From: mccall@mksol.dseg.ti.com (fred j mccall 575-3539)
Subject: Re: Clinton Policies
Organization: Texas Instruments, Inc
Distribution: usa
Date: Wed, 7 Oct 1992 14:35:32 GMT

In article <1992Oct05.175553.14065@watson.ibm.com> johniac@austin.ibm.com (John Iacoletti) writes:
>In article <1992Oct2.203245.18119@mksol.dseg.ti.com>, mccall@mksol.dseg.ti.com (fred j mccall 575-3539) writes:
>|> In <1992Sep30.213640.31229@watson.ibm.com> johniac@johniac.austin.ibm.com (John Iacoletti) writes:
>|> 
>|> >Scenario 1:  Go bankrupt, default on the debt, and start over.  This
>|> >sometimes happens to organizations that can't control their spending.
>|> 
>|> This is generally considered a Bad Thing (tm) when done by
>|> governments, and particularly bad when done by the governments of
>|> major nations.  If you don't understand why this would be so, I'm not
>|> sure where to even begin explaining it.
>
>I'm just trying to enumerate the ways to get us out of the massive
>federal debt.  I didn't say they were all good ideas.  We need to
>examine all of the scenarios though.  If we really want to get rid of
>the debt, it's going to hurt.  The question is, how much "hurt" do we
>want to inflict on ourselves.

I think there's a difference between 'discomfort' and 'hurt'.  This
first method is tantamount to chopping off your leg because your
toenails need trimming.

>
>|> >Scenario 2:  Stop all government spending, except to pay off the debt.
>|> >Start again in four or five years with a balanced budget based on poll 
>|> >tax revenues, with no deficit spending allowed, for any reason.
>|> 
>|> This is a terrible idea for more reasons than I have time to go into.
>|> Not allowing deficit spending for any reasn is a bad idea.  No
>|> government spending except to service current debt is a bad idea.  A
>|> poll tax as the only tax is a bad idea.
>
>Argument by assertion.  Isn't that special?

Yes, it is.  There are entire wings of libraries filled with books
explaining the theory of why this is a bad idea.  I see that I once
again am behaving as if I have a 'chip' on my shoulder; no, wait --
YOU wrote that, didn't you.  Hmmmmmmmmm. 

Anyhow, let's try a brief explication of some of these things.  It
will be brief enough so that you will no doubt be able to raise all
sorts of simplistic arguments that would require more detail to
refute.  Because that sort of game is such an incredible waste of
time, I prefer not to play it.  Anyway, on with the show.

Not allowing deficit spending forces government into a pro-cyclical
fiscal role.  What that means is that instead of government spending
acting to 'smooth out' the ups and downs of the economy (with
accomodating monetary policy), it now must act to REINFORCE them.
This occurs because government revenues will drop during economic bad
times (because GNP drops) and they aren't allowed to run a deficit.
Ideally, the government should run a deficit during bad economic times
and a surplus during good economic times.  The reason we're in trouble
now is because they've forgotten that second part up in Washington.
For further detail, look in the card catalog under 'Economics:
Keynesian'. 

With regard to the elimination of all government services other than
debt service on currently existing debt, whether this is a 'bad' idea
or not relies on whether or not you think there are some things that
government should actually be doing.  Most libertarians will argue
that there are no such things, but I've never heard a convincing
argument for that position.  There is usually entirely too much
handwaving away of externalities of various human activities.  In
addition, what happens with regard to interstate commerce, interstate
disputes, defense, foreign policy, and all those other things that (to
me, anyway) it makes sense to do at the national level?  Each state
has their own, and when there is a dispute between states they fight
it out?  After all, there is no funding for Federal courts,
regulation, etc.  That's been eliminated because we're only going to
service the debt.  See your card catalog under topics quite literally
too numerous to mention; start with 'Economics; Macro', 'Foreign
Policy', and 'Commerce, Interstate'.  For arguments pro- and con-
about what government should typically be doing, look under
'Economics: Government policy and regulation' (for example).  

As for the poll tax as the only tax, a bit of simple thought seems
enough to debunk this.  This is a highly regressive method of taxation
that in no way reflects the benefits that people get from government.
The net effect (assuming you make it high enough to get enough money
to do ANYTHING) is to force an even larger percentage of the U.S.
population into living below the poverty line.

>
>|> >Step 1. Flatten the income tax to 15% of earnings above $10000.
>|> 
>|> This is a good idea.  It is also where this should probably stop,
>
>Absolutely not.  This is just the first step in changing from the
>"soak the rich" method of taxation to a "pay for what you receive"
>method.  If you stop here, it's not much of an improvement.

Actually, it is an INCREDIBLE improvement.  I guess what you consider
an 'improvement' rather depends on what you're trying to accomplish.
A flat tax puts people in the position of getting what they pay for
(government services are typically worth more to people who have more
to protect, more interests, more interaction on the sorts of levels
that require governmental regulation, etc.).  Look in your card
catalog for anything written by Milton Friedman (which should be a
familiar name to a libertarian) or under 'Economics: Monetarist'.

>
>|> since most of the rest of this is bad ideas, IMHO.  It will require,
>|> however, some *HUGE* cuts in spending.  What gets killed?
>
>Everything gets cut, but you can start with Defense, Health and Human
>Services, FICA, Agriculture, and congressional and presidential 
>salaries.

FICA is income, not outgo, and it in fact does not meet the total
required expenditures for SS payments, medicare, etc.  Take a look at
the numbers.  To get down to where a 15% flat tax on income will cover
things, you are going to have to cut spending roughly to 1/3 of what
it is now (approximately to $500 billion or something less -- I really
don't feel like working the numbers in detail).  Interest on the debt
runs around $200 billion.  I assume you also want to pay down the debt
in some reasonable amount of time.  You're going to pretty much have
to cut everything, and not by anything remotely resembling half.
Let's be generous and say you have $300 billion left after you pay the
interest on the debt.  What do you want to spend it on?  That's
probably an easier question than asking what gets cut.

>
>|> >Step 2. Replace the income tax with a sales tax of 18%.
>|> 
>|> Presumably with no exemptions?  You've just lowered a bunch more
>|> peoples' incomes to below what they need to live based on the
>|> additional tax you just hit them with (18% of everything under $10k
>|> plus an additional 3% on everything else).  Rotten idea, except for
>|> the folks who make their livings by shuffling money around.
>
>Again, this is an interim step to shift the burden of government
>equally onto the people who benefit from it.  You don't want to stop
>here.  You also want to cut government spending and pay off more of
>the debt every step of the way.

Except that it doesn't do what you claim you want to do.  It shifts
the burden more heavily onto those who can least afford it and who are
benefitting least from the government -- that 20% of the population
who are already living in poverty.  Remember that $300 billion you had
to play with after the last step?  Cut it down to around $50 billion
(unless you somehow managed to pay down a significant portion of the
debt by this time, and I don't quite see how you do that, given the
numbers we're talking about).  So, of that list of things you had
before, what gets cut?

>
>|> 
>|> >Step 3. Require referenda for changes in taxes or increase in 
>|> >        government debt.
>|> 
>|> This one I think is probably a good idea.  However, I'm not convinced
>|> that it's a WORKABLE idea.
>
>But it's necessary.  The only way to cure runaway spending is to have
>the people control their own pursestrings.

If people can't vote responsibly for people to represent them, how do
you expect them to do this?  If people wanted the cuts you're talking
about prior to this point, why aren't they voting for people who
advocate such cuts?  Why didn't you involve the "people control[ling]
their own pursestrings" before this?  Why didn't you let the people
decide what got cut and who got taxed up to this point?

>
>|> 
>|> >Step 4. Eliminate all other taxes and fees, except customs, fines &
>|> >        the 18% sales tax, and implement the contract recording fee.
>|> 
>|> This refers to "the contract recording fee" as if it is a well-known
>|> thing.  What does it refer to?  Is there a proposal someplace for such
>|> a fee?  What is the expected income from such a fee and what is the
>|> expected loss in income from doing away with all those other taxes?
>
>Sorry.  I pulled this out of an ongoing discussion, in which (I
>assume) this fee was described in more detail.  At this point, I'll
>have to cop out and say that the fees will have to be set at a level
>necessary to finance government spending at the level you have
>acheived at this point in the conversion process (not the current
>levels).
>
>|> >Step 5. Lower sales tax to 10% and implement head tax of $400/family 
>|> >        member/year.  (Reality check: $400*260*10^6=$104*10^9)
>|> 
>|>                                                     What this shows is
>|> that $5k/family member is the break-even point for this proposal, and
>|> that the taxes of anyone making LESS than that go up.  In other words,
>|> more people fail to make it, and we increase the tax load on the poor,
>|> who are least able to afford it.  At the same time, those who are
>|> better off get a tax cut.
>
>You're looking at this from your "soak the rich" mindset.  

Let me get this straight.  Here is the man who claims *I* have a chip
on *MY* shoulder, and yet he uses terms such as "'soak the rich'
mindset" to describe anyone who disagrees with his vision of
Libertopia?  Looks to me like you're reading the wrong mind again,
John.  Flat income taxes DO NOT 'soak the rich'.  The rich get more
benefit from government services, have more to protect, and hence
should pay more.  Do you charge the same thing for insurance on a $50k
house as you do on a $50 million house?  Of course not!

What happens to all those people who will simply be unable to both pay
your proposed taxes and stay alive at the same time?

>Again, one
>of the purposes of this tax restructuring is to share the burden of
>government equally--this makes sense in a system where everyone has an
>equal say in how tax money is spent.  As others have pointed out, this
>will discourage the lower income people from voting in bread and circuses
>for themselves at others' expense, which is how we got into this
>spending mess in the first place.

And so we come down to it.  You're not interested in an 'equal say'.
You're interested in putting in place a system which is an oligarchy
in all but actual title.  Fine, you've stopped the 'lower income
people' (who make up probably 60% of the population, given the current
income distribution) from having a say (since probably 30%-40% of them
will simply be unable to both live and pay their taxes).  Now, what's
to stop that top 20% from riding roughshod over everyone else?

>
>|> >Step 6. Eliminate customs taxes.
>|> 
>|> Replacing them with?  Cutting what?
>
>Replacing them with nothing of course.  The idea is to reduce federal
>spending.  Cut everything equally to achieve the lower spending level.

'Everything' being WHAT?  Right now, you have managed to say that the
poorest people have to pay the bulk of the interest on past debt while
getting nothing in return (and presumably going to prison when they
are unable to pay).  There's not much left to cut, John.  Have you
paid the debt off yet?  From the numbers so far, it sure doesn't seem
like it. 

>
>|> >Step 7. Eliminate sales tax.
>|> 
>|> Ok, net government income is now down to that $104 billion from head
>|> taxes plus whatever this 'contract fee' is expected to bring in.  We
>|> can probably no longer service the debt, much less do anything else.
>
>By this time, the debt would necessarily have been eliminated or
>reduced well below $104 billion + contract fee revenue.

Then you never arrive at this point.  Either you have failed to pay
down the debt, the economy has dropped into the toilet, or you have
had another American Revolution and they've taken the folks trying to
tax people into starvation out and shot them.

[We get to keep guns, right?]

>
>|> >Step 8. Replace head tax with government participation tax of $100/year.
>|> 
>|> Reducing income to less than 15% of what it was, in one fell swoop.
>|> Now what?  You now have an income of around $10 billion, IF YOU ASSUME
>|> THAT ALMOST ALL ADULTS ELECT TO PARTICIPATE.
>|> 
>|> Why not just say that we're not going to support a central government
>|> and secede?  You've created the same net effect.  Of course, since the
>|> State is now going to have to do everything, you're probably paying
>|> just as much to fund the same services at the state level.
>
>Not the "same" services, but the services that the people of that
>state agree are necessary and are willing to pay for.  That way you
>don't have Texans paying for Byrd's West Virginia pork, etc.
>
>In 1800, this country spent about $1.08 per person.  In 1910, this
>country spent $6.81 per person.  $100 is rather generous, even when
>you consider inflation.  $5000 per person is outrageous and it's just
>getting worse.

Rather generous, you say?  Let's look at a few numbers, then.  The GNP
Deflator (a measure of inflation in the economy rather than from a
consumer standpoint, as the CPI measures) has increased to roughly 12
times what it was in 1910.  That says that your $100/person is pretty
much the 1910 level.  So much for 'generous'.  Now, if you take into
account that this ISN'T 1910 and that the world and the economy have
changed immensely since then, you should see that the level of
spending that was sufficient in 1910 simply isn't going to be enough
now.  This is actually a cut, by the way, since REAL GNP has increased
quite a bit since 1910, so the same level of spending is a
proportionately smaller part.

I trust this was long enough so that you don't have to engage in any
'mindreading', John.  Perhaps now you see why I didn't really want to
expend the time and effort to try to explain what I meant, when you
probably still won't understand all the implications without a lot of
reading. 

[I don't mean that to be insulting; it's just that without sufficient
background on your part, I can sit here and try to explain the
concepts underlying the reasoning here forever.  I really don't want
to type in several thousand pages of explication.]

-- 
"Insisting on perfect safety is for people who don't have the balls to live
 in the real world."   -- Mary Shafer, NASA Ames Dryden
------------------------------------------------------------------------------
Fred.McCall@dseg.ti.com - I don't speak for others and they don't speak for me.
Newsgroups: alt.politics.clinton,talk.politics.misc