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Date:         Tue, 17 Nov 1992 12:06:57 -0500
From:         Andrew Allen <E7L8ALL@TOWSONVX.BