TCS Daily


Good Little Stuff from Big Mac

By Larry Kudlow - October 15, 2008 12:00 AM

It certainly wasn't the big-bang across-the-board tax-reform and tax-cut plan that I and others lobbied for. But John McCain's "Pension and Family Security Plan" unveiled today on the campaign trail does have some solid pro-growth nuggets. I'm calling it some good little stuff.

The most important pro-growth measure is a reduction in the capital-gains tax rate to 7.5 percent in 2009 and 2010. Although I wish it were permanent, at least it will reward investors who scoop up undervalued assets, including bargain-basement stocks and underwater homes. Two years is not a very wide window. But this could promote a faster recovery in asset prices and wealth creation.

Alongside the cap-gains cut, McCain is proposing to increase the amount of capital losses eligible for tax write-offs from $3,000 to $15,000 for tax years 2008 and 2009. It's an offset to ordinary income. And again, while it should be permanent, at least it will be helpful.

Also in his plan, withdrawals from tax-preferred retirement accounts will be taxed at the lowest rate (10 percent) for the first $50,000 withdrawn from these accounts. Tax rules forcing seniors to sell retirement-account stock holdings when they reach age 70.5 will be suspended. That's good.

In effect, going into the final debate, McCain has a significant corporate tax cut and a modest capital-gains tax cut. He also wants to keep the Bush income-tax cuts in place. All of these measures are pro-growth.

I would have preferred a Paul Ryan modified flat tax with two brackets of 10 and 25 percent. In other words, a true across-the-board reduction in marginal tax rates as an economic recovery measure to connect with folks who are worried about recessionary losses for their jobs and home mortgages. Economic anxieties are big, and a big-bang tax-cut response would be optimal.

But cutting taxes for businesses, capital gains, and individuals does give McCain a lot of pro-growth meat on the bone for the big debate.

Now, if only McCain can succeed in selling these measures. Especially the corporate tax cut, which should be sold as a middle-class consumer tax cut inasmuch as corporations pass along their tax costs to consumers in the form of higher prices. This is the key to selling the corporate tax cut. McCain's senior advisors tell me he has been briefed on this language, but so far it hasn't materialized in the debates. Perhaps it will Wednesday night.

Really, the McCain tax contrast with Obama is not hard to make. In the last debate McCain referred to Obama's tax hikes as Herbert Hoover. I'd like to see Hoover reemerge tomorrow night.

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182 Comments

Pro-growth tax policies
Mr McCain and Mr Kudlow both seem a little out of date. It's those pro-growth tax policies that have contributed so much toward putting us where we are today.

Over the past 35 years, American productivity has increased 19 percent. Of that amount, 18% has gone into the pockets of investors (plus, of course, the famously overpaid executives). No more than one percent has gone toward the salaries of the workers... despite the obvious contributions they have made toward building the nation's wealth.

Plus, the workers get taxed at a disproportionately high rate, compared to the rate already enjoyed by the recipients of unearned income. John McCain's tax plan? Reduce the tax for those holders of paper even more, while ignoring the workers who must pay at twice the rate.

Squeezed at both ends, having to pay their income taxes at a higher rate than the idle rich, having to pay a steep payroll tax the rich (those above the cap) are exempt from and suffering from escalating prices that don't begin to be reflected in our illusionary CPI, how do these people manage to pay their bills?

Abundantly available consumer credit, of course. They can still buy the necessities. Only since they haven't been able to earn the wages to afford it, they must borrow the money they weren't able to earn from those investors who got it instead. So it was a marriage of convenience, from those who had to those who had not.

That looks like it's running out now. The credit markets, when and if they ever come back, won't be coming back in the same form. And in that light, Obama's tax plan looks a lot more sensible.

Under Obama, people earning less than $19,000 (that's the bottom fifth of jobholders), save $567. Under McCain's plan they would save the princely sum of $21.

In the $19,000-37,600 range? Obama saves them $892, while McCain saves them $118.

$37,600-$66,400? Obama savings, $1,118. McCain savings, $325.

$66,400-111,600? Obama savings, $1,264. McCain savings, $994.

$111,600-161,000? O saves you $2,135. M saves you $2,584.

$161,000-227,000? Obama saves you $2,796. McCain saves you $4,437.

Things change in the following, top five percent of income earners. Between $227,000 and $603,400, Under Obama you would pay an additional $121. Under McCain you would save $8,159.

$603,400 to $2,870,000, Obama would hit you for an extra $93,709. McCain would award you another $48,862.

And finally, the big prize winners, the top tenth of one percent, those making over $2,870,000, would pay an extra $542,882 under Obama. McCain would give them an additional $290,708.

These savings to low-earning workers put the money where it is needed-- into the pockets of people who would consume more if they only had more cash available. And once again, we find all the industry cutbacks and job layoffs coming from a soft consumer economy-- NOT from a lack of many trillions of dollars in investment capital, looking for a home in the overstuffed credit and derivative markets. The capital's been there all along, it's just been wasted in a ridiculous round of free market, speculative excess.

And in the end it was all wasted. Didn't contribute one lick to anyone or any thing.

Look at the chart above to see how you would fare under each plan. And then think how many jobs could be saved if ordinary little people only had some more money in their pockets.

Roy is shilling for Obama
"Over the past 35 years, American productivity has increased 19 percent. Of that amount, 18% has gone into the pockets of investors (plus, of course, the famously overpaid executives). No more than one percent has gone toward the salaries of the workers... despite the obvious contributions they have made toward building the nation's wealth."

Completely bogus clap-trap that has been debunked by numerous studies. Here's one:

http://tinyurl.com/educationForRoy

"Plus, the workers get taxed at a disproportionately high rate, compared to the rate already enjoyed by the recipients of unearned income. John McCain's tax plan? Reduce the tax for those holders of paper even more, while ignoring the workers who must pay at twice the rate."

So what? This is about giving incentives for investors to INVEST. There are way fewer of willing investors than there are willing workers. Supply and demand thing. So, 'fairness' has nothing to do with it.

That is why when the Irish slashed their corporate income tax rate down to 12.5%, they went from being the per capita poorest country in Western Europe to being the richest in about 15 years.

Or, to put it another way: What is so 'fair' about imposing poverty on all just to satisfy some envy-based ideology that you and Obama wish to impose on your fellow man?

"...having to pay their income taxes at a higher rate than the idle rich..."

Hmmmm....the 'idle' rich that comprise the top 10% of income earners produce a whopping 70% of income tax revenues. So much for being 'idle'. Hey! If they are so worthless, why don't we just shoot them? I mean, its not like the government will miss that 70% of 'idleness', right?

"Under Obama, people earning less than $19,000 (that's the bottom fifth of jobholders), save $567"

Ummm...people earning less than $19,000 don't pay income taxes or, very few of them do. The entire bottom 40% of income earners don't pay any income taxes, actually. So, how can they 'save' on taxes on this wonderful Obama tax plan? Answer: They don't. They will get a de facto welfare check for being poor. The Obamatons (including Roy here) label it a 'tax credit'. Milton Friedman called it a 'negative income tax'. John Galt in "Atlas Shrugged" called it 'time to get the hell out of here!'

The tax code is supposed to be an instrument for raising revenues, not a disguised Zimbabwean 'Robin Hood' program complete with our very own President Mugabe buying votes with the largesse.

"These savings to low-earning workers put the money where it is needed-- into the pockets of people who would consume more if they only had more cash available...And then think how many jobs could be saved if ordinary little people only had some more money in their pockets."

Like those tax rebates earlier this year that YOU insisted would stimulate the economy but didn't (as I said then and am now backed by real historical data)?

I warned you back then that I would throw this back in your face when that Keynesian nonsense failed to deliver. It bombed. I am now throwing it back in your face, Roy.

If investors won't invest, no new jobs will be created. And all the 'some more money' in the pockets of the 'little people' won't matter if Obama enacts the LARGEST tax increases (as you yourself have outlined) in American history on investors, er...the 'idle rich' as you call them.

"The capital's been there all along, it's just been wasted in a ridiculous round of free market, speculative excess."

