Patterico's Pontifications

7/19/2011

How I Learned to Stop Worrying and Love the Debt Bomb

Filed under: General — Karl @ 7:20 am



[Posted by Karl]

The title is misleading; then again, so was the subtitle for Dr. Strangelove. Sometimes, a light touch helps illuminate a heavy topic.

Let’s start with the heavy part. Kevin D. Williamson lays out the inevitable endgame for our public debt problem:

Medicare, Social Security, and national-defense spending are going to be cut. Lots of other stuff is going to be cut, too. To the extent that such cuts are insufficient, taxes are going to go up to pay the difference. That’s the deficit-reduction deal. There isn’t another one. The question is only whether we implement it voluntarily or involuntarily, under conditions of stability or under conditions of crisis.

The issue of whether we are stable now aside, Williamson’s question reminded me of a piece from Megan McArdle back in May, warning left and right that neither may like the results of waiting:

Fiscal crises are–ahem–inherently unpredictable events. No matter how you assure each other that your awesome new health care plan can’t possibly be repealed because everyone’s going to be lovin’ on it so hard . . . or that no peacetime US government in history has ever collected more than 20.5% of GDP . . . the fact remains that when interest rates are rising and everyone’s panicking, the unthinkable frequently happens. Moreover, the tax hikes and spending cuts that are required in a fiscal crisis tend to be much more draconian than would otherwise be required, because they tend to happen when GDP is depressed and the gap between tax revenue and spending is exceptionally large.

Some of what McArdle writes is true, but the real fight — both now or in a possible crisis — is over the mix of spending cuts and tax hikes. A look at other countries’ crises is rather eye-opening on this key point. Canada reduced government debt from 68% of GDP in 1994 to 29% of GDP in 2008. There were six to seven dollars in budget cuts for every dollar of tax hikes — and these were real cuts in spending, not reductions in spending growth, and not the imaginary spending cuts Democrats have offered Republicans in past decades. By 2000, Canada was cutting personal and corporate taxes, as well as capital gans taxes. (Read the linked story for another example, set by New Zealand in the 1980s.) During the same period, Sweden reduced public debt from 78% of GDP to 47% of GDP by cutting public spending from 71% of GDP in 1993 to 52% in 2008—that is, by almost one-fifth of GDP. During the period Sweden cut taxes four times and abolished wealth taxes, inheritance and gift taxes. Finland similarly cut spending and taxes as part of its fiscal consolidation.

Indeed, a study of fiscal consolidations in 21 countries of the Organization for Economic Cooperation and Development over 37 years concludes that failed attempts to close budget gaps relied 53% on tax increases and 47%, while successful consolidations averaged 85% spending cuts and 15% tax increases.

I am not for doing nothing about the debt ceiling and have written a number of pieces about the need to do something about the public debt at all levels of government. Moreover, it is certainly possible that in a debt crisis, the intransigence of the left could force the federal government to take a tax-heavy approach proven to fail in all those other OECD countries. I tend to think there is still enough of the American spirit around to resist becoming wage slaves to the state. Assuming we can manage to avoid a more statist approach than Canada, Sweden and Finland, it would seem the left ought to have the greater interest in defusing the debt bomb now, as a crisis will likely be tougher on their priorities.

–Karl

108 Responses to “How I Learned to Stop Worrying and Love the Debt Bomb”

  1. No resolution can proceed without the support of the mushy middle. And the way they blow will be determined by whether they feel more threatened by big cuts in spending or by big tax hikes.

    Despite GOP efforts to argue that tax hikes will be imposed on everybody, and not just the rich, most of the mushy middle doesn’t yet accept that argument. And if they don’t think their taxes are going to go up, they’ll never rally round an anti-tax hike / spending cut platform.

    Rather than continue to market a message that isn’t being received, the GOP needs to shift their messaging: they need to make the argument – over and over again – that tax hikes are not just bad for the people whose wallets are gored, but for the economy as a whole. Tax hikes = fewer jobs created, more layoffs, no raises, less job security for those with jobs. It isn’t a tough sell, but it’s one the GOP hasn’t been making very effectively.

    For an example of how this can work, check out Steve Wynn’s blast blast at Obama.

    steve (369bc6)

  2. Karl, you make a good point. We would all be better off, especially the Left, if we could agree to take well informed and sensible steps to address the spending crisis. That’s beyond dispute.

    However, the Left isn’t interested in any program to restrain government spending. They pretend to be concerned, but their actions betray their intentions. They’ve manufactured the crisis and now seek political advantage by exacerbating it.

    ropelight (69434e)

  3. Karl – Good to see your posts. There is not going to be a default unless Obama wants one. The community Organizer In Chief is just in fear mongering campaign mode looking to score political points.

    Republicans need to hammer him on his lack of seriousness – his ridiculous budget voted down 97-0, ignoring his debt commission, his lack of a plan, the inability of people to score speeches, his fear mongering, and the Republicans’ own willingness to take risks and advance difficult solutions.

    You also point out that there are debt bombs at different levels of government, which is correct, and Obama has shown no lack of willingness to increase cost burdens for state governments through mechanisms such as ObamaCare.

    He has never seen other peoples’ money he is unwilling to confiscate and spend.

    daleyrocks (bf33e9)

  4. It needs to be emphasized again and again that the reason why Republican reject these Democrat proposals for “Three dollars of spending cuts for every dollar of tax hike” is because we have been there before. Reagan bought into it with TEFRA in 1982. That’s when the Democrats brag he raised taxes. Then George HW Bush bought it in 1992 and lost the election. In both cases, the spending cuts never materialized.

    We know that history. A lot of the mushy middle doesn’t.

    Mike K (4c76c8)

  5. There’s a strong tension between the solutions to two big economic problems, high debt and high unemployment. The two problems compete for top mindshare among the fickle electorate.

    Tackling the debt by downsizing govt (which I favor) will cause a rise in unemployment. If we eliminated DOC, DOE (both of them,) FNM, FRE, and all the other wasteful and destructive govt agencies, hundreds of thousands of middle-class professional jobs will be eliminated. In theory, the unshackled private sector economy would eventually find more productive positions for some of those people, but it will take a good long while at best. Many of those workers are minorities, concentrated around Wash DC, who would raise a ruckus (yes, that prediction shows I’m a racist.)

    We face an apparently intractable problem, with an electorate with a ten-second attention span, and a political system that has proven unable to deal seriously with very big problems.

    The peas will be too big and bitter to eat.

    gp (72be5d)

  6. gp, the idea that the modest spending reductions being discussed would result in such large layoffs is just the kind of fearmongering that the Democrats are engaging in.

    SPQR (26be8b)

  7. GP: it isn’t just that the private sector will eventually put the idled bureaucrats to ‘more productive’ work, I argue that a real move to shrink government will start to unleash the cash that has been sitting on the sidelines… cash that businesses will use to increase production and employment and cash that consumers will feel more comfortable spending.

