I would hope the government's recklessness is acknowledged.
To Joel Haynes, that is indeed the book. One should never count on one's memory for citing such information. I hope all who suport curent government financial policies will take time to balance what they have had drummed into their thinking by NYT and other Keynesians, by reading this work.
Last word (for now), still the best blog I've seen.

woud not the assurances of backing by the government owned (in part) FM twins lead bankers to make questionable real estate loans, and did not those loans "tip' the economy?

(a) maybe, maybe not. the fact that the originators didn't have to hold the debt, and could resell it immediately for bundling in securities, was probably a larger factor.

(b) no, see my reply to (a).

For reference, you can read the cites provided by joel upthread, and/or any of the other 1,000 articles that factually dismember the Fannie Mae / Freddie Mac stuff and, if you wish, make a reply.

But you have to address the facts, you can't just assert things based on your feelings about the role of government.

you can't just assert things based on your feelings about the role of government.

Or more precisely, you can, and when you do, some people will agree with you and be content, but it's not very convincing to those of us who don't already agree with you.

elm, perhaps a more meaningful distinction would be between borrowing for consumption and borrowing for investment. Even the government can do borrowing for investment -- that's what bonds to build infrastructure are. And for that kind of borrowing, you are correct that savings and borrowing are equally good (or bad).

I admit that I may well be putting words in their mouths (thoughts into their heads?). But what I think the people mean who say that saving is superior to borrowing is that saving is better than borrowing for consumption. Yes, it would be clearer if they said that explicitly. But if that is what they were indeed thinking, then I would argue that they have a legitimate point.

to Joel Hanes
I simualtaneously agree with some of what you say and strongly disagree with other
You compare government run enterprises vs. private. I suggest a different way of resolving our differences. What is to "regulate" enterprises for the best result? No bureaucracy can match the efficiency of the market place... of competition. I believe debating government vs private ownership is missing the point. Ought we be debating regulation vs competition? The latter is not always available to regulate every type of enterprise. Take power as an example. there's only one means of delivering power to a home or enterprise; delivery is inherently monopolistic. But power can be produced at many locations and by many means..fossil fuels, solar, wind, biofuels. Would you then suggest ownership of the delivery assets but deregulation of the production? Public railroads with private trains? In my town is the HQ of a weird power company, half deregulated and half regulated. Makes little sense. So while withholding my support for wholesale government ownership of any enterprise, on the theory that such is inherently without the stimulus of the profit motive, I would like to see those of your pursuasion make your support for government ownership, and your opposition to deregulation, aligned with the availability of competition as the finest regulator. More later.

Ah yes, "efficiency". I believe it was C. S. Lewis who pointed out that, whenever efficiency is being touted, the pertinent question is, "Effecting what?"

thank you wj, for the clarification (see my comments on Koslowski vs Buffet) and Jim Parish, I'm looking for efficiency in the creation of wealth, with the premise that creation, not distribution, should be effected (Lewis' word) or made as efficient as possible. Indeed, I believe that starting with tax policy, the greater creation of wealth should be the basis of all government economic policy. Greater wealth means a greater tax base, allowing revenues for government expenditures to grow without draining incentives for creation. More specifically, taxes should encourage investment, health care and education, the three activities which make people productive. tax not earnings, whether by capital or labor, but rather consumption (I don't mean sales tax, EXACTLY)

1. All persons residing in the U.S. shall come together in units for the purpose of reporting all income from any source, each item to be identified by payer's and payee's tax number. Members of a unit need not be related, need not reside together, and a unit may consist of as few as one person. With equality as the primary goal, this act established units to be taxed, so that all persons, whether related or not, legally here or not, are taxed equally.
2. Each year congress shall set by legislation a "minimum wage" and a "tax rate".
3. The following income shall not be subject to taxation:
• An amount equal to a year's earnings at the minimum wage rate, for each adult (age 20-65) member of the unit, decreasing 10% per year to 50% at age 15 and increasing 10% per year to 150% at age 70.
• All payments for what is classified as necessary health care for all members of the unit including medical care, any pharmaceuticals prescribed by a recognized health care professional, vision and hearing aids, and membership fees for health-enhancing entities such as gyms or other exercise facilities. Health care insurance premiums may be deducted but not health care expense paid for by such insurance.
• All educational expenses including day care for young children or legally incompetent persons, that portion of state and local taxes identified as spent on education, that portion of parochial school tuition, fees and other expenses identified as going for non-sectarian education, tuition, fees and educational materials for private school education at any level, and a per-diem allowance for students traveling more than 50 miles from primary residence for education.
• All income saved into an identified account from which investments may be made.

