From: DEMON@DESIRE.WRIGHT.EDU (The Integral Differential)
Newsgroups: bit.listserv.politics
Subject: Re: Brett's primers on supply-siders...
Date: 6 Nov 92 21:40:47 GMT
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	The first catch :)
>other Andy:
>...
>What Brett' appears to be advocating is that what we need is *more* tax
>cuts for the wealthy, as opposed to demanding that they pay their fair
>share and cutting off the loopholes and dodges that they currently
>utilize to avoid paying.

	A nice bit of misrepresentation.  I see you followed Clinton closely.
Nowhere are "tax cuts for the rich" advocated or even mentioned.  Tax cuts
should be across the board.  (Nor are loopholes advocated.)

>What I suspect that Brett' and I agree upon is that there is currently
>inadequate economic growth and there is a need to rebuild infrastructure.
>We probably also agree that we need to encourage long-term investment,
>balance the government's budget and eliminate the deficit

	Yes.

>Where we disagree is what the government's role should be in correcting the
>problem.
>
>I certainly agree that tax cuts can stimulate the economy; however, I think
>that we've been giving them to the wrong people. What I would suggest is
>that we phase in drastic tax cuts on lower and middle income people by
>progressively raising the level of income at which one pays no taxes.
>For example we could over say a period of four year at a rate of 1,000.00
>dollars a year increase the exempted income level from $4,500.00 (to
>8,500.00). Additional amounts could be exempted based on the number of
>dependents on the income.

	No problems here.
>
>This would serve a number of functions; first it would stimulate consumer
>spending in the "basic" areas (food, clothing, shelter, cars, etc.) that
>would stimulate our ailing industrial base. Second it would allow us to
>downsize the IRS.

	Good, good.
>
>I have a number of ideas about changes that can be made in the tax code
>(that I have posted in the past and won't bore the old timers on the
>list with) among which would be the imposition of an universal accounting
>method for calculating income, a limit of 10x the salary of the lowest
>paid worker to be deducted for executives as well as a limit on the
>number of supervisory/management staff (as a ratio to production workers)
>costs that can be deducted.

	I wouldn't place any regulations on corporations.  Let them live/die by
the market.

>As far as taxing capital gains goes, if it is the sole source of an
>individual's income, I would tax it the same as income obtained from
>employment. If it is in addition to income, I would implement a sliding
>scale that would encourage investment (small gains that are a less
>than a quarter of a person's total income would be taxed at a very
>low rate) by middle class people. I would, of course continue the
>exception for the one time exemption from capital gains for senior
>citizens selling a house.

	Capital gains are actually a second tax.  You are first taxed on the
income that you use to invest, then again when you reap any gains.  At the very
least, they need indexing for inflation.  At best, no tax at all.

>In order to encourage long-term investment, I think the best thing
>that we can do is to discourage short-term speculative investments
>(not to mention junk bond trading schemes, etc.). What I would
>propose is a transaction tax on the sale of stocks, bonds and
>other securities. The tax would not apply to first issues or stocks/
>bonds/securities that have been held in excess of 10 years.

	We already have those.  (Commissions :).  I think the federal
government should stay away from any kind of transaction fee.  They would be
meddling in a market to no apparent gain.  (They would take in revenue, but
there would be no benefit to the market.)

>Now on to a few comments on the texts of Brett''s postings:
>
>From the Laffer portion of the postings (also the latter portion):
>
>>For some reason unknown to politicians, people don't work to pay
>>taxes, and if necessary will stop working to avoid taxes....
>>       [Or funnel more money into tax-free investments--Brett]
>
>I have never met anybody who has avoided working for the fact that they
>will have to pay some portion of their income in taxes. It seems to me
>that the people who go to the greatest lengths to avoid paying taxes
>are the people who don't actually work, but obtain their income solely
>through investment.

	I'm at the top income bracket.  (Hello down there :).  If the top
bracket is returned to past levels (50%, 97%, etc.) I will not take future
raises as salary, but instead as stock options, pre-tax benefits, etc.  I will
not lose 1/2 to 9/10 of my money by taking the raise as ordinary income.

>>       The US worker is not stupid.  When faced with taxes that are too high,
>>they will shunt money into tax free investments.  They will work for cash and
>>bypass the tax man.  When rates are lowered, people pull their money out of
 the
>>shelters and invest it in stocks and other taxed securities.
>
>The choice that most workers face with their paychecks is not whether to
>invest in tax-shelters but whether to pay the gas&electric bill or to
>buy food.

	An even better argument for lower tax rates.  This is not a rich vs.
poor argument.  The poor are not that way becuase others are rich.

>>  Every preceding tax cut for capital gains had caused a rise in
>>revenues.  It makes you wonder about those opposing new cuts in the capital
>>gains tax rate.
>
>And reducing the price of goods 50% will encourage consumers to buy more
>goods, but in the long run you still get 50% less and all you are really
>doing is buying time. If you want to increase revenues, put a limit on
>tax shelters.

	Not what is said above.  The key is whether or not the increased volume
makes up for the loss in profit per-item.  If you reduce profit by 50%, but
sell more than twice as much, then you are ahead.  Every time the government
has reduced the per-item "profit" (tax) the volume has increased more than
enough to make up the difference.  The same thing happened with cuts in the
income taxes during the 1980s.