    And if the downsizing is done right (for example, notice now that DOE will be eliminated in the spring of 2012 and DOC in the summer and so on), then employment gains in the private sector will actually be in advance of any real cutbacks in government employment.

    steve (369bc6)

  8. Don’t you realize our political masters are just going to inflate us out of the debt? So what if they pay out $241 trillion if it isn’t actually worth anything? The validity of the debt may not be questioned but that doesn’t mean it has any valuation ties built in. Hopefully we’ll be able to avoid hyperinflation but even that I’m not so sure about. At some point people just aren’t going to be willing to lend the treasury money at losing rates. Even now the fed is buying something like 75% of the treasury offerings. Seems pretty mythical to me, much like the various government trust funds that have been raided over the years.

    Soronel Haetir (29fbb7)

  9. SPQR: I am mongering mainly hopelessness, not just fear. Not deliberately to benefit Dems, I assure you.

    steve: “businesses will … increase production and employment” Not until the demand depression abates. People have learned to live with less, and many realize they are just as happy that way. What do people need that they haven’t already got?

    steve: “employment gains in the private sector will actually be in advance of any real cutbacks” How so? What’s the secret to such rapid employment gains? Sounds like sky pie to me.

    gp (72be5d)

  10. You’re all approaching this too logically, which is why you’ll never engage with the other side. Read Depak Choke-me’s editorial in today’s SFGate. (If you can, I think my eyeballs started bleeding at the second paragraph.)

    THAT’S the mentality you’re debating against and attempting to try and find some middle ground with.

    Lord help us all…

    rtrski (c69273)

  11. “If we eliminated DOC, DOE (both of them,) FNM, FRE, and all the other wasteful and destructive govt agencies, hundreds of thousands of middle-class professional jobs will be eliminated.”

    gp – Oh Noes! The government must continue to use our dollars to employ hundreds of thousands of overpaid, underutilized, unneeded bureaucrats or they will be unemployed.

    Spoken like a true capitalist, comrade.

    daleyrocks (bf33e9)

  12. _________________________________________

    the kind of fearmongering that the Democrats are engaging in.

    I’ve spoken with a person associated with the place where I work who is pretty much an ultra-liberal. He once told me that he didn’t think Hugo Chavez was an extremist. But this person is employed by the government, so his lunacy at least results in benefits for him.

    By contrast, I’m way more puzzled by people who are no less liberal in their outlook and voting habits, but who aren’t even connected to the government–be it at the local, state or federal level. They strike me as the ultimate suckers, as the biggest saps. However, I’m sidestepping the issue of such folks undoubtedly having a desire to receive the most generous social security benefits possible during their senior years, and, if the need arises today, the most generous government-mandated unemployment benefits imaginable.

    In some ways — as is the case with that district in New York state that went Democrat instead of Republican a few months ago — liberalism truly springs forth from very greedy emotions. That left-leaning instincts are anything but an indication of one’s generosity, selflessness and noble idealism.

    Mark (411533)

  13. “steve: “employment gains in the private sector will actually be in advance of any real cutbacks” How so? What’s the secret to such rapid employment gains? Sounds like sky pie to me.”

    gp – How about by getting rid of some of the uncertainty Obama has created that is overhanging the economy on regulation, what industry he is going to nationalize or attack next, what changes in the tax code he going to threaten to make.

    He is a walking, talking, war on business.

    daleyrocks (bf33e9)

  14. Well, just imagine how all those government workers will whine anyway, when we employ them until the fed just plain runs out of money and has no choice but to stop employing people for the sole reason of employing people.

    That’s practically what’s happening right now actually. It’s not like we’re choosing between a world where we have plenty of money and a balanced budget and employ everyone and provide ample entitlements. That’s what Obama promised, but only idiots believed he meant it.

    We’re choosing between running out of money or cutting spending. Numbers are republicans.

    Dustin (b7410e)

  15. Comment by rtrski — 7/19/2011 @ 9:07 am

    Yes, for days I had been waiting with baited breath to get Deepak Chopra’s take on the debt crisis. I actually broke out with laughter at the first paragraph.

    One of the virtues of being on the liberal side of politics is that total obedience isn’t required. There are no hidden agendas. Ideology doesn’t lead to unreason. In a political climate where it feels as if the inmates are running the asylum — as in the current Republican threat to default on America’s debt — the prevailing sanity of President Obama is something that others and I have taken for granted.

    Comedy gold.

    http://www.sfgate.com/columns/chopra/

    elissa (00bdd0)

  16. daleyrocks: As I wrote, I personally favor eliminating those agencies. I am pointing out that that would cause significant pain in the short term, for which our easily-distracted electorate has no stomach or patience.

    I’ll vote Republican in 2012, only because it’s the right thing to do, but I have no hope that the R’s back in power can solve these twin problems of debt and unemployment. If the R’s do seriously attack the problems, the voters will turn them out again in two years, because the voters are hypersensitive to pain, and short-sighted.

    gp (72be5d)

  17. gp firing 40% of the federal workforce would be a feature,not a bug. The recession will end when unemployment hits the public workforce. Besides, there salaries and benefits are not worth the cost of borrowing. Its cheaper to just cut them lose.

    cubanbob (409ac2)

  18. daleyrocks if the republicans win a home run in 2012 the first thing they should do is impose huge taxes that hit mainly democrats. Democrats like taxes and they should pay them. Then cut the entitlement state way back. Less spending and more revenue and pretty soon you have a balanced budget.And R’s, don’t forget to pass a national right to work act and repeal both the Wagner and Davis-Bacon Acts.

    cubanbob (409ac2)

  19. “daleyrocks: As I wrote, I personally favor eliminating those agencies. I am pointing out that that would cause significant pain in the short term, for which our easily-distracted electorate has no stomach or patience.”

    gp – Our comments crossed. You say you want those cuts but you don’t want the consequences of the cuts, even if they are potentially short-term. You can’t have both. You need to make up your mind what you believe in and stick to a position, IMHO.

    daleyrocks (bf33e9)

  20. A couple of points related to gp’s comment.

    1. Even by Keynesian standards, reducing spending by 1% reduces growth by only 0.6%. The examples given tell an even better story, esp. Canada.

    2. Rightsizing government will have distinct political consequences. W.R. Mead has written (correctly, imho) that it will have a disproportionate impact on the black middle class. The right needs to be thinking about and be preparing for these effects.

    Karl (f07e38)

  21. “There are no hidden agendas. Ideology doesn’t lead to unreason.”

    elissa – CLASSIC. Thank you.