This encourages growth of the tax base, thus growth of the government's ability to pay for its responsibilities, by fostering health care, education and investment, all of which contribute to growth of income, taxable to support legitimate government purposes.
4. The "tax rate" shall be applied to any income over and above the deductions listed above, regardless of amount. It seeks the elusive concept of fairness by taxing at the same rate all "disposable" income.
5. There shall be no federal tax on corporations or other business entities. Products made in the USA will be more competitive in the world market by eliminating taxes as part of their cost.
6. The Office of Management and Budget shall compute revenues to be expected using the newly set tax rate and minimum wage, applied to the previous year's reported incomes. No expenses in excess of that amount may be authorized or made by the federal government without approval by 75% of each house of Congress. It sets the Federal budget to produce a surplus in times of economic expansion and a deficit in times of contraction to promote economic stability.
7. At the request, by legislation duly enacted by a municipality having greater than 100,000 inhabitants or a state, a surtax may be imposed on citizens of that municipality or state which shall be applied in a manner exactly as applied for the Federal tax. It recognizes disparity in cost of living among various locations. It facilitates sufficient sources of revenue for states and municipalities.
8. For units whose deductions exceed total income, the Federal Government shall make payment equal to the tax rate multiplied by the shortfall in income, as shall municipalities and states. This addresses aid to the truly needy while retaining personal responsibility.

wj: I'm not inclined to give Tom's posts an excessively harsh reading nor an excessively favorable one. If he wishes to distinguish borrowing for investment from borrowing for consumption then he's perfectly free to do so.

As I suggested in a post yesterday (June 30, 2010 at 06:37 PM, I agree that U.S. households too-often borrowed for consumption during the prior inter-recession period (wealth-effect spending). Many people used a second mortgageHELOC to fund vacations, decorate their homes, and otherwise fund consumption. (Something similar occurred during the dotcom bubble.)

I don't support or encourage that behavior and I didn't engage in it myself. It was bad for the individuals (in the medium-term), who accumulated debt during a strong economy and must now deal with that debt in a weak economy.

Now that we're in a weak economy, the tables are exactly reversed. If an economic recovery will occur, then borrowing (even for consumption) makes more sense now because you'll repay that debt during a strong economy.

Hey, we're off topic, so what the hell.

As far as I can tell competition is an absolutely crap regulator. Absolute and utter crap.

I like regulation. Regulation means I can buy a house without worrying that it will fall down on my head, I can buy a hamburger without worrying that it will poison me, and I can invest my money with some assurance (some) that the actual value and risk associated with the investment is made reasonably clear to me.

These are all *unalloyed good things*. Don't you think?

Competition does not produce them. Regulation does. As evidence, I offer the 1,783,298,487 cases where, in the absence of regulation with nice sharp teeth, the miracle of competition did not bring them about. On the contrary.

Efficiency is, likewise, one of many factors to consider when thinking about economic behavior. Risk and harm are others. Externalities are others. Whether the public good is best served by the good or service being broadly and reliably avaiable, as opposed to available at the lowest cost or through the most efficient means, is another.

Whether the public good is served by the activity even happening in the first place is another.

These kinds of discussions always seem to come down to "efficiency", which always translates to "greatest return on investment to the owner or investor".

There are other factors involved in human activities than that. They deserve representation in the legal and political process.

russell: Any person who spout off talking points on the wonders of laissez-faire capitalism and the evils of regulation on day 71 of BP's Deepwater Horizon disaster negates his own points.

Tom: Move to Somalia. They have no government. It must be very nice.

The hazards of efficiency is one of the things I'd like to write about, which probably means doing some research.

But essentially there is no guarantee that gains from efficiency will translate into more wealth or security for the average person. We joke about Luddites, but you have to ask: why should people participate in efficiency measures that hurt them now with only a vague hope that their children (if they have any) might be better off than them. Maybe. Except that looking at the stats, it'd likely be the kids of rich people who'll be better off.

For efficiency to pay for off for everyone, you need very low unemployment and significant wage growth. Otherwise you're asking people to trade jobs in an inefficient system that nonetheless spreads the money around for no job and no money. Lately we've produced economic growth with high unemployment and zero wage growth. The point already came, I think, that people realized that it doesn't matter a damn what the stock market is doing if they don't have a job or feel insecure about losing theirs or the portion of the economy that serves the needs of ordinary people is tanking. I say already came because I think the election of Obama was that signal. I just think it wasn't taken seriously, even by the Democrats, and that was a big mistake.

But anyway, I don't worship efficiency in times of mass unemployment. If 7.5 million unemployed people were sucked into absolutely unproductive jobs at private corporations in which they accomplished nothing at all, and those jobs paid $50,000 a year, that would cost $325bn a year in "efficiency", while reducing unemployment to 5%. Now, would we be better-off or worse-off for that? If the price of every product went up 3% to compensate, would we even notice? Would the fact that another 7.5 million people were employed and buying stuff and the other 150 million people in the labor force felt a little more secure in their jobs be worth a 3% efficiency drop?