>From the Forbes interview with Milton Friedman:
>
>>       Aren't markets now supposed to discipline central banks?
>
>That's the idea, except the Federal Reserve is supposed to prevent
>them from failing, so there is no real discipline. One of the most
>amazing episodes of this occurred when the Hunt brothers decided
>to try to corner the market on silver, the Fed all but ordered the
>banks not to loan out money for speculative ventures of this nature,
>the banks went ahead and lent hundreds of millions out anyway. When
>the market applied "discipline" (when the bottom fell out) the Fed
>bailed them out, wiped their noses, dried their eyes and bandaged
>their knees.

	And it's doing it again with real-estate investors.  (Watch for a bank
near you to be seized and liquidated for easy profits for real-estate buyers.)
	In another series I argued that loans should not be treated the same.
Loans for speculation should meet much tougher requirements and carry a higher
interest rate than ordinary consumer loans.

>>       Four years ago, when we interviewed you, our cover line was "Why
>>liberalism"--in the American sense of interventionist government--"is
>>obsolete."  Well, if liberalism is dead, why won't it lie down?
>
>>       There are too many good jobs at stake.  You have this enormous
>>bureaucracy in Washington, and also in every city and state, all dependent
 upon
>>the continuation of New Deal and Great Society kinds of programs.
>>       Instead of Licoln's government of the people, by the people, for the
>>people, we have government of the people, by the bureaucrats, for the
>>bureaucrats--including among the bureaucrats the elected bureaucrats.
>
>I disagree; the reason is that at the bottom of it we do not trust the
>private sector (markets) to invest in and take responsibility for
>infrastructure.

	Well *I* do.  I trust UL to test electronics.  Consumer reports to be
mostly fair in product reviews (except cars, grumble), Sea Shepard to be a lot
better than any government agency at stopping whale hunting, etc.
	Any time a publicly funded organization is set up to solve a problem
the bureaucracit law takes over: the task becomes job security instead of
problem resolution.

>Government may not be perceived by many as a good
>or efficient provider of such, but it is more trusted than the private
>sector.

	Again I have to disagree.  The private sector is not some evil entity.
There are good companies and bad, and it is up to the consumer to make an
informed choice.

>>       Forbes: How do you explain Bush?  Because it's not as if the Reagan
>>policies were unsuccessful.
>
>>       Friedman: They _were_ successful.  My answer to that is that principles
>>matter a great deal even in politics.  Mr. Reagan had very strong principles.
>>Mr. Bush has some strong principles, but not about the domestic economy.
>
>Reagan may have strong principles but unfortunately his principles created
>"rolling recessions" and a great deal of unemployment; this is fine for

	Reagan created the largest peacetime expansion ever.  18 million
new jobs, falling unemployment, etc.  When did "rolling recessions" occur and
how are 18 million new jobs and a falling unemployment rate translated into a
great deal of unemployment?

>the wealthy who enjoyed a great deal of prosperity at the same time that
>the unemployment drove down the cost of labor, ie., meant that the
>average american worker made less money and had a lower standard of
>living.

	The middle class gained the most during the 1980s (35% or there abouts,
compared to 26% for upper and 29% for lower, numbers are from memory via
Forbes, but I will post the actuals this weekend).

	The rich, in quantity, gained more.  But like Ross said, doubling a
penny isn't that much.  Doubling a million looks like a lot more when you say
"gained a million".  Both are still 100% improvements.

>>       What bothers me is not so much the historical debate, but what's ahead.
>>The combination of political and technological change opens up a vast amount
 of
>>low-cost labor.  There may be half a billion to a billion potential workers in
>>China, Eastern Europe and Latin America.  And that constitutes a real
>>revolution in possible cooperation between capital-rich countries and
>>labor-rich countries.  It could give us another industrial revolution....
>
>Or it could just create more domestic unemployment, economic stratification
>and ultimately another depression. The good news is that the products
>imported from these "labor rich countries" will be cheap, the bad news
>is that few will be buying.

	I don't think the "protect American wages" argument is valid.  We have
no special hold on a standard of living higher than our neighbors.  If they
want to work for less money, it's up to us to either work for a competative
wage or prove we're worth more.
	I'd be more than glad to give up the extra cars and TVs if it means
Mexican workers are earning enough to buy GM cars and Zenith TVs.

>>       Well, I think our friends down south have eloquently put down any
>>supply-side nay-sayers.  The proof is in the pudding, so to speak.  We are
>>today approaching the point Mexico was at last decade.  They are using the
 same
>>methods we used to boom in the 80s.  Why have we turned away?  Collective
 guilt
>>at being wealthy?  Tired of success?  Willing to rest on our laurels?
>
>Why have we turned away? Simple, supply side economics are not good for
>the common man, the majority of voters do not like what the "blessings"
>of supply side economics have brought us, high unemployment, enormous
>deficits, social stratification, etc.

	Supply side did not bring us those things.  It brought jobs, decreasing
deficits (as a % of GNP), etc.  The only social stratification I have seen is
by those promoting class warfare (ie, progressive income taxes).
	Reagan only implemented half of supply-side, and it was still a huge
success.  If he had implmented the other half (spending cuts) he could have
tackled the debt also.  However, a stonewalling congress forced him into a
choice: debt reduction or cold war victory.  I think he made the right choice
for the times.

Brett'
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