    The only problem is that if Democrats told voters what they actually thought, there’s probably less than 10% of the population who would vote for them. I’m not sure how that fits into Chopra’s not agenda comment or how he would see Obama’s chameleon-like changes between the 2008 primaries, to the general election campaign, to the way he has governed. Clearly no underlying agenda or even unreason in bypassing Congress and violating the Constitution.

    daleyrocks (bf33e9)

  22. n the current Republican threat to default on America’s debt

    Wow, Elissa. That is totally unhinged. Not much different than saying Rick Perry demands secession or that Paul Ryan wants to murder your grandma, but still.

    As stupid as this is, since it’s totally unnecessary, the GOP should pass a bill prioritizing servicing the debt over other obligations, in the event the debt ceiling is breached. I know Reid and Obama will refuse to pass the bill, but at least the GOP can point to something as proof they aren’t threatening to do something that isn’t actually going to happen.

    Of course, anything bad that happens after a deal isn’t reached will be blamed on the GOP. Chopra won’t be alone in spinning instead of solving.

    I love how he goes on about freedom of thought being the bulwark of the liberal mindset. Except it’s the one kind of diversity they always abhor.

    I love how he blames the current debt on Bush’s foreign policy, which was cheaper than Obama’s … basically not sure what it bought, but it was more money spent on it.

    Dustin (b7410e)

  23. “2. Rightsizing government will have distinct political consequences. W.R. Mead has written (correctly, imho) that it will have a disproportionate impact on the black middle class. The right needs to be thinking about and be preparing for these effects.”

    RAAAAAACIST!!!!!!!!

    daleyrocks (bf33e9)

  24. Karl @20 – What are you talking about? I thought according to Rev. Al and Rev. Wright that the entire black middle class was in prison for drug crimes or traffic stops in the wrong neighborhoods.

    daleyrocks (bf33e9)

  25. The peas will be too big and bitter to eat.
    Comment by gp — 7/19/2011 @ 8:44 am

    Well, they’ll just have to settle for “cake”.

    AD-RtR/OS! (b87a7f)

  26. Well, how in the world do we prepare for these effects?

    What happens when urban hellholes run out of gang intervention bribes? It’ll take awhile for the guns the gangs bought to need replacement. OK… that’s a clumsy interpretation, but what happens when all the ‘agencies’ servicing urban areas are cancelled?

    Other than flight, what works for saving St Louis or Baltimore? They have to elect some good local leadership and be responsible for themselves. Nothing else will work. As the progressive beast really starves, we will see riots of many varieties. If we are moved by that, we will never be a prosperous nation. We will always skate on the edge of insolvency.

    Not that GP is wrong, I guess. There will be political consequences, but hey, it’s not like we’re losing a lot of votes over them. If one was to group people into races, which I don’t like to do, blacks have removed themselves from relevance politically. No Repubican can get more than a tiny percentage of their support, no matter what they do. No Republican can lose more than a tiny percentage (if any).

    Dustin (b7410e)

  27. Don’t accept a false dichotomy. The actual choice is between increased taxes or reduced spending, either one is capable of preventing default.

    ropelight (69434e)

  28. Is there a way that we can do tax reform to raise more revenue without hurting the economy? Bill Clinton (of all people) made the case that we have a corporate tax rate of 35%, but by the time businesses get done availing themselves of all of the loopholes Congress has written into the tax code they end up paying on average something like 23% (and if you are General Electric you pay nothing). Clinton argued that we ought to cut the tax rate down to 25% while at the same time eliminating all of the deductions and loopholes. In theory, businesses could then devote more time to long-term strategy rather than short-term tax avoidance, and everyone would be better off.

    Could the same thing happen with personal income taxes? I would prefer that the GOP stay out of the trap the Dems are laying where the debate gets focused on which tax bracket pays what rate and instead deliver a comprehensive plan for tax reform that would lower rates while eliminating deductions and write-offs. I would even be willing to consider a plan that phases-out mortgage deductions and charitable giving deductions as long as it meets the goal of making tax compliance easier and more transparent.

    It should go without saying, though, that all this tax reform should be predicated upon the adoption of real spending restraint and entitlement reform. In fact, spending and entitlements have to be dealt with first, and only then would tax reform be taken up.

    JVW (39c649)

  29. Comment by cubanbob — 7/19/2011 @ 9:36 am

    The easiest way to hit “Democrats” with increased taxes is to end the deductibility of State and Local income-taxes from the Federal Income Tax Return.

    AD-RtR/OS! (b87a7f)

  30. “The easiest way to hit “Democrats” with increased taxes is to end the deductibility of State and Local income-taxes from the Federal Income Tax Return.”

    AD – 15 yard penalty for unnecessary roughness. That was just plain mean to the Democrats. Heh.

    daleyrocks (bf33e9)

  31. What happens when urban hellholes run out of gang intervention bribes?

    I suppose the un-organized militia will just have to set up check-points to ensure that “what’s in St.Louie, stays in St.Louie”.

    AD-RtR/OS! (b87a7f)

  32. ____________________________________________

    One of the virtues of being on the liberal side of politics is that total obedience isn’t required.

    That’s a laugh. Even more so since I’m sure there have been many occasions during his life when he’s hung out with a room full of leftists. Also, the very concept of “political correctness” — which comes mainly from leftist sentiment and fosters obedience in speech — counters his observation.

    As for Chopra’s disingenuous in other ways, he reminds me of those people in the media who proclaim “We’re not liberal! How can we be? After all, we’re owned by big corporations!”

    Or: “We’re not liberals! We’re progressives!”

    Worse of all, I’m sure Chopra perceives himself as coming from a part of the political spectrum that is very humane, big-hearted, tolerant and sophisticated. A big guffaw needs to be directed at people like him.

    Mark (411533)

  33. Another way to hit Democrats is to outlaw public sector unions.

    ropelight (69434e)

  34. “I suppose the un-organized militia will just have to set up check-points to ensure that “what’s in St.Louie, stays in St.Louie”.”

    Snake Plissken was unavailable for comment.

    daleyrocks (bf33e9)

  35. daley, “mean” is one of the things I do best.

    As to the Corporate Tax:
    Why don’t we just finally admit that businesses do_not_pay_taxes?
    Do like WA, replace the income tax on business with a Business License Fee of a set percentage of gross
    (now WA’s is highly graduated so that a company grossing Billions such as Boeing, pays a much smaller rate than “Joe’s Corner Drugs and Soda-Fountain”);
    but it is a system that every business pays something, and it is a known cost that is absorbed by the clientele.

    The “downside” is that there would be a reduced demand for Tax Lawyers, CPA’s, and IRS Auditors – but some small sacrifice is demanded in hard times.

    AD-RtR/OS! (b87a7f)

  36. Yet another way to hit Democrats is to enact a Universal Minimum Income Tax. It would work like the Alternative Minimum Tax only every resident would pay the minimum tax, say 10% of earned income to be applied to the national debt.