Yeah, by counting both the GDP lost to misallocation of capital and GDP lost to the recession caused by the inevitable “bust”, the housing boom will probably cost America $284 trillion. In other words, the housing boom and bust reduced the present value of both future GDP and future Federal revenues by about 17.5%.

And you want to elect the same clowns that pushed the most for the 'economic' policies that led to this misallocation of capital? Fannie and Freddie were the primary enablers that provided an artificial floor market guarantee that the toxic mortgages would be bought. If they didn't exist, then there would have been no where for the mortgage sleazebags to peddle their garbage in the first place, now would there?

"And once again, we find all the industry cutbacks and job layoffs coming from a soft consumer economy-- NOT from a lack of many trillions of dollars in investment capital"

Uh...no. The soft consumer economy is a symptom of the drop off in investment, not the other way around.

For example, 2007 GDP would have been about $15.9 trillion rather than $13.8 trillion because of that $284 trillion malinvestment of capital. There would be no recession.

And that all has to do with INVESTMENT, Roy. Not consumption.

You also seem to confuse the EXISTENCE of investment capital with the WILLINGNESS of investors to invest it where it does the most good. Just because it exists doesn't mean it will get invested. Investment patterns proved that quite true during 1932-1941 and later in the 1970s under Nixon, Ford and (especially) Carter. The 'rich' you scream about will simply invest more in munis, specially crafted insurance policies, overseas and other tax free shelters, just like they did in all prior eras when society decided to 'nail the rich'.

"And in the end it was all wasted. Didn't contribute one lick to anyone or any thing."

Yeah, blowing it on financing for granite kitchen counter tops or $600k balloon mortgages the borrower was never ever able to repay in the first place is not a very productive investment. We completely agree on that. Expect a fight from Marjon on this though.

So make your case for McCain
Your piece from the Heritage Foundation does not "prove" a case but merely states it. For example it uses the "implicit price deflator", which I find is the "current dollar GDP divided by constant dollar GDP". And looking at the two charts, this produces a negligible difference in the measurement of productivity, 1968-2008.

The other side of the charts is strictly apples and oranges. Median household income is not a useful concept in describing gains or losses in inflation-adjusted compensation; "real compensation per hour" sounds to the ear much more like it. But there is no mention of just how Heritage may have calculated this figure.

Further, if we are to adjust for a faulty calculation of the inflation adjustment vis a vis productivity, we really need to tinker with the CPI. This device has been used since its inception to hide the true rate of price inflation... and thus the shrinkage in employee salaries. The CPI wildly undervalues the true rate of inflation-- and so overstates the reputed gains in employee comp.

So your one-page stub of an article leads us down an intriguing path for further study. But it certainly fails to make any kind of airtight case.

But moving along, going to the core of your argument, the author states that "Benefits, such as health coverage, 401(k) plans, and paid sick leave are an increasingly large part of workers’ earnings."

Support that. During the period in question, employer contributions toward workers' retirement funds have, in my view, drastically been reduced. But I'm keeping an open mind. I'd like to see something reputable on this issue. Would you, perchance, be including the contributions toward 401Ks, which didn't even exist in 1973, while omitting the hollowing out of company-managed retirement funds by the failure to contribute? If so, that would skew your findings.

Recall that I've been an employer as well as an employee. I do know a little bit about the off-payroll costs of maintaining an employee. And I think they've gone down. A notable exception has been the rise in the payroll tax, following the 1983 restructuring of Social Security. But that has affected both sides of the coin in exactly the same degree. So if you include that in your calculation of increased other-than-payroll comp, you allow an illusion to enter. Add it to both sides, or to neither side.

***

I'll briefly address the next issue. There is no reason today to try to offer fresh incentives for investors to make more money to invest. They have already been the recipients of so many perks, not the least of which is an entirely unfair double scale of taxation (for earned vs. unearned income) that they have come out immensely on top.

And my premise is that this overhang of income that doesn't reach to every level of society, doesn't work properly as the main driver of our economy. It promotes speculation and gambling.

The proof is that periodically, the excess of investment funds creates a bubble and disappears at the pop. This latest pop, in the credit markets, is just an additional proof that "free" markets don't work without a careful structuring of the rules of the game by an outside party. Plainly put, investments without referees describing the bounds of the environment, get unproductively squandered. Every time. It's known as the "business cycle".

Meanwhile, in each new downturn, the real problem comes ever more clearly into view. The system is starved of PROFITS.

It is my humble view, based on experience, that businesses need to be run on a profit basis. That is, they need to earn more in sales than they put out in expenses. If they're doing that, there is never a need to incorporate (just a way of getting someone to loan them operating funds). Nor is there a need to utilize credit, other than during seasonal or exceptional downturns. A strong reliance on lines of credit, stockholder contributions, etc. just means the business is not standing alone, making the money it spends, and hopefully a little more. (The above does not address the irrational drive to expand and devour, which would make a good subject for another discussion.)

Get your business to be a profitable one and you never have to sell an interest in it. You can just take out as much as you need to live on, and give the rest to your work force. These complex financial schemes and instruments just make trouble for us all. And distract us from the business of making money while making things that other people buy with the money they've earned.

So, returning to my point, every time we have a collapse, the root cause of it comes shining through: weak consumer demand. Which is another way of saying, inadequate employee incomes. What one's customers need more than anything is not a super-hot market in derivatives, but buying power.

There is demonstrably an absolute excess in investment funds the way the system is currently designed. I would invite you to compare the size of two piles of money. The first is M1, or plain old cash. The stuff people use (or should use) to buy the stuff we make. The second is the total amount of value contained in all the financial markets. It's like comparing one brick to the Pyramids.

So your captains of greed really don't need any more money than they're already getting. In fact we've just found once again they've been squandering their gains in ill-conceived and unproductive ventures. So Obama's plan includes a very sensible allocation of some of that excess income toward retiring a bit of federal debt.

I think that's good. That's the way I'm voting this year. Make your case for giving the turkeys that caused the problem even more of our money to waste.

Ireland
"That is why when the Irish slashed their corporate income tax rate down to 12.5%, they went from being the per capita poorest country in Western Europe to being the richest in about 15 years."

An appropriate move for any incipient economy. Estonia would be another example. If you want to attract businessmen, this is the quickest way to do it.

The United States is at a very different point in its development as a nation. What we need now is to give the average citizen a greater equity in the businesses we already have. While we still have them, that is.

Raise taxes, quickest way to drive business away.
It works both ways, no?

I agree with you in principal
"What we need now is to give the average citizen a greater equity in the businesses we already have."

I just disagree with your preferred methods in doing so.

You might find this way of democratizing equity more agreeable: http://www.capitalhomestead.com

I don't have to make a case 'for' McCain. This election is and always has been about Obama.
"There is no reason today to try to offer fresh incentives for investors to make more money to invest. They have already been the recipients of so many perks, not the least of which is an entirely unfair double scale of taxation (for earned vs. unearned income) that they have come out immensely on top."

Your logic fails to take into account that we are ALWAYS talking about FUTURE investment. Fairness also has nothing to do with it.

And regarding 'fairness' anyway, investors have been nailed with double or even triple taxation on their profits, as well.

Life is unfair, so what? We have to acknowledge that reality and deal with it. One of those things with regards to proven economic facts (not theory) that is regarded as particularly unfair is that investors pondering future potential investment don't care about the past. We ALWAYS have to offer fresh incentives -- particularly for more riskier investments like providing capital for business expansion as opposed to just parking it in a CD or investing it overseas. Particularly in today's world. Ironically, European nations we consider 'socialist' because of high personal taxation don't kill that particular goose that lays the golden eggs like we do and Obama definitely proposes to do more of. They have no problem with treating investment income with more incentives. Unlike us, they realize that they have no choice in the matter.

"So, returning to my point, every time we have a collapse, the root cause of it comes shining through: weak consumer demand...What one's customers need more than anything is...buying power"

No, you are flat out wrong. It comes from a collapse in continuing investment -- either sudden or gradual.
It also doesn't matter how much purchasing power consumers have if the tax and regulatory policies keep investors away -- as Obama's policies are proven by history both ancient and recent to do. No more investment, no more jobs. In this case, the chicken does have to come before the egg. And if you cook all of your chickens, you'll have to get some more from somewhere else or live w/o any more chicken meat and definitely no more eggs.