Talk to me about efficiency when we have full employment, basically.

3% being the fraction of the private economy ($12 trillion) that $325 billion represents. This country is large and very, very rich. We can afford not to have unemployment. We could afford a lot of nice things if we just decided it was worth paying for them.

Tom :

No bureaucracy can match the efficiency of the market place... of competition.

Once again, you disguise half your argument in the postulates. I infer that the truth of the above proposition seems to you so self-evident that you use it as a first principle.

I don't think it's always true, and I think there's good evidence that it's not always true.

But our real disagreement comes in another of your assumptions:

the greater creation of wealth should be the basis of all government economic policy.

I strongly disagree. We created our goverment to "establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity"

Note that "to help the money-obsessed get wealthier" didn't even make the list, except as subsumed in securing the blessings of liberty. The Founders were well-acquainted with men who assumed that creation of wealth was the first goal of all human striving, but that's not what they chose as a primary goal for their new polity. (Notice that Justice is capitalized and comes first, and a civil society second, and defense third, and then the general welfare fourth, and all those more important than protecting and promoting private enterprise.)

And wealth accumulation is only one of the goals of private enterprise, although we are accustomed to discussing it as if it were the only goal.

I would argue that great concentration of wealth in a few hands is inimical to justice, dangerous to a civil society, poisonous to the common good and to the general welfare, and that a primary goal of government should be to prevent such concentration, especially if that concentration is at achieved the expense of the population at large.

That is to say, I deny the validity another of your fundamental assumptions.


1. All persons residing in the U.S. shall come together in units ...

We could call them communes. Tom may prefer a different word. But I support the basic idea. I'd ask how frequently Tom would allow individuals to change communes, and on what terms.

3. The following income shall not be subject to taxation:

Okay, here Tom recognizes that each commune ought to be taxed on what we might call its profit, rather than its gross income. The general principle is unexceptionable.

• An amount equal to a year's earnings at the minimum wage rate, for each adult (age 20-65) member of the unit ...

This is a marvelous incentive for high-income persons to join communes full of unemployed adults. The latter can of course demand a certain consideration for serving as tax shelters. Not a bad thought.

• All payments for what is classified as necessary health care ...
• All educational expenses including day care ...

We might call these "legitimate expenses", something like "cost of goods sold" for a business. We could quibble over whether the list should be limited to these, but that would lead straight to the mish-mash of deductions in our current tax code.

• All income saved into an identified account from which investments may be made.

Now THIS gets interesting. Tom is basically talking about an unlimited communal IRA. It's not clear what counts as an "investment". Could the commune invest its IRA in real estate? More important, and something I don't see Tom addressing: what about withdrawals from the IRA? I assume he'd count them as income, whenever made.

5. There shall be no federal tax on corporations or other business entities.

Well, the commune could call itself a "business entity", just like a foreign-owned corporation. "Hey, our commune is a personnel agency, providing temporary employees to companies who need them." I have to think about that one.

More later, maybe. Inventing a whole new tax system is hard work.

--TP

The hazards of efficiency is one of the things I'd like to write about, which probably means doing some research.

I hope you do write about it, Jacob. I figure the name Pareto will come up when you do.

--TP

Tony P... a warning... you're dealing with an old, fat, white man who left the GOP because it was as corrupt and intellectually bankrupt as the democrats. He's taken a shot at the Libertarians, but what he wants to find is common ground in economics with persons having the widest possible collections of backgrounds. None of the social conservatism here; it creates scisms impossible to bridge. Now..
I started out calling them households, to get away from families, but that sounded too much like the traditional, so I settled on "units" as the most apolitical name I could think of. In and out at will, but the head honcho must pay taxes on everybody's income, and take responsibility for everybody's welfare for the same period. Your "communes " sound like someone stuck in the sixties. Update yourself!
Then you embark on converting these units into businesses (which are to be tax free). Yet the money sooner or later reaches people, and then it is taxed... and at a single rate. Well, not quite.. the young get a lower exemption because their cost of living is lower, and us old folks get more for the opposite reason. I admit discounting kids was, in part, to discourage financial incentives for reproduction (welfare babies).
The "legitimate expenses" are selected to encourage people to become more productive, e.g., healthier, better trained and better equipped. This is a legitimate goal for government, as it increases the tax base.
You correctly identify the unlimited IRA.. part of my quest to make this a saver nation, not a debtor nation.
You and I could not agree more on "inventing a new tax system is hard work". What you see is about a decade of thinking and revising by me. But if you can stand working with a fat old white man.. lets keep at it. Its fun.. and who knows, maybe somebody else out there is listening. Your turn..

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Whatnot


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