    The UMIT would self-expire when the debt reached zero, but would automatically reinvigorate itself should any national debt ever again arise.

    ropelight (69434e)

  37. “You say you want those cuts but you don’t want the consequences of the cuts” I didn’t say I didn’t want the consequences of the cuts. I said the voters don’t want the consequences of the cuts, and they will react fickly. Acknowledging the challenges of those consequences is prudent.

    What did the voters learn from the Sep 2008 financial panic, one of the scariest things in our lifetimes? Nothing. Less than nothing: six weeks later they voted for more recklessness, more debt, more govt.

    Then in 2010 they got scared again, and swung the other way a bit. If in 2012, we elect Chris Christie (I wish!) and two houses of R’s, and dash the alphabet agencies to pieces (I hope!), voters will swing the other way by 2014, because of the resulting rise in unemployment, the decline in govt handouts, the lawsuits, strikes and riots, and the MSM daily editorializing about the UNFAIRNESS of it all.

    It’s wise to anticipate that.

    gp (72be5d)

  38. _____________________________________________

    it will have a disproportionate impact on the black middle class.

    Some analysts have noted that a huge percentage of black America is tailor-made for Obama, because he and they share a racial background. But such observers fail to note that politicians in past years who were no less liberal than Obama but, unlike him, of purely white/Caucasian ancestry, including Gore and Kerry, also got huge backing from extremely large portions of black voters.

    Surveys indicate upwards of 90-plus percent of black America is lock-step with leftist politicians and most liberal policies.

    When I look at the mindset behind that situation, I don’t think I’m being too sarcastic when I theorize that if Obama suddenly became a staunch conservative — or even a staunch centrist — a lot of black Americans would begin to discourage the idea of diversity and lose their ardor for civil rights.

    Mark (411533)

  39. ropelight:
    I would much rather see a Universal Consumption Tax at the retail level (not a VAT) replacing all taxes on “income”
    (the definition of which has been, and is, the great controversy of our times),
    with the exceptions only for groceries, and prescription/over-the-counter drugs
    (but not for dietary supplements – unless you have a Dr.’s prescription).
    This tax would also be on services, which would broaden the base allowing the rate to be kept quite low.

    AD-RtR/OS! (b87a7f)

  40. Worse of all, I’m sure Chopra perceives himself as coming from a part of the political spectrum that is very humane, big-hearted, tolerant and sophisticated. A big guffaw needs to be directed at people like him.

    Comment by Mark — 7/19/2011 @ 10:18 am

    It’s really amazing how out of touch this guy is. He truly thinks conservatives are evil nazis or something, and the left is all things noble and wise.

    Meanwhile, democrats have total responsibility for the past three huge record breaking deficits. Blaming Bush for them is pathetic. I’d love to have the GOP’s $150 billion average deficit back, but I know even that was simply an unsustainable crisis.

    Dustin (b7410e)

  41. Daleyrocks: not pie in the sky at all.

    Start with the premise that Americans are basically optimistic and that optimism is reflected in our pursuing more and better (we want to buy more and earn more, we want to grow our businesses, etc.). That is our default mindset… unless, of course, something happens to shake that innate confidence, such as a terrorist attack, popping of some economic bubble or, to get to the point, Obama.

    Right now, Obama is, per Steve Wynn, a giant wet blanket on that optimism. He’s got people and businesses so scared that we’re collectively just sitting on trillions of dollars in cash.

    Remove the blanket and businesses which have cash and ideas on how to grow will start to act on those thoughts, increasing hiring and spending more on plant and equipment. Consumers who have been sitting on cash will no longer feel the need to conserve cash to meet higher taxes or health care or gas prices and will start spending a larger percentage of their disposable income. This is turn will encourage businesses that there are buyers for their products, making them even more confident in hiring people.

    Yes, it is a bit of a self-fulfilling prophecy, but that is really the way the economy works. If we spend and invest more, it grows. If we get scared and hide, the economy shrinks. In order to get elected, Obama trashed the economy, portraying it as far worse than it was (and McCain, clueless as he is, couldn’t respond and Bush had no credibility or willingness to say things weren’t as bad as Obama was claiming). He continued with that theme to get his agenda passed (‘never let a good crisis…’). And now he wonders why business isn’t spending their cash?

    steve (369bc6)

  42. “Why don’t we just finally admit that businesses do_not_pay_taxes?”

    AD – I have a fundamental problem with that type of blanket statement. It depends on the industry and the type of tax in my experience.

    Theory says business pass on all costs to customers, but as I have demonstrated to manic commenter EPWJ on numerous occasions, reality often conflicts with what he learned in text books if he learned anything at all. Some companies have little or no pricing power and just have to eat changes in taxes. That’s just the way things are. Screw what theory says.

    daleyrocks (bf33e9)

  43. Don’t accept a false dichotomy. The actual choice is between increased taxes or reduced spending, either one is capable of preventing default.

    that is a false statement: if you keep raising taxes, you will actually reduce the revenue flow, not increase it, and then the government defaults because there isn’t enough money to pay the bills.

    the only plan that w*rks long term is to cut spending and taxes. the problem is that no one ever cuts spending.

    redc1c4 (fb8750)

  44. Some companies have little or no pricing power and just have to eat changes in taxes. That’s just the way things are. Screw what theory says.

    what happens to these companies when they run out of profit margin to eat?

    they either raise prices or go out of business. that’s not theory, it’s reality.

    redc1c4 (fb8750)

  45. steve @41 – I agree with you. Back in #13 I was quoting gp’s response to you. Financial institutions currently hold record amounts of cash reserves waiting to be put to work. They don’t want to lend and business don’t want to borrow, at least at the levels both did before 2008. Why, with the banks, regulatory scrutiny and second guessing is part, but a common element is the incredible uncertainty Obama has created that overhangs the country.

    daleyrocks (bf33e9)

  46. “they either raise prices or go out of business. that’s not theory, it’s reality.”

    redc1c4 – Or they sell to a competitor with a lower cost structure or the government bails them out. You got it.

    daleyrocks (bf33e9)

  47. Somewhere today (I can’t put my finger on it as I’ve been to several dozen sites) someone disparaged the proposed BBA by saying we don’t have to wait the 5-10 years to get it ratified and implemented;
    we have, today, the Debt Ceiling – just refuse to raise it, and tie that refusal to a prioritization list of what the administration MUST pay with the available funds, in order.

    Just why does the Administration need to borrow $1.6T this year, and next, and next…

    AD-RtR/OS! (b87a7f)

  48. _____________________________________________

    and the left is all things noble and wise.

    That assumption — which I suspect a lot of people fall for (or the notion that liberalism imbues one with kindness and generosity) — makes the absurdly one-sided political nature of black America even more fascinating to me. That is a living laboratory to scrutinize and study, in which nuance and variation are limited. IOW, when a huge percentage (90-plus percent) of a community favors the same type of politician, the same type of ideas and policies, one does not need to fret about overlooking shades of gray in order to understand cause and effect. Yea, of course there are some centrists and rightists in black America, but they’re a tiny (very tiny!) part of the whole.