" M1, or plain old cash"

Technically, plain old cash is M0. But I get your point.

"The second is the total amount of value contained in all the financial markets"

We've chewed on this over and over again before. The value is not the same as actual money. But real money was sacrificed in exchange for that value -- and at some risk.

"So your captains of greed really don't need any more money than they're already getting"

That's not for you to say. Those are not your investments. As for your need for vengeance, you remind me of a story about how a drunk passenger liner captain rams an iceberg and the passengers refuse to help the captain save the ship because they'd rather all freeze/drown as long as the captain 'gets what's coming to him!'

Or, the more real world example of Zimbabwe driving off white farmers from their land and giving it to blacks for reasons of 'fairness and justice' who can't even farm weeds comes to mind. Result: mass starvation and loss of Zimbabwe's primary export revenue source -- agri products.

"So Obama's plan includes a very sensible allocation of some of that excess income toward retiring a bit of federal debt."

1) That 'excess' income will suddenly go elsewhere or be left 'fallow'. Obama won't thus get his hands on much of any future investment income gains if no further gains are generated in the first place. This has been proven by history over and over again as well. So, there will be no more extra revenues for Obama to use for anything.

What has been proven is that by cutting taxes on investment, the government's revenue take of even the cut taxes increases. The government might spend it and more like a drunken sailor in port with Oprah's credit card, but that does not disprove this point, btw.

2) Obama is not going to retire ANY of the federal debt. His health care plan will sock us for at least $800 billion in spending per year alone. Take all of his spending proposals plus what the Democratic Congress will want and put them together and we are looking at $2 trillion in additional spending MINIMUM. No part of the federal debt will get paid off but it certainly will be increased.

And in that above, I deliberately didn't take into consideration the coming implosion of Medicare and Social Security. Factor in just ONE of those in addition to Obama's proposed tax and spending policies and we will be living in the United States of Zimbabwe for sure.

what amazes me
is how Roy will be quick to jump into supporting that concept with regards to defending the 'efficacy' of Cap & Trade or Carbon Taxes. Or raising gasoline taxes.

But somehow, that never applies to investment capital or even work incentives in the American Left's world view. I guess Lefties always think they can choose between the Red Pill and the Blue Pill for each and every time an economic reality not of ideological comfort they are confronted with.

Fatal Flaw: Tax shelter
"The "Capital Homestead Account" or "CHA" is the primary tax-sheltered vehicle.."

When the government has the power to give, it has the power to take.

The government must not have the power to create such a tax shelter and tinker with the tax code to buy votes.

more of the same delusion by Kudlow
So investors get to: "scoop up undervalued assets, including bargain-basement stocks and underwater homes". That seems like a good deal for an investor. WHY does that investor ALSO need a cut in capital gains taxes? The fallacy of Kudlow's philosophy is that we need to pile on a second benefit- 1-for an investor, who already has capital, he/she is investing 2-and already has the opportunity to take advantage of buying when prices are low 3-the additional benefit Kudlow argues for is not revenue-neutral, to institute it would create pressure on the other end to replace the reduction in revenue.

Can we finally put the nail in the coffin to trickle-down economics? Its 0 for 2. Can we please use our experience to learn instead of depending on theories to keep arguing for failed economic policies? Think of it this way: picture 2 boulders stacked vertically. The top boulder represents, lets say, people making $250,000+, the bottom boulder represents people making less than $250k. The Jolly Green Giant walks up to the boulders and lifts the top boulder. The top boulder is lifted but the bottom boulder stays firmly on the ground. But, if the JGG grabs the bottom boulder and lifts, both boulders are lifted. Thats how it works, this country is lifted from the bottom-up. When the bottom and middle have more money, they spend more money, in doing so provide opportunity to those at the top to make more money.


Kudlow continues his delusion with these comments:

"But cutting taxes for businesses, capital gains, and individuals does give McCain a lot of pro-growth meat on the bone for the big debate."

Yeah, pro-growth meat palatable only to the wealthy. Its delusional to equate that to job creation and growth for "normal" workers, as we've learned from experience.

"Especially the corporate tax cut, which should be sold as a middle-class consumer tax cut inasmuch as corporations pass along their tax costs to consumers in the form of higher prices. This is the key to selling the corporate tax cut."

Do corporations also pass along their tax costs to consumers in the form of LOWER prices? No, they don't. So what is the benefit to middle-class consumers? Didn't think so. Kudlow's comment is based on nothing more than fear. Kudlow is an economist, its awfully convenient to him to forget supply and demand in his comments. This is what you get with blind ideology. Will you EVER learn?

But Kudlow got one thing right, that is the key to selling the corporate tax cut. Its easier to sell lemons to people who don't need lemons when you convince them its not lemons you're selling.

more amazing
The problem with Cap and Trade is its an admission to acceptance of pollution. It allows a company to pollute all it wants if it has the money to do it. Doesn't mean I reject the concept totally, just sharing the logical view of liberalism. The problem with pollution is the pollution, as in the goal should be to reduce and ideally eliminate it. I'm not convinced Cap & Trade would do that, but its a place to start and we can see what happens from there. We need to do something.

In my opinion, we should raise gasoline taxes. Its the best way to push the market to alternatives faster, which is where we HAVE to go.

BTW, is anyone else flabbergasted at the stark decline in gas prices lately? Do we need more proof that supply and demand are NOT the key influence in the price as we've been led to believe by the right? I bought that line myself, aren't I the fool to think people on the right are honest sometimes.

I don't mean to speak for Roy. I don't know who said what, I just jumped in, I was in the neighborhood. I'm sorry to see TCS is resuscitated, frankly.

Fear and Lemons
>"pro-growth meat palatable only to the wealthy. Its delusional to equate that to job creation and growth for 'normal' workers, as we've learned from experience."

Please explain from whom those "normal" workers will derive thier created jobs if not primarily from your hated and envied "wealthy"; there's a common rejoinder, but not an unaffective one, which I'm sure you've heard: "People don't get jobs from the poor." (Oh that's right -- the Gov't can simply create all those jobs -- how stupid of me.)

After that, you can cite the vast experience from which "we've" (whoever this collective "we" may be) supposedly learned your premise.

>"Do corporations also pass along their tax costs to consumers in the form of LOWER prices? No, they don't. So what is the benefit to middle-class consumers? Didn't think so."

What on Earth...? Of course you "didn't think so," because you're apparently not thinking, period. Kudlow is pointing out something basic which indignant lefties who rail about "sticking it to greedy corporations" in the form of high tax rates fail to understand: Corporations are ultimately never tax PAYERS, they are tax COLLECTORS, in that any tax costs they incur are indeed passed on to customers just as ANY overhead is passed on to customers. Therefore they couldn't possibly "pass along their tax costs to consumers in the form of lower prices" Hence, corporate tax cut = lower prices for customers (those very same "middle-class customers" you invoke), since corporations wouldn't be inclined to raise their prices in order to cover high tax burdens. You're endorsing Kudlow's argument without even realizing it.

>"This is what you get with blind ideology."

Unlike your own apparent devotion to the ridiculously flawed concept of Socialistic theory which requires human nature to be so fundamentally altered that individuals will be inclined to work just as hard for the benefit of strangers as they are for the benefit of themselves and their loved ones, right? No blind ideology there, huh....

The only "fear" or "lemons" to be found in Kudlow's analysis is that extracted by blind ideologues who fail to grasp such a basic economic premise as High Corporate Tax Rate = High Consumer Prices, and twist it into something patently illogical.

Supply and demand, works every time.
"Tightening credit has eroded demand and pushed prices down 18pc from a year ago, and 51pc from the record $147.27 a barrel reached on July 11."
""Demand not just for energy but across all consumer products is going to be hit,'' said Jonathan Kornafel, a director for Asia at Hudson Capital Energy in Singapore."
"Fears that the world was heading for an economic slowdown saw oil prices fall to their lowest level for nearly 14 months, impacting on several areas of consumer spending and raising hopes that consumer price inflation, which hit a 16-year high in September at 5.2 per cent, may be about to decline."

Fears that the world was heading for an economic slowdown saw oil prices fall to their lowest level for nearly 14 months, impacting on several areas of consumer spending and raising hopes that consumer price inflation, which hit a 16-year high in September at 5.2 per cent, may be about to decline.

Maybe the government should buy everone a boat...
...will they buy the gas too?

"The announcement came four months after the company said it would eliminate 1,000 jobs because of the falling demand for recreational boats amid a poor economic environment. Counting Thursday's announcement, the company has slashed more than a third of its marine work force since the beginning of the year.

"These actions impact not only thousands of people in our company but their families as well, and those are painful and life-changing for many," said Brunswick Chairman and Chief Executive Dustan McCoy. "Our actions around reducing costs position us to be profitable in a smaller marine market and to prosper when the economy and the marine markets improve.""

http://www.argusleader.com/apps/pbcs.dll/article?AID=/20081011/BUSINESS/810110325/1003/business

Nice to know you're back bob
Your Jolly Green Giant analogy is just BS, btw.

"Do corporations also pass along their tax costs to consumers in the form of LOWER prices?"

The ones in competitive marketplaces certainly do. Just as they pass along cheaper labor costs. Go to Walmart some time if you don't believe me.

Here is WHY cutting corporate taxes is good for the economy: http://www.cato.org/pubs/tbb/tbb_1008-50.pdf

"Its delusional to equate that to job creation and growth for "normal" workers"

Really? Hmmmm...and just where do 'normal' workers get their main means of income? From jobs. Where do they get their jobs from? Rich people. I don't know about you, but I've never gotten a job from a poor person. Have you?

Ooooooooooohhh....what a concept!

Fair Warning
>"Go to Walmart some time if you don't believe me."

Don't mention Wal-Mart to Bob unless you want to experience an apoplectic outburst of such emotional severity you might suffer second-degree skin burns.

Corporate taxes most harmful to growth
"In a blockbuster new study titled "Tax and Economic Growth," economists at the Organization for International Cooperation and Development studied the effects of various types of taxes on the economic growth of developed nations within the OECD and found that "corporate taxes are found to be most harmful for growth, followed by personal income taxes, and then consumption taxes.""

"The main recommendation of the study is that if countries want to enhance their economic growth they would do well to move away from income taxes - especially corporate income taxes - toward less distortive taxes such as consumption-based taxes. The key to creating a growth-oriented corporate income tax system is to impose a reasonably low tax rate with few exemptions."

http://www.taxfoundation.org/blog/show/23478.html

"Corporate taxes are found to be most harmful for growth, followed by personal
income taxes, and then consumption taxes. Recurrent taxes on immovable property appear to have the least
impact. A revenue neutral growth-oriented tax reform would, therefore, be to shift part of the revenue base
from income taxes to less distortive taxes such as recurrent taxes on immovable property or consumption.
The paper breaks new ground by using data on industrial sectors and individual firms to show how redesigning
taxation within each of the broad tax categories could in some cases ensure sizeable efficiency
gains. For example, reduced rates of corporate tax for small firms do not seem to enhance growth, and high
top marginal rates of personal income tax can reduce productivity growth by reducing entrepreneurial
activity."

http://www.olis.oecd.org/olis/2008doc.nsf/LinkTo/NT00003502/$FILE/JT03248896.PDF

"The center-right coalition said it will cut company taxes from 28 percent to 26.3 percent and reduce social security fees by 1 percentage point to increase Sweden's competitiveness.

It will also reduce demands for company documentation in a number of areas and make additional reductions to social security fees for young employees. This means the estimated cost for employing someone under the age of 26 will be 12 percent lower than for an older employee.

Since ousting the left-leaning Social Democrats in 2006 with pledges to reform Sweden's welfare state, the four-party government alliance has made large cuts to income taxes."

http://www.iht.com/articles/ap/2008/09/08/business/EU-Sweden-Company-Taxes.php

Robots are more productive
An unintended consequence of minimum wage laws and employee regulations have led to significant automation in many sectors. Raspberries are less expensive because a machine can now harvest them. No handpicking required.
I saw a Sony vending machine in an airport selling electronics.
People are such a vital asset to the military, they are diving into robotics to replace pilots and minimize risk to soldiers.
Building and designing robots is not a trivial task. As populations decline, automation is required to maintain and improve standards of living.

Has nothing to do with "warm and fuzzy"
How is my point considered socialism and Kudlow's is not??

My priority is, if the government is going to offer benefits, give the benefits to lower and middle income people. They in turn spend money and provide opportunity for entrepeneurs and business owners to get in the market and do their thing. A business has a better chance to succeed when its customers have money, thats a win-win for everyone.

Kudlow's priority is for government to offer the benefits directly to entrepeneurs and business owners. Bypass the customers and make the wealthy even more wealthy. Who ever got a job from a poor person, right?

I agree with much of your comments Joanie, leave the business owners alone and let them grow their business. Wealthy folks don't need more tax breaks, they're already wealthy! They've had Bush's tax cuts and what has it done for the economy?

According to your logic, we exist in a socialist environment, thats how it is. The question from there is, does the government work for the wealthy and corporations or does the government work for the common people? Its not that I want socialism and Kudlow does not. We're both socialists according to this line of thought, we differ in where the priority should be. Trickle-up, exactly. The stimulus checks were a drop in the bucket. They did stimulate the economy a little bit, retail numbers bounced for a few months. But thats peanuts compared to real wealth.

A fallacy in Kudlow's view, and yours and Zyndryl's and Stinkhammer's, is that giving the benefits directly to the movers and shakers correlates with more jobs. What incentive does a business owner have to create jobs just because he/she has more money in her pocket? There is not a direct correlation. As we've learned the last 6 years or so, business profits are up and jobs are down. A business owner isn't going to expand only because she has more money. If there is an opportunity to expand, she will expand, whether she gets a loan to obtain the capital or whether the government provides the capital or whether her profits are up and thus has the capital. What kind of opportunity is there to expand when the majority of Americans are buckling down because their pay is stagnant and expenses are skyrocketing? Demand is a pretty important part of the equation, is it not?

Lets be realistic too. Every business owner has an accountant or lawyer, they jump through loopholes and cut every corner possible to reduce their tax burden. Thats reality. I would love to be in a position where we can responsibly reduce taxes on small business, but they are not first in line of priorities in my view. They're already doing fine. And if their customers are doing well, they'll do even better. Corporations are even lower on the priority list. Frankly, if a Board is willing to pay a CEO $20 million I'd vote to tax the SOB 80%. Now thats an incentive. And think about that, the dude would still bring home $4 million. Instead of super-duper-rich he'd only be super-rich. Boohoo. I don't like the idea of the government doing that, but i would support it because an executive making $20 million a year is even worse. We have to be realistic.


I still see the sense of the articles at Mises. The problem with Mises is they're too extreme and ideological. For example, I want lower taxes for everyone too, I don't like taxes either - but when our country is at war and deficits are four to five hundred billion a year, we should all pay higher taxes and meet our responsibility. Its the price we should pay for who we elect. Instead, gov borrows money and there is no accountability for putting us in deep debt. All the while people whine about taxes, smart people at Mises speak only about lowering taxes, worse, to lower the taxes for people who are already wealthy. You'll never see a pragmatic and responsible position as I'm offering on Mises. Trickle-down economics has failed twice in two tries, what else but blind ideology would ignore this fact in earnest to keep its philosophy from changing. Theory does not trump experience. And a socialist in capitalist clothing is still a socialist.

upgrade to: smear and lemons
Business owners create jobs, but there is not a direct correlation between making a business owner more wealthy and the creation of jobs. Our most recent experience is the last 8 years.

I don't hate or envy wealthy people. I want change, I want government to stop giving handouts to people who don't need them; and then have to see idiots try to explain its a good thing because it creates jobs, when as we speak, jobs decrease as wealthy people receive more handouts.

Poor people don't create jobs, absolutely. Hey, what if, and I'm going outside your box so try to stay with me, what if we could raise people from the bottom up and have more wealthy people, thus more people who can create jobs? Wouldn't that work better than making a wealthy person, who already creates jobs, more wealthy in the hopes they would create even more jobs? Do you want more wealthy people, or just a few people more wealthy?


"Therefore they couldn't possibly "pass along their tax costs to consumers in the form of lower prices" Hence, corporate tax cut = lower prices for customers (those very same "middle-class customers" you invoke), since corporations wouldn't be inclined to raise their prices in order to cover high tax burdens. You're endorsing Kudlow's argument without even realizing it."

Thats great, first you contradict yourself within 2 sentences. If they can't possibly pass along their tax costs to consumers in the form of lower prices (1st sentence), how does corporate tax cut = lower prices for customers (second sentence)?

You only see it in one direction. Indeed, if taxes don't go up, it wouldn't cause price to go up. But, if taxes go down, shouldn't price go down too? If tax goes up, price goes up, shouldn't it work in the inverse as well? It should, but it doesn't.

Your last sentence in that paragraph is very interesting. The reason you say is because you agree with a point I just made to Joanie, because Kudlow and I are both socialists in this line of thought. The difference is who we give the handouts to.

I agree with you about corporations as tax collectors, not really tax payers.

Government does not give, it can only take.
The government must take before it can 'give'.

How do you decide who will get taken?

Not your best
I was really hoping for more competent parries than these:

"Your logic fails to take into account that we are ALWAYS talking about FUTURE investment."

Who's talking about future investment? Investment always taes place in the present tense. And whenever the investor class has more money than they know how to spend, they have a compulsion to put it into something they think will earn them even more money. It's a sickness-- one they are unaware they have.

Look at all the investment money that has been poured into GM and Ford. Has that made them any more solvent?

My point-- which I was really hoping you'd dare to address-- was that most of this "new" investment money goes into schemes that eventually blow up in the end. All that money ends up doing no good for anyone. Not even for the rich. Yet they cling to the illusion that their money can get something for nothing.

Now, of all times, as we the patient taxpayer once again has to bail out the foolish rich investors, you should be embarrassed to cling to that old, thoroughly disproven view. Excess investment funds, in our financial environment, are invariably wasted.

I will agree with Cato in one thing: the more we bail out these ignorant rich folk, the more heedless they become of any hazard. Thus we are training them in all the worst lessons. And as each turn of the screw takes place at a higher and higher scale of wealth, the NEXT big blowout will cost us all not just a couple of trillion but many many trillions.

Nonetheless, I'm sure you'll be right there, still screaming that all they need is more chips to play with.

"Fairness also has nothing to do with it. And regarding 'fairness' anyway, investors have been nailed with double or even triple taxation on their profits, as well."

The only thing you can say about the fact that we tax wages at one rate, and unearned income at half that rate, is that there is in fact class warfare-- and it's being waged against the poor.

As for the famous "double taxation" on dividends, it's not so. An arm's length transfer has occurred between a corporation's earning of profits and their distribution of a dividend to their members.

All income gets taxed multiple times. The dollar I earn is taxed once, and once again when I spend it on a haircut. And once again when the barber buys my tomatos. Even though the same dollar may have landed back in my pocket, it has been taxed three times along the way. It's a tired argument, and one that only works with people who don't bother to think things through.

The problem with out current cash flow engine is that so much money is caught up at the top, and never circulates down below where it's needed. THAT is the reason GM's not selling any cars. We all lose-- just because too many incentives have been awarded to people who don't ned them. And too few to those who do.

Certainly with your finely tuned mathematical brain you can understand that if you do not repair this fundamental misallocation of circulating funds, and instead purchase one billion dollars of GM stock, you haven't fixed the problem. They're operating at a loss every time they open the factory door... so all you've done is buy them more time until the eventual bankruptcy.

Throw the money out onto the street for anyone to pick up, on the other hand, and GM smells opportunity. They crank up to full production, and sell every vehicle that comes off the line. They have to hire back everyone they've fired to keep up production levels. And all their new hires buy new Jimmies for themselves. The engine is humming again.

Which reminds me. I don't think you've ever answered my question. Have you, personally, ever had to meet a payroll?

Which suitcase are you going to pick?
I might as well get all of this out of the way.

1. "I don't have to make a case 'for' McCain. This election is and always has been about Obama."

Yes, you do. McCain is not a bright fellow. He is particularly thick in the area of managing a very large economy. And he has no financial advisers to speak of. He used to have the less than estimable Phil Gramm, who gave him some tutorials of dubious value. But now he just sits there like a deer in the headlights when the talk turns to money.

Obama, on the other hand, is the brightest guy in nearly any room. And HIS team boasts Warren Buffet, Paul Volcker, Bob Rubin, Jeffrey Sachs and others far too numerous to mention.

What McCain uses to make up for this lack is simple pugnacity. His fans appreciate his "socking it to" Obama-- even if his talking points are laughably refutable. It's a dim brain that takes this as being a good quality in a leader. And in fact the polls show us currently that the only faction in the American public who has increased their support for the man has been Southern white males-- poor Johnny Rebs who will always march up the hill behind some charismatic leader.

2. I realize that without some quantification, my main point isn't going to make much sense to you. So here, since I already know your answer to the question about ever having to meet a payroll, is the fuller explanation for why money is better placed in the hands of consumers than it is in the coffers of hedge fund managers.

The market in credit default swaps ALONE is now $45.5 trillion. M1, by comparison-- all the money that's available for use by the Little People-- is currently only $1.454 billion. In fact M2 is only $7.769 billion now.

Imagine if that $45,500,000,000,000.00 had instead been invested in WAGES. How much business would that kind of stimulus have generated? Do you think any American corporation-- no scratch that, any producer on earth-- would require being bailed out? Such a move would have been the very est sort of targeted stimulus package, boosting all ships on a huge tide of actual profit.

Best of all, the money would have entered people's pockets as actual compensation for the labor equity they have put into the American miracle.

Divide that number into the lower 99% of Americans-- the 297 million who actually have a need for more spendable income. Each man, woman and child would get $153,200 in this dividend.

So what would the owners of such a credit default swap get for their investment? They would get once again by far the richest nation that ever entered the pages of history, built upon the solid rock of creation and consumption. A nation in which nearly everyone actually owned his own home and was able to pay his bills.

Second question: what did they end up with, investing it the way they did?

You'd have to be pretty dumb to get this one wrong.

Retiring debt and paying for Medicare and Social Security
Me: "So, returning to my point, every time we have a collapse, the root cause of it comes shining through: weak consumer demand...What one's customers need more than anything is...buying power"

You: "No, you are flat out wrong. It comes from a collapse in continuing investment -- either sudden or gradual."

I see you don't support that contention with any evidence. But let's return to the wisdom of those who chose to lay off their potentially ruinous investments with credit default swaps.

The best analogy is eggs in a basket. Your investors chose to put 45,500,000,000,000 eggs in a basket with a big fat hole in the bottom. Every egg got busted. And now you're telling me the fix is to get more eggs to put in the basket.

Put those eggs in the hands of hungry people and the first thing they'd do would be to buy everything they needed-- including, for example, retirement savings and medical insurance. They'd have a buffer against adversity.

Then they'd pay off all their consumer debt. This step alone would produce many trillions of "new" investor dollars that, having just been evicted from their current activities in the credit markets, would be looking for a new home. So right there is where your newly available investment money would come from.

And finally, every egg would pay taxes-- with about a third of the egg going to the federal government and more shoring up the funding of all the states. We would finally begin funding our national expenses. And have enough left over to start retiring the federal debt.

You won't admit you can see this. But you're not dumb... I know you can.

Raising corporate taxes
If we were to raise corporate taxes and lower personal income taxes below $250K, the first thing it would do would be to strengthen a weakening dollar. And that would be good for business across the globe. So we would all be able to buy more stuff with fewer dollars. That, to me, is as good as everyone getting a raise.

