From: jwh@citi.umich.edu (Jim Howe)
Subject: Re: Wake up call
Date: Thu, 15 Oct 92 12:01:20 EDT
Organization: IFS Project, University of Michigan
Reply-To: jwh@citi.umich.edu

In article <9210151437.AA14610@TIS.COM>, richard@TIS.COM (Richard Clark) writes:
|> 
|> [...]
|> 
|> 	Four, lift the cap on Social Security income taxes. What the
|> hell, the middle class is *already* paying their fair share. Lifting the
|> cap would produce an immediate 14% tax increase on the rich, resulting in
|> them *finally* paying their fair share of the Social Security budget. Or
|> didn't you know that? That SS tax is only collected on the first 50,000
|> dollars of income? In other words, the rich put in only as much as the 
|> middle class.
|> 

False.  It is true that people only pay taxes on their first $50,000 in
income, however when benefits are paid, the person who made a million
dollars a year will not receive any more than the person who made $50,000
a year.  What you get back is related to how much you put in.  People
at the top see a lower return than people at the bottom.  To elaborate on
your last comment, the rich put in only as much as the middle class 
*and they only receive payments as big as those paid to the middle class*.
Taxing Social Security is simply a double tax.  You paid income tax
on the amount that was taken from you for FICA, and you pay tax on
the same money when it is 'returned' to you in the form of SS payments.
I think this is wrong.  What we really need to do is eliminate SS
and let people save for their own retirement.  Let's phase out the
current system and phase in a mandatory investment system where 
workers own their own retirement investments.  This creates a larger
investment pool for the economy, and provides less 'revenue' for
the general fund to steal from to cover deficits.

|> [...]
|> 
|> 	Six, protectionism. Currently a dirty word in politics.

As it should be.

|> But
|> only because foreign companies have *literally bought* our politicians.
|> This alone, is the single most effective way to bring jobs back home.
|> And for what cost? Nothing, zero, zilch, nada.

Tell that to the people whose jobs depend on imports.  Also, protectionism
tends to foster retaliation, making exports more difficult.  This costs
jobs as well.  In addition, protectionism raises the costs of goods and
lowers the quality due to reduced competition.  The result is that
consumers pay more for less.  Not the best way to improve your nations
standard of living.  Foreign competition, brought on by free trade,
will reduce the cost of products, increase quality, and make the
U.S economy more efficient.  People will be able to spend less and
save more, or get more by spending the same.  Either way, the net
effect is to help, not hurt, the economy.

|> The customs services are
|> already in place. All it entails is changing a few numbers on a few
|> pieces of paper. All it requires is taxing the living daylights out of
|> anything imported into this country! 

And yet you complain about taxing the middle class.  What happens to
the costs of products that you 'tax the living daylights' out of?  They
become more expensive or non-existent.  Prices go up in this country
and the price is paid by consumers, who are largely middle class.  What
you have done is simply imposed a hidden tax on the middle class.

|> When prices of foreign products go
|> up, American manufacturers pick up the slack. When the cost of production
|> and shipping from outside get higher, the manufacturing moves back home.
|> It really *is* that simple. What do you think the Japanese are doing?
|> They *ban* almost *all* imports! What they don't outright ban, they tax
|> out of the market! America builds a myriad of products at lower cost than
|> Japan, but we cannot sell them because they are *banned* from the Japanese
|> marketplace! And where do you think all the American jobs have gone?
|> Most of the high-tech and automotive industry has gone to Japan because
|> their government subsidizes it! Their government subsidizes the *dumping*
|> of their products into our country in order to drive our manufacturers
|> out of business, and then they raise their prices to reap the benefits.

Evidence?  What you are claiming is simply not true.  There certainly
may be companies who no longer operate in a particular market, but
I would bet that you can't find an instance where prices have gone
up unreasonably as a result.  What you are describing is known as
predatory pricing, and research has shown this practice to be virtually
none existent and certainly unsucessful whereever it may have been
tried.

|> And where do you think the remaining American jobs are going? Overseas,
|> and away. Thank you Mr. Bush for signing a free trade agreement with
|> Mexico, so that our businesses can now move there, where the cost of labor
|> is cheaper, the taxes are lower, there are no unions, there is no
|> environmental policy, and on and on... Bring our jobs back home. Tax the

There is more to production of products than cheap labor.  Labor must
be productive to be effective.  By almost any measure, U.S. labor is
the most productive in the world.  Of course, this doesn't mean that
all work will be done in the U.S.  There is a concept called comparative
advantage at work.  Even if you are better at doing something, it is
often better to let someone else do that something because you are 
*more* productive at doing something else.

|> hell out of anything imported into this country. Level the playing field.
|> What the heck, let's teach the Japanese a lesson, and *ban* the import
|> of Japanese cars, stereos, and electronics for two years.
|> 

Why don't we just pass a law preventing U.S. citizens from purchasing
imported products?  That is effectively what you are doing.  Of course
this ignores the fact that we supposedly live in a free country.

|> 
|> 	Whew. Just a raving madman frustrated with politics and the
|> economy and the inability of the former to deal with the latter.

Sit down, take a stress pill.  Things aren't as bad as you want to
make them out to be.  Try to get a better understanding of economics
before making rash proposals.  Try reading Henry Hazlitt's book,
"Economics in One Lesson", it is short, easy to read, and very
enlightening.  I can recommend other books if your interested.



James W. Howe                  internet: jwh@citi.umich.edu
University of Michigan             uucp: uunet!mailrus!citi.umich.edu!jwh
Ann Arbor, MI   48103-4943         
Newsgroups: talk.politics.misc,ba.politics