    So when one wants to gauge whether leftist sentiment nurtures generosity, humaneness, prosperity, responsibility, decency, tolerance and sophistication among and within humans, they can study much of black America. And what I observe, decades on end, is not terribly reassuring or satisfactory to me. That is unless one judges behavior where far too many people demonstrate behavior that is harsh, rowdy, mean, coarse, flaky, foolish, paranoid and unkind as anything but negative or symptomatic of pervasive liberalism.

    BTW, even though I’m a rightist, I wouldn’t necessarily be all that comfortable with the idea of any mainstream part of society displaying 90-plus percent conservative biases or being extremely one-sided to the right. That’s why I believe the 90-percent leftist slant of sectors of America similar to the black community is very self-destructive and very pathetic, if not even somewhat appalling.

    Mark (411533)

  49. we have, today, the Debt Ceiling – just refuse to raise it, and tie that refusal to a prioritization list of what the administration MUST pay with the available funds, in order.

    Just why does the Administration need to borrow $1.6T this year, and next, and next…

    Comment by AD-RtR/OS! — 7/19/2011 @ 10:59 am

    Yeah, sounds good to me.

    Just pass a bill explaining what the priorities are, and reemphasize that the debt ceiling cannot be breached. Make it federal law (though I already think it basically is) that servicing the debt is first, and go on down the line from there.

    Put funding the BATF as the very last priority, to be done after 100% of other priorities have been funded without breaching the ceiling.

    That’s what the American people have to do. If my debt ceiling at my salary is $500,000, that’s enough for a car, a house, and student loan. Maybe a credit card. I’d be an idiot to let it get that high, but once I did, I would have to manage my bills without going over that.

    And if I want to be prosperous, I would cut my spending as much as I can, knowing that I can’t magically change my income so easily (nor can the US Treasury change its).

    makes the absurdly one-sided political nature of black America even more fascinating to me.

    I think that will change. We’re in the information age now. As times goes on, more and more people will challenge their bubbles and realize they don’t have to be whatever they are told.

    I don’t really care to even group people by skin color, but I do like it when someone like Allen West really shows what it means to be a patriot. He doesn’t need anyone to tell him right from wrong… he just thinks for himself.

    Dustin (b7410e)

  50. Re: Elissa #15 and Dustin #40:

    That’s what made my eyes bleed. It’s not very funny once you realize this complete nutjob fervently believes what he wrote. Then it becomes prophetically terrifying.

    And they call the other side “wingnuts”?

    rtrski (192cf0)

  51. Hypocritical scum lefturds.

    DohBiden (d54602)

  52. Deepak Chopra made himself rich and famous peddling New Age hokum to needy liberal Baby Boomers. Once you internalize that, there is really no need to spend much time caring what he thinks about politics.

    JVW (39c649)

  53. The left oppose things they now support when a repub is in office.

    DohBiden (d54602)

  54. It should be interesting for Dems to note that in Canada during the period that the debt to gdp was being brought down it was the Liberal Party of Canada that was in power and the finance minister was Paul Martin. He made a great Finance Minister who stuck with the plan to make Canada more competitive and reduce debt. He later became Prime Minister and self destructed but that’s another story.

    scr_north (5b4c7c)

  55. “Hypocritical scum lefturds.”

    DohBiden – I don’t want to be picky, but aren’t you supposed to supply a citation when you quote a definition?

    daleyrocks (bf33e9)

  56. So Rupert Murdoch voted for Obama the debt ceiling opponent and this is how the left treats him by falsely accusing him of hacking into the phone lines to make his critics look bad.

    DohBiden (d54602)

  57. #39, AD, I’m in complete agreement on replacing the Federal Income Tax with a Universal Consumption Tax, at the retail level, with details, exclusions, and exceptions to be worked out later, the fewer the better.

    #43, redman, we’re on the same page. I should have included a statement to the effect that while both (raising taxes and reducing spending) would address the immediate debt crisis, only
    reduced spending was capable of offering a long-term solution.

    Thus modified, my original proposition stands.

    ropelight (69434e)

  58. Comment by Mark — 7/19/2011 @ 11:16 am

    Mark, you need to look at what Walter Russell Meade has written over at The American Interest on the Blue Social/Economic Model, Inner Cities, and the Black Middle-Class.

    His latest is:
    http://blogs.the-american-interest.com/wrm/2011/07/17/why-blue-cant-save-the-inner-cities-part-i

    AD-RtR/OS! (b87a7f)

  59. The UMIT would self-expire when the debt reached zero, but would automatically reinvigorate itself should any national debt ever again arise.

    This isn’t realistic. The national debt has only ever been paid off once, and that was by Andrew Jackson.

    If it kicked in whenever the national debt hit 10-20% of GDP, that’s probably more doable. It would allow the country to borrow, but not a crippling levels.

    Another Chris (c04459)

  60. Watch spin if you dare
    ask not for whom the clock spin
    spin for thee, suckah

    http://www.usdebtclock.org/

    ColonelHaiku (cc5c75)

  61. deepak chopra two
    words that live in infamy
    dumb futhermucker

    http://www.youtube.com/watch?v=qySx8tSs8BQ

    ColonelHaiku (cc5c75)

  62. I would much rather see a Universal Consumption Tax at the retail level (not a VAT)

    Why not a VAT? It seems to me that a VAT is the fairest system as well as the hardest to evade.

    Milhouse (ea66e3)

  63. The slowdown in economic growth seen in EU corresponds almost directly with the imposition/increases in VAT.
    VAT is applied at every step of a manufacturing process; is very destructive, and very accounting intensive.
    It would be much better to just apply a “sales tax” at the retail level – you buy something, you pay tax; you don’t buy something, you aren’t taxed.

    AD-RtR/OS! (b87a7f)

  64. Also, if our “betters” would have their way, the VAT would be imposed on top of the current Income Tax, not in place of it.
    Such an arrangement would guarantee the stagnation of the American Economy mirroring what we have seen in EU – think of it as the current condition, but permanently!

    AD-RtR/OS! (b87a7f)

  65. If we can cut federal spending to 10% of GDP, I’d fund it by a flat 5% VAT and a flat 5% income tax. States could piggyback on the system by adding whatever percentage they liked to each.

    Milhouse (ea66e3)

  66. The slowdown in economic growth seen in EU corresponds almost directly with the imposition/increases in VAT.

    That would apply to any tax, and especially to any increase in tax.

    VAT is applied at every step of a manufacturing process; is very destructive, and very accounting intensive.

    How so? You just keep your VAT receipts and submit them with your VAT collections, to account for the part you’re keeping.

    Milhouse (ea66e3)

  67. How so? You just keep your VAT receipts and submit them with your VAT collections, to account for the part you’re keeping.