I would not mind one bit if we lost a few businesses. The ones we'd lose have already sent all their jobs overseas. The names may still be American, but the goods have a Chinese label on them, and anyway more and more actually come from Cambodia or Vietnam now.

Nearly every remaining one would stay because they realize we're still the best place to operate from. Do you have any idea how high the notional tax rates were in the 1950s? Was business good back then?

Of course it was. And business owners still understand why it was.

Oh boy, more taxes!
I'm not sure which way you assume I will jump on carbon taxes and gasoline taxes. But I think each are useful approaches to our funding shortfalls-- not to mention nice screwdrivers with which we can tinker with industrial and social policy.

Take gas taxes. The states have chronic budget shortfalls now, due to policies initiated in the Bush administration. One result is fewer funds for highway building and maintenance. It's a good way to pay for our highway systems as well as to help limit fuel use.

We're never going to wean ourselves from foreign sources by just drilling our few remaining untapped reserves. Collectively that will only gain us another year or two of oil. We need to use a painful stimulus to increase the speed with which we develop viable non-oil fuels.

I'd also get rid of the depletion allowance. It does nothing for us. Unless, of course, you want to give all the workers a "life depletion allowance". Because each year, these individuals use up more of their capital-- that is, their remaining life span. Same principle.

Cap and trade? Sure, why not? It's a great way of putting one of the big externals of industry-- exhaust fumes they don't have to pay for-- back into the expense/ income equation. And no one has come up with a better idea to curb emissions.

Getting jobs from poor people
There's a strong case to be made for lowering corporate taxes... and I know you could do an eloquent job of it.

So instead let's give more thought to taxing investment-- as our current problem has entirely to do with runaway investment funds being allocated unwisely. Let's make it less attractive for investors to invest.

First and foremost, we KNOW that investors have no other option. You can neither stimulate nor deter investment. They are constitutionally unable to just put their loot under the mattress. It's like a developer, who has to obsessionally develop, a gambler and the horses, or a junkie and his fix...

Sure, they could put all that cash in overseas investments. But if they were to repatriate it here, the IRS could catch 'em. And squeeze their lemons. We could start out by taxing capital gains at a rate DOUBLE that of ordinary earned income.

Aren't I bad today? I should take more of these little vacations.

2. "I don't know about you, but I've never gotten a job from a poor person. Have you?"

Sure have. My whole career was spent utilizing an underused resource-- the money poor folks do have, and need to spend on essentials. And I certainly found working with poor folks to be more salubrious than working with rich ones-- which I've also done.

My ugliest of all clienteles? That would be a tossup between highly educated foreign service types (I was working out of DC) and the newly arrived rich. Most old money was reasonable, intelligent and decent-- qualities I often found in members of the underclass as well.

One point
In the 1950s who had health insurance?? I never heard of such a thing until I was in the military in the 1980s. My parents never had health insurance until about that time (1980-81). The vast majority of Americans did not have health insurance until the mid to late 60s or after.

Why?

It wasn't necessary. An office visit to most clinics was $5-$10 in 1960. A common operation (appendix) cost around $700-$900 and routine baby delivery was a couple of hundred. By 1975 that had all begun to change. My youngest brother cost the folks (in 1974) nearly $1,000 and an office visit was $15-$20.

The best two family income indicators for any time (or at least up to the mid-80s) are the minimum wage and average per-hour wage. The minimum wage in 1960 was about $1 an hour, in 1975 it was a bit over $2. So while wages in that time about doubled, basic medical cost went up pretty close to the same (about 2.5 times).
But that is nothing like what weven seen since. The basic office call is now around $100, basic outpatient surgery is often between $5,000 and $10,000 and more. Not counting the more exotic and expensive diagnostic and surgical proceedures, the average price of healthcare in 30 years is up, easily, by 5 times it's 1975 price. And God forbid you have to have an MRI or major surgery and hospital stay!

And the base price has actually gotten more expensive as doctors, to cover their butts from law suits, now order a lot more tests, ultrasounds, MRIs and CTs than are really necessary. Your basic office call is far more likely to cost you $500 or $1,000 than it was just a few years ago.

Unfortunately, it isn't rising health costs that created the need for insurance, it was government programs, law suits and insurance that created the increased costs. of this I'm fully convinced. Sadly, there seems to be no easy solution. I guess I would start with severe tort reform and really crimp down on the government programs and insurance companies.

Perhaps we are so far gone that the only answer is a single payer system. The chance that, even a gently stepped, reform(s) would creat serious problems and possibly even kill people may just be too great.

One thing is for certain, both McCain and Obama are wrong. More private insurance is not going to solve the problem; it will just create an even more expensive system.

FDR policies started single payer health insurance
During WWII, industry was forbidden to compete for workers on salary.
So they competed with benefits.
The rest is history.

Costs are so high because of single payer.

Look at health care that is competitive, like Lasik and plastic surgery, and cost is low and quality high.

If such competitiveness can reduce costs and improve quality for elective procedures, imagine what it would do for life saving procedures.

We are already felling the effects of a 'national' plan. Doctor shortages are cropping up all over delaying an office visit to months.

Of course, the AMA restricts competition by controling medical schools, state certification (50 different ones) and immigration.

Wal Mart and CVS are trying to meet needs by opening clinics in stores and by providing low cost prescriptions.

Some doctors offer discounts for cash.

"Cash on the barrelhead! That's the formula for driving down health-care costs and improving access to physicians for a large segment of the population, according to a consortium of doctors and patients that is relatively new to North County.

SimpleCare's founder, Dr. Vern Cherewatenko of Renton, Wash., said he invented the concept eight years ago after he realized that "68 percent of our health-care dollars are being wasted on the system itself.""

http://www.nctimes.com/articles/2004/12/05/business/news/12_27_4612_4_04.txt

I partially agree about private insurance. Insurance needs to be private, but real insurance, not maintenance. You don't have insurance to change oil in your car.

I like Paul's economics.
He just forgets the Constitution requires a national defense.

Life must be grand on Planet Roy
"Who's talking about future investment? Investment always taes place in the present tense. And whenever the investor class has more money than they know how to spend, they have a compulsion to put it into something they think will earn them even more money. It's a sickness-- one they are unaware they have."

That right there proves more than anything your ignorance of economics.

"Look at all the investment money that has been poured into GM and Ford. Has that made them any more solvent?"

so...STARVING them of future capital WILL make them more solvent? Do you even READ what you write?

"was that most of this "new" investment money goes into schemes that eventually blow up in the end"

Utter hogwash. If what you say was even REMOTELY true, we would have had 50% unemployment, oh...for the past several centuries...and the Soviet Union would still be a going concern that we probably would have adopted a long time ago.

"Now, of all times, as we the patient taxpayer once again has to bail out the foolish rich investors"

Either that, or we go down with the sinking ship. So, whine all you wish. Doesn't change those facts.

"The only thing you can say about the fact that we tax wages at one rate, and unearned income at half that rate"

Uh...no. First it gets slammed at 35% as corporate income taxes. THEN it get's slammed again as dividends. And it is the same profits owed to the same shareholders. There is no 'arms length' nonsense involved. Only idiots think that way or folks who hate 'the rich' so damn much that they fantasize of ways to make lampshades out of their skin. Which are you, Roy?

The 'working guy' equivalent of your 'arms length' transfer BS would be when your paycheck is taxed when it is cut (as it is now) AND AGAIN when you deposit it in your bank. After all, technically the money belongs to the bank. The bank then owes you a 'credit' as defined in your bank account. That's an 'arms length' transaction, Roy.

"All income gets taxed multiple times. The dollar I earn is taxed once, and once again when I spend it on a haircut. And once again when the barber buys my tomatos."

Yeah...but the barber and tomato seller are TWO different people. Again, are you one of those who can't see this or are you one of those who hate the 'rich' so much you want to make lampshades of them?

"It's a tired argument"

It's tired BS. Yet, you keep spouting it.

"THAT is the reason GM's not selling any cars. We all lose-- just because too many incentives have been awarded to people who don't ned them. And too few to those who do."

No, the reason why GM is not selling any cars is the same why Toyota can't sell them either -- people can't get the debt needed to buy them.