    If only it were that simple.
    If you are conducting a secondary operation on a component that you purchased from someone else, you have to document how much time and material were involved in that secondary op, and how much that contributed to the value of the final piece/component of the assy that you sold.

    It would make computing depletion allowances seem like kindergarten nap schedules.

    AD-RtR/OS! (b87a7f)

  68. If you really want to decrease the size and intrusion of the Government (at all levels) into the lives and freedoms of individuals, you want to keep taxation as simple as possible.
    When systems become complicated, bureaucracies expand to “sort out” the complications, creating new complications, and so on.

    We used to have a saying in motor racing that applies:
    To prepare a winning car, you need to lighten and simplificate.

    The same holds true for government, it needs to be stripped down to its barest fundementals, and watched like a hawk; only giving it the jobs that no other organization on Earth is calpable of performing – but even then, putting it out for bid, just to keep everyone on their toes.

    AD-RtR/OS! (b87a7f)

  69. If only it were that simple.
    If you are conducting a secondary operation on a component that you purchased from someone else, you have to document how much time and material were involved in that secondary op, and how much that contributed to the value of the final piece/component of the assy that you sold.

    Huh? Why would any of that be necessary? Say the tax is 10%. You bought the components of your product for $128, and have a receipt for the $12.80 VAT that you paid. You work on it, and eventually sell it for $180. So the value you added is precisely $52. You charge your customer $18.00 VAT, and send the IRS a check for $5.20, plus your receipt for $12.80. How much accounting does that take?

    Milhouse (ea66e3)

  70. “You charge your customer $18.00 VAT, and send the IRS a check for $5.20, plus your receipt for $12.80.”

    Milhouse – It’s calculating that $5.20 cents to retain where the complications come in, since you presumably add labor and other components to the part before you sell it for $180. In your example you say all the components cost $128. Do the components have to be identified separately at sale since you paid each vendor a separate originally so the government can track payments on which you are withholding $12.80 but paying an additional $5.20? It’s a cost accounting nightmare.

    daleyrocks (bf33e9)

  71. With a VAT how would the off the grid underground economy sending dollars home to Mexico part work?

    elissa (827fa0)

  72. Daleyrocks, I don’t understand. Your labor is part of the value that you added, which is being taxed. The components you bought are your inputs, for which you’ve paid tax, which you’ll withhold from the tax you charge your customer. No, you don’t need to identify the components separately on sale; why would you? The customer doesn’t care what the components are; he doesn’t need to know how much of the $18 VAT he paid went to the IRS and how much you kept. He just has to know that when he combines it with another item for which he paid $120 plus $12 VAT, and sells it on for $500 plus $50 VAT, he keeps $18 + $12, and sends $10 to the IRS.

    What accounting is needed here? It seems to me that you just put your receipts in a shoebox, and at the end of the quarter you send them to the IRS together with an account of how much VAT you collected, and a check for the difference.

    Milhouse (ea66e3)

  73. “Daleyrocks, I don’t understand.” – That is clear. We are talking past each other.

    “Your labor is part of the value that you added, which is being taxed.” – Labor is a cost to me as an owner of a business the same as the purchase of component parts. Did I pay a VAT on my workers’ wages? Why am I paying taxes on a cost? Please explain?

    “The customer doesn’t care what the components are;” – Correct

    “at the end of the quarter you send them to the IRS together with an account of how much VAT you collected, and a check for the difference.” – Not quite so simple. You need to think like an accountant. The IRS will be getting VAT reports from your component suppliers saying you already paid them a certain amount of money. You will be sending them VAT reports sending them a net amount of VAT based on your final sales, reflecting the interim VAT withheld. How do they reconcile the two? By providing a mind numbing incredible amount of detail for an audit trail or does the IRS just decide to trust every filer? You tell me.

    daleyrocks (bf33e9)

  74. Really, the VAT thing has always bugged me at a gut level.

    Why would we want to punish (yeah, that’s how I see it) improving objects?

    We have to penalize something with a tax, or we can’t have a funded government. If we’re to change it altogether, I’d just opt for a sales tax. What smarter people are calling a Universal Consumption Tax. Again, I wouldn’t tax the necessities. This is more progressive than the progressives are, since a drug dealer buying TVs doesn’t get the break he gets today, and a parent earning $60,000 but struggling to pay for the necessities of his parents and his kids gets a much easier shake.

    This VAT discussion seems too complicated. I don’t want to throw all this on top of businesses. I also think it’s more equitable to ‘penalize’ spending your savings before you penalize improving goods. I also think the more sophisticated companies would find ways to avoid the tax altogether.

    We buy a lot of our goods from China, and need more jobs here. This is the government getting out of the way of taxing employment, and finding the least bad place to get in the way.

    There are a myriad of other reasons, too. It’s easier to collect than income tax. Hell, perhaps we could eliminate the IRS and have states collect the funds and send them in.

    Dustin (b7410e)

  75. Do you pay VAT on your workers’ wages? If they’re employees, then no, and therefore when your customer pays the VAT for the value they added to the product you pass that on, just as you do the VAT for your own labor. If they’re contractors then they’ll have charged you VAT for their services, so you take that out of what your customer pays. Either way, labor is an input to the final product and its price, so the ultimate consumer ends up paying the VAT on it.

    How do they reconcile the two?

    It seems to me the essence of simplicity: your suppliers report the receipt numbers they issued you; you report the same numbers, and viola.

    Milhouse (ea66e3)

  76. Dustin, at the end of the day a VAT is just a sales tax. The ultimate consumer ends up paying all of it, just as he would a retail sales tax. Except that he can evade a retail tax by buying wholesale, or under the counter. With a VAT only the tax on the final reseller’s markup can be evaded, because everybody but the final consumer will demand a tax receipt so they can deduct it from the tax that they charge. And stuff that falls off the chain before the retail stage is still taxed. And it’s easier to enforce because there are fewer suppliers early on the chain, so even if the retailers are almost unsupervised they won’t get away with much.

    Milhouse (ea66e3)

  77. It seems to me the essence of simplicity: your suppliers report the receipt numbers they issued you; you report the same numbers, and viola.

    Isn’t it simpler to just charge 19% sales tax on all goods without this endless cycle of reporting?

    I can see that being a hassle. Also, at a fundamental level, why in the world should someone be taxed for improving an item? That really brings in a host of potential problems. What if a politician doesn’t like a company, and requires them to improve their goods with some regulation (like an EPA reg). Does that constitute a tax increase?

    There’s an endless list of hassles here. And all along, I keep asking myself what makes this solution better than just a consumption or sales tax. You note the ultimate customer is paying either way. That’s true of both systems.

    The answer is to find a tax rate that supplies the needed revenue clearly.

    With a VAT how would the off the grid underground economy sending dollars home to Mexico part work?

    Comment by elissa —

    This also implicates my side, to be fair. But a lot of illegals aren’t paying income taxes either. Criminals earning money off-grid would finally pay tax for their goods, though.

    Dustin (b7410e)

  78. Except that he can evade a retail tax by buying wholesale, or under the counter.

    . And it’s easier to enforce because there are fewer suppliers early on the chain, so even if the retailers are almost unsupervised they won’t get away with much.

    Thanks for explaining.

    I will have to think about this, though. You have identified a problem, I’ll grant. But damn does it seem like it’s not as easy to handle as you’re suggesting.

    Dustin (b7410e)

  79. Also, at a fundamental level, why in the world should someone be taxed for improving an item?

    “Improving an item” means exactly the same thing as “selling an item at a profit”. Have you got a problem with taxing that?

    Milhouse (ea66e3)

  80. Comment by Milhouse — 7/20/2011 @ 8:42 am

    How do you value the Intellectual Property that guided the labor that went into improving the value of that component?
    If it is a machined part, someone had to sit at a CAD desktop to layout the improvement, and then transcribe that into a CAM machining center.
    What is the value of that engineer’s/technician’s education/experience that allowed him to complete that task?
    And, how much value is imparted by the software for the CAD/CAM process itself?
    It is an accounting nightmare, and will involve more lobbyists attempting to influence the fine points of the regulations than we have now on drawing the fine lines on “Income”.

    AD-RtR/OS! (a64e11)

  81. “It seems to me the essence of simplicity: your suppliers report the receipt numbers they issued you; you report the same numbers, and viola.”

    Milhouse – Exactly. When the final product you sell includes parts from 48 different suppliers, matching those initial 48 VAT reports from the suppliers with a final sale VAT report sounds like childs play. This is similar to why there was so little hue and cry over the Obama Administration’s inclusion of a requirement in ObamaCare to report all transactions with vendors over $500 annually to the IRS. People can just push a few buttons, right?

    daleyrocks (bf33e9)

  82. “With a VAT only the tax on the final reseller’s markup can be evaded, because everybody but the final consumer will demand a tax receipt so they can deduct it from the tax that they charge.”

    Milhouse – Why would you support more unproductive reporting requirements and government bureaucracy to track it?

    daleyrocks (bf33e9)

  83. How do you value the Intellectual Property that guided the labor that went into improving the value of that component?
    If it is a machined part, someone had to sit at a CAD desktop to layout the improvement, and then transcribe that into a CAM machining center.
    What is the value of that engineer’s/technician’s education/experience that allowed him to complete that task?
    And, how much value is imparted by the software for the CAD/CAM process itself?

    How do you value it? By what they charged you. That’s how much it’s worth, after all. If they charged you VAT, then you submit their receipt. If they didn’t charge you VAT, then whatever value they added is in your sale price. Who cares how it breaks up beyond that?

    When the final product you sell includes parts from 48 different suppliers, matching those initial 48 VAT reports from the suppliers with a final sale VAT report sounds like childs play. This is similar to why there was so little hue and cry over the Obama Administration’s inclusion of a requirement in ObamaCare to report all transactions with vendors over $500 annually to the IRS. People can just push a few buttons, right?

    You don’t have to match them up, the IRS does. And for the IRS it is indeed a matter of pushing a few buttons. They’ve got the resources to do it. That’s a far cry from making every small businessperson spend days filing new paperwork.

    Milhouse (ea66e3)

  84. If that engineer went to West Podunk State, and paid x for his degree , is it worth less than the same degree from MIT, which would cost x+y (even if they both would impart the same capability, knowledge, and intellectual performance)?

    And, how do you quantify the difference for VAT calculation?

    It just boils down to the point mentioned by daley above:
    Why would you expand the bureaucracy and reporting requirements of the Federal Government when your goal is to simplify things?
    More government workers never translates into increased Freedoms & Liberties for the American People!

    AD-RtR/OS! (a64e11)

  85. “…You don’t have to match tYou don’t have to match them up, the IRS does…”

    You’ve never gone through an IRS audit?

    AD-RtR/OS! (a64e11)

  86. “…You don’t have to match them up, the IRS does…”

    Sorry, copy & paste error.

    AD-RtR/OS! (a64e11)

  87. “You don’t have to match them up, the IRS does.”

    Milhouse – You are completely missing the boat here. Using your example, I am withholding $12.80 from my VAT payment to the IRS when I sell my product to the customer. I have to detail to the IRS why I am doing that – because I already paid VAT of $12.80 on the components in that product. To do so, I have to provide a list of the components. The IRS has no way of matching without me providing data to them. I have to prove to them I have specifically already paid VAT on the components in the final product to justify my withholding of $12.80 or I will receive a deficiency notice. Sure, I can pull receipts out of shoebox, but I still have to enter the data on a form for 48 purchases and send it to the IRS, which I did not have to do before. If you like busy work, it’s a great thing. It does not add to a company’s bottom line one bit.

    It is a paperwork nightmare.

    daleyrocks (bf33e9)

  88. If that engineer went to West Podunk State, and paid x for his degree , is it worth less than the same degree from MIT, which would cost x+y (even if they both would impart the same capability, knowledge, and intellectual performance)?

    And, how do you quantify the difference for VAT calculation?

    Huh? Why would you have to?

    Milhouse (ea66e3)

  89. Daley, you don’t itemise the specific inputs for each item you sell! You total your collections, submitting the list of receipts you issued to others, the the receipts you received for your inputs. The IRS knows you’re telling the truth about your inputs because the numbers you report match the ones your suppliers submitted. They don’t care that much whether the receipts you issued are accurate, because unless you’re the final seller your customers will be submitting those receipts in their turn; if you undercharged them then they’ll have to make up the difference.

    Milhouse (ea66e3)

  90. What I think you’re missing is that everything your business buys is an input to everything it sells. There’s no need to detail how much of what goes into what. The box of pens you bought for the office is an input into whatever it is you sell; just list the receipt in among your other input receipts.

    Milhouse (ea66e3)

  91. The IRS knows you’re telling the truth about your inputs because the numbers you report match the ones your suppliers submitted.

    What happens when there are millions of discrepancies around the country?

    How does the IRS solve that?

    It’s inevitable. Just is your point about people avoid a sales tax unless something is done about that.

    I don’t want to have to submit millions of receipts. I don’t want the IRS processing trillions of receipts. Perhaps it would be better to shutter the IRS for good, and have states collect 19% in sales tax. They would need to work out an enforcement scheme for those who avoid paying tax for their goods. But that doesn’t seem too difficult.

    Dustin (b7410e)

  92. I don’t think that office supplies count as value-added to an industrial product.
    You can still deduct that as a front-office expense on your income taxes, but you would have to prove in an audit hearing what value it brought to something in the machine shop (whatever).
    Remember, in EU, the VAT is separate from the corporate/business income tax; as it would be here absent a repeal of the 16th-A.