"Throw the money out onto the street for anyone to pick up, on the other hand, and GM smells opportunity. They crank up to full production..."

Really, that was the total crap you spouted earlier this year with regards to the stimulus checks, too. It didn't happen, Roy...as I and others predicted. It won't happen again, either.

Case in point now: What are the banks that have been bailed out so far doing with that money? Nothing but shoring up their balance sheets. They certainly are not resuming lending. They would be stupid to do so, too.

It must be living on Planet Roy.

"Which reminds me. I don't think you've ever answered my question. Have you, personally, ever had to meet a payroll?"

I don't recall you asking it. But, yes I have. It wasn't fun, either. And the causes of one particular payroll crisis I had to deal with was from government interference of a very arbitrary nature, too.

No, I don't (have to make a case for McCain)
Because the political reality of this election is that it has ALWAYS been about Obama.

McCain is just a more respectable 'no' vote against Obama than Ralph Nader or the Peace and Freedom candidate is. In particular, he's the alternative that isn't perceived as a 'wasted vote' compared to the others.

"Obama, on the other hand, is the brightest guy in nearly any room"

Oh, thank you thank you for that good laugh, Roy. I needed it.

" since I already know your answer to the question about ever having to meet a payroll,"

Uh, where is this question about meeting a payroll coming from? And, I did answer it (see the post answer where I first saw your question).

"The market in credit default swaps ALONE is now $45.5 trillion"

Again, that is not MONEY but numbers...paper values. They are liabilities that can never be serviced if called in total or even in fraction, like 10%, as well. The ONLY money available to service ALL that and more is M0. M1 and M2 also constitute a larger amount (in proportion) of paper values/credits as well.

What happens if only 10% of ALL insured cars in your particular state were to simultaneously have accidents? All of the insurance companies would go broke -- instantly. They can't service even 10% of their liabilities at one time and their actuaries are counting on that fact.

Roy, with all sincerity, as long as you don't understand money and how it is different from credit, you're going to continue to waste a lot of time on bogus calculations like in the next paragraph:

"Imagine if that $45,500,000,000,000.00 had instead been invested in WAGES. How much business would that kind of stimulus have generated? Do you think any American corporation-- no scratch that, any producer on earth-- would require being bailed out? Such a move would have been the very est sort of targeted stimulus package, boosting all ships on a huge tide of actual profit."

Again, there never has been $45 TRILLION to 'invest' in anything, so it wouldn't be 'invested' in wages, either. Furthermore, in order for wages to be considered an investment instead of just an expense, the ROI would have to be greater than the money spent on the wages themselves. So, if we don't have $45 TRILLION in money for just 'investing' in the wages, where are we going to get the $45 TRILLION PLUS TRILLIONS more to justify investing into it, anyway?

"Such a move would have been the very est sort of targeted stimulus package, boosting all ships on a huge tide of actual profit."

Again, stimulus packages don't work. You keep ignoring that. No, you keep DENYING that. They especially don't do jack for what is needed: altering people's future, long-range economic decisions.

"Divide that number into the lower 99% of Americans-- the 297 million who actually have a need for more spendable income. Each man, woman and child would get $153,200 in this dividend."

In which case you'd get hyperinflation, as $45.5 trillion in non-existant money would have to be created out of thin air. Way to go, Roy!

"So what would the owners of such a credit default swap get for their investment?"

The value of the default swap would be eroded by hyperinflation -- since inflation is a default on debt by another means. The recipient of the premiums come out ahead but not by much since the 'premium' won't be worth much, either.

"what did they end up with, investing it the way they did? You'd have to be pretty dumb to get this one wrong."

A lot more than they would have with Zimbabwean-style hyperinflation wrought by Roy's $45.5 trillion plan. Now, talk about dumb.

No wonder you are an Obama supporter
"I see you don't support that contention with any evidence"

Provide me with evidence on something else as commonly proven and obvious like, "prove that the sky is blue" and then I'll waste my time doing the same with you on this basic tenet of economics.

"45,500,000,000,000 eggs"

No, they didn't Roy. There aren't 45,500,000,000,000 eggs to begin with. There never was. It was all unbacked liabilities to begin with and by deliberate design.

Let's say I want to go into the insurance business. I go to my neighbors and say, "For a $10 premium per month, I'll insure your $2,000 hot tub."
They say, "ok". Meanwhile, my actuaries tell me that I need so many customers paying those premiums in order to cover potential claims that the actuaries are predicting I will be hit with over the span of a year. Let's say I insure 100 hot tubs. That's a total liability value of $200,000, correct? I get $1,000 month in total premiums or a total of $12,000 a year in them. That means that if worse came to worse, I could cover replacement of six hot tub claims in a year ($12k / $2k = 6 hot tubs). The actuaries say, "Don't worry! You'll only have to pay out for 1.2 hot tubs per year, according to our projections!"

Furthermore, for the sake of argument let us also say that the local currency supply doesn't even have a total of $200,000 in it! The hot tubs didn't get bought all at once, so the same money circulated over and over again for use in purchasing all those hot tubs. That is how the neighborhood wound up with 100 hot tubs with an aggregate worth of $200k even though the neighborhood doesn't have $200k in total currency supply.

But, if some freakishly giant sink hole opened up and sucked down an entire fifth of the neighborhood and I got 20 claims in one year ($40,000), could I cover that? Nope. I'd go belly up and 14 of those 20 policy holders would be left high and dry.

Unless I can get some politicians under my thumb to bail me out. I could sell them preferred shares in my insurance business and use the capital infusion to make good on my promises. Life goes on and I have to pay out a 5% of profits in dividends for the preferred shares the government holds. I might even lose control of the business entirely, if they bought enough shares. But, what if the government didn't even have enough of that kind of money to bail me out?

Back to square one: those 'customers' are screwed.

Notice how I don't even bother to postulate the scenario of all 100 hot tubs biting it? What's the point? But...as I quote you next, you SEEM TO DO so.

" Every egg got busted. And now you're telling me the fix is to get more eggs to put in the basket."

Our government doesn't have the money for even a fraction of the $45.5 trillion credit default swap liability. But, it does have quite a bit to keep defaults from happening -- or cascading in a chain reaction that could climb towards even near $1 trillion and up if they do happen -- in the first place.

Note on caveat in the above: Not unless they do the Weimar Germany/Mugabe's Zimbabwe route. In which case the resulting hyperinflation will pretty much make it all a moot point anyway.

Yet, you seem to be in complete ignorance of all that and even propose blowing $45.5 TRILLION in equally hyperinflationary money anyway...because it would be blown on the 'little guy' while ignoring that that the little guy would see everything he does own crash in value as the hyperinflation destroys the entire economy.

oh yes.! Let the ship sink because the drunk captain who struck the iceberg deserves to go down with it!

Hullo Roy! Hullo! WE are ALL on that ship and we can't get off, either. There will be very view survivors compared to even The Titanic's.

"And have enough left over to start retiring the federal debt."

Yeah...I grant you that: Hyperinflation does wipe out debts. It's why governments resort to it so often in history.

You completely miss the point
You seem to clearly understand the concept of "tax something more and demand for it will go down" when it comes to gasoline taxes, but not capital investment.

I'd be curious to see how you can explain how the laws of demand and supply are somehow 'suspended' for one but not the other.

Why do you think I did it?
...besides the fact that it is a legitimate real-world example of my point.

Oh man
"First and foremost, we KNOW that investors have no other option. You can neither stimulate nor deter investment. They are constitutionally unable to just put their loot under the mattress. It's like a developer, who has to obsessionally develop, a gambler and the horses, or a junkie and his fix..."

No, we KNOW the exact opposite. The first thing they want to do is protect what they already have. If worse comes to worse in how they see the future will hold -- and that is the reason why FUTURE investment incentives matter, Roy -- the more they will keep it stuffed in their mattresses, Roy. That is what happened in the Great Depression and what happened in the 70s.