    AD-RtR/OS! (a64e11)

  93. “The IRS knows you’re telling the truth about your inputs because the numbers you report match the ones your suppliers submitted.”

    Milhouse – I understand the part about the inputs.

    “They don’t care that much whether the receipts you issued are accurate, because unless you’re the final seller your customers will be submitting those receipts in their turn; if you undercharged them then they’ll have to make up the difference.”

    “What I think you’re missing is that everything your business buys is an input to everything it sells. There’s no need to detail how much of what goes into what.”

    The above two excerpts are where I struggle with your assumptions. Heritage estimates that the EU loses 12% of its VAT revenue each year from fraud. Customers don’t care what you paid for your inputs but the IRS certainly will in trying to tax you for the right amount of value added. Unless they assume you turn over 100% of your entire inventory every year, an invalid assumption for many businesses since some inventory turns many times while other portions does not, you and the IRS should very much care about the component composition of your final sales. Timing differences between years when inventory is actually sold or written off will result from the meat axe approach you suggest.

    daleyrocks (bf33e9)

  94. AD – A European-style VAT tax would be more of a consumption tax and directly impact consumer savings.

    I am also not in favor of any system which relies upon the government to calculate my appropriate tax liability. I have been through corporate tax audits with the IRS and they do not always play honestly or by their own published rules of conduct.

    daleyrocks (bf33e9)

  95. Milhouse,

    I think you are assuming a rational implementation. I think history has demonstrated that to be a pipe dream. Imagine the most cumbersome possible implementation of VAT, now ratchet it a couple notches worse and you are approaching what would be the likely reality after the lobbyists get done with it.

    Soronel Haetir (29fbb7)

  96. Gotta love the lefty trolls accusing the tea party of using dictatorial powers to shove things down the public’s throat when they defend U.N. blasphemy laws.

    DohBiden (d54602)

  97. The Left isn’t very liberal, not in thought or in deed. They’re totalitarians. Uncle Joe is behind the mask, waiting impatiently for the opportunity to reveal his true identity, and to fulfill his destiny.

    ropelight (b6290d)

  98. The left will do anything to defend their policies.

    DohBiden (d54602)

  99. ==This is similar to why there was so little hue and cry over the Obama Administration’s inclusion of a requirement in ObamaCare to report all transactions with vendors over $500 annually to the IRS. People can just push a few buttons, right?==

    Exactly, daley. That was one of the first examples I thought of while reading through these comments discussing VAT.

    I think as recently as a decade or so ago I might have considered VAT to be a viable alternative/improvement to our income tax code. But:

    *With the government’s insatiable desire to grow and to be the employer of favored Americans (at the expense of other Americans or the private sector) I no longer can support any additional bureaucracy dreamed up by our D.C. rulers which entails public sector employees and czars slopping at the trough while being fed by taxpayers.

    *With the invasion into our health and personal lives with Obamacare–and the unelected, appointed for life death panel which answers to no one–I can’t trust yet another invasion into what’s left of the business community in a process where the government would have unprecedented access to every aspect of the inner workings of businesses large and small.

    *With the creation of the run amok TSA, having been given government authority to invade the personal space and bodies of travelers from babies to grannies to Cubs managers–all but ruining the experience of air travel not to mention the short haul airline industry–I really cannot support the idea of a single new federal government program and bureaucracy of any kind being created and given power over Americans.

    elissa (7f84b5)

  100. I think you are assuming a rational implementation.

    Yes, I am. Any policy can be implemented irrationally and in a way that maximises employment for public servants; if we were to be afraid of that we should never advocate any policies at all! But there’s no reason why a VAT can’t be implemented simply and rationally, especially if done by a Republican president and congress. And it really doesn’t have to be more complicated than what I’ve just described: anything a business spends is an input to its production. Don’t worry about what get taxed in what year; it will all come out even in the long run, and the cost of designing, enforcing, and complying with rules to take care of it will probably exceed the extra revenue it would generate. For the same reason, don’t worry too much about people sneaking personal expenditures into the business account; sure, it will happen just as it happens now, but the cost of preventing it is probably more than it’s worth. Ditto for retail evasion; some enforcement is needed, but no need to go overboard.

    Milhouse (ea66e3)

  101. Milhouse – I view the type of VAT you describe as just another ivory tower scheme dreamed up by folks with little real world experience in implementing such schemes, much like the lawyers who wrote the Sarbanes-Oxley nightmare for accountants. The fact that you are now saying don’t worry about what gets taxed in a given year, compliance costs, etc., either shows how little thought you have given the subject or how poorly you understand cost and tax accounting.

    daleyrocks (bf33e9)

  102. Daleyrocks – government should have to comply with Sarbanes Oxley.

    JD (d83df3)

  103. vAny policy can be implemented irrationally and in a way that maximises employment for public servants

    Sales tax is implemented right now. It works. It’s imperfect. I didn’t pay sales tax when I bought something from Amazon or when I bought my neighbor’s old lawnmower (and I didn’t charge any when I sold the repaired lawnmower on craigslist).

    But it still pretty much works. My support for such a measure is a bit of a vote of low confidence in what the government can handle without a disaster.

    And there’s no need for many federal employees. states really can handle this.

    By and large, we need to look for ways to take down the fed’s overarchingness. That’s what really got us into the situation we’re in. We need people to rely less on the feds, and come unto contact with them less. I’d love to start replacing federal functions with state ones, especially law enforcement and tax enforcement. Combined with the state legislature choosing Senators again, and I think we’d solve a lot of problems long term. The deficit is a symptom.

    Dustin (b7410e)

  104. Milhouse,

    Look at the track record of government, what policy have they actually managed to implement in a rational way without creating burdens that were deliberately overlooked while being pushed? I support policies that can’t be misused by my political opponents, no others, and not even all such policies.

    Soronel Haetir (29fbb7)

  105. If gays want to get married let them go somewhere more friendly towards their agenda.

    Honestly the debt is too large to worry about this.

    DohBiden (d54602)

  106. My first experience with VAT was as a teen-aged owner (well, driver) of a British car wondering why the price paid here was less than the posted price in England. That’s when I learned about VAT, and the way it was refunded on goods that were exported, which is why the price on EU delivery cars looks so good, but only if you ship the car to America (or where-ever) within a specified term. If you keep the car there, you get a nice bill from the “DMV” informing you of your VAT liability.
    And, Yes!, if a VAT was imposed on top of the current Income Tax, either the savings of Americans would decline to even more minuscule levels than now, or the consumption of “wants” would implode – probably the latter, with a heavy effect on “needs” too.

    AD-RtR/OS! (a64e11)

  107. The only thing worse than our current insane tax code would be a VAT. Better to go with a National Sales Tax collected at the Retail level. It would have the virtue of being quick, universally applied, and direct, with low administrative costs.

    ropelight (b6290d)


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