You seem to be lumping all investment opportunities under a single umbrella. Not all are 'equal' as far as economic results are concerned. We want them to invest more in 'riskier' investments like start-ups than we want them to invest in safer ones, like tax-exempt muni bonds, correct? So, why give them more incentive towards the muni bonds...or the CDO bundled sub-primes?

"Sure, they could put all that cash in overseas investments. But if they were to repatriate it here, the IRS could catch 'em. And squeeze their lemons."

Which is why there are trillions worth of unrepatriated wealth overseas from investments originally made forty or fifty years ago. They just won't bring it back here to invest in America until we finally grow some brains. Overseas makes for a fine mattress to stuff all that in.

No, you never got a job from them. They never cut you a payroll check, did they? They might have been your clients and customers, but that is not employment, but commerce. Commerce that would whither on the vine if we enacted even HALF of your proposed tax policies.

World War II created health insurance perk
"By the 1940s, health care costs in most industrialized nations were paid by the government.

That might have happened in the United States, too, if not for World War II.

To halt inflation during the war, the government put a cap on wage raises. To compensate workers, companies began offering health insurance.

By the time the cap on raises was lifted, health insurance had become a common perk to attract and retain workers.

In 1950, GM President Charles Wilson offered to pay 50 percent of the health care costs of his employees. Walter Reuther, national president of the United Auto Workers, initially resisted, believing the cost should be spread across many companies or across the nation, according to a biography of the union organizer.

Reuther gave in, and GM entered the health care business. "

SimpleCare
" How does it work? We call it PIFATOS – Pay In Full At Time Of Service – and it is truly a “Cash-Based Revolution.” A patient sees a doctor for a non-catastrophic reason – yearly check-up, a nagging flu, a twisted wrist, an aching stomach, etc. The doctor bills the patient after the visit. The patient pays in full before leaving. Because doctor charges are anywhere from 25 – 50% inflated due to administrative costs caused by the health insurance industry, you’ll be paying drastically reduced rates for your medical expenses. In conjunction with a regular catastrophic health insurance policy to cover extremely costly procedures, PIFATOS can save the average healthy adult and/or family up to $5000/year!*
"

http://simplecare.com/index.htm

Immediate withdrawl from Iraq is not responsible.
That's what Paul advocated and it would create a worse situation.

Customers can have all the money in the world...
...but unless a business is incentivised enough to make a profit from it, there will be no investment made and thus no new jobs created and no products/services offered.

In the old Soviet Union, the workers had a saying: "They pretend to pay us, we pretend to work"

What you and Roy and Obama are basically proposing is a variation of that saying, "They pretend that the laws of economics can be suspended, we pretend to create more jobs"

" What incentive does a business owner have to create jobs just because he/she has more money in her pocket? "

Because you refuse to acknowledge that it is not about GIVING money to the business owner but instead it is about allowing him to KEEP HIS/HER money that they earn from FUTURE work and investment. You yourself noted that even profitable businesses of today are holding back investment into the future, correct? Well, that is a perfectly logical thing for them to do if they perceive that their ROI will be raped by the Robin Hood bandits that might be in charge in the near future.

"Demand is a pretty important part of the equation, is it not?"

Yes, which means that the causes for rising demand should be promoted as much as possible. And those causes are from wealth generated by past economic growth.

Yeah, like believing that houses are productive investments
That must be the ultimate in 'warm & fuzzy' right there. :)

Withdrawl without victory endangers our military.
Leaving Viet Nam to defend itself after promising support, Reagan's withdrawal from Lebanon, Clinton's withdrawal from Somalia were all seen as signs of weakness on the part of the USA.

It could certainly be argued that US forces should have never been sent, but, once committed, it is more dangerous in the long run to withdraw in defeat.

Paul didn't convince me he understood that.

Isolationist delayed US support for UK and China prolonging WWII.

The purpose of the military is to kill people and break things. If the military is committed to a mission, the civilian leadership must ensure full commitment to that mission or don't send them in the first place.

And I do support withdrawing US forces from ROK, Japan and Germany. They need to defend themselves.

" I want government to stop giving handouts to people who don't need them;":
Who needs them? How do you decide?

I agree with this: "I want government to stop giving handouts to people"

" But, if taxes go down, shouldn't price go down too? "

In a free market, competition will result in lower costs if producer costs drop.

Incentives
"Wouldn't that work better than making a wealthy person, who already creates jobs, more wealthy in the hopes they would create even more jobs? Do you want more wealthy people, or just a few people more wealthy?"

I have heard many entrepreneurs state that their expansion plans are limited by increased taxes. Hiring more staff, creating more jobs is not worth it to them if that extra dollar is worth less.

Why should the government limit the opportunity of anyone to become wealthy?

It began before that
I'm not sure when the first catestrophic care policy was written but it was a while ago. However, even that, was generally considered something more wealthy people had and it wasn't for everyone. During WWII the first employer healthcare policies were put in, but they did not become pretty universal until much later. When I was a teen I knew a few people who had health insurance plans, but even then most of those people just had accidental injury and/or catestrophic illness policies.

In the 60s big union shops began putting in health insurance as part of the pay package and in the late 70s we started seeing that at smaller businesses and private pay policies popping up. Still, until sometime in the 80s, it wasn't a real problem to get a doctor's appointment without insurance. Now it is.

Yes, the real explosion came in the 90s.

It's like a bubbling pot of porridge
I've hardly missed your point.

"You seem to clearly understand the concept of "tax something more and demand for it will go down" when it comes to gasoline taxes, but not capital investment. I'd be curious to see how you can explain how the laws of demand and supply are somehow 'suspended' for one but not the other."

That law is working just fine, as is the law of gravity. I may have been too subtle for you, and my didactic truncheons haven't penetrated your skull far enough to reach your brain. But my message, consistently in the year or more since this crisis surfaced, has been that we have an excess of investment capital. And we can see that excess manifest itself in the fact that there are these repeated bubbles, where zillions of investment bucks inflate some mirage of value, then pop and disappear. Thriving traffic in bad mortgages is but the latest in a string of market failures stemming from too much money trying to squeeze itself into too little value.

You mean you haven't noticed that? Our investment money supply has clearly been far in excess of any real uses to which it may be placed. And as a direct result it has devoted itself to the bidding up in price of today's version of exotic tulips: schmortgage-backed securities.

For which there is currently... no demand.

How to make money
"No, you never got a job from them. They never cut you a payroll check, did they? They might have been your clients and customers, but that is not employment, but commerce. Commerce that would whither on the vine if we enacted even HALF of your proposed tax policies."

Running a business creates very real differences in perspective, as opposed to being a lone philosopher ruminating over the state of the world's navel. Whenever you start a hopefully profit-making enterprise, your first question has to be: "Where's the money coming from?"

It's this consumer demand that creates the work to be done. The startup capitalist merely fills in the blank space with a real enterprise. The part startup capital plays in the whole affair is a tangential one.

In other words you can have all the capital one could ever want-- but if there are no customers, the plan will flop. Whereas if you have thousands of eager customers but no spare cash, all that happens is you start on a shoestring, and build your biz a little more slowly in those first couple of years.

Which is how I did it. I had tools, a truck and a rolodex. As soon as word hit the street I was in business, people were lining up to book my services. Then I added personnel.

My secret? Pricing myself a little cheap, so the po' folks could afford me. It turned out there was a lurking iceberg in unsatisfied demand out there. And yes, they cut me payroll checks at the end of each job-- checks I passed along to my staff after taking my own cut and meeting other expenses.

It was those poor people who provided the venture capital for me to expand.

Too prosperous?
Where can all that money be invested?

Just about every capital intensive industry is controlled by so many government regulations why would any rational investor want to toss it down a rat hole?

The USA needs refining capacity yet years are required to get permission to build.

Until the USA allowed private investment in space launches, no one would invest in space launch systems. Now, we have many billionaires developing space systems.

Why do you want to punish others who want to do the same?
All your socialist policies punish those entrepreneurs who want to do what you say you did.

In the last power vacuum...
Hitler came to power.

Another issue with the middle east, they don't have the same concept of time that we in the west have.

Forcing them to a timetable plays into the hands of those who will be our enemies and we will just have to do it all over when they attack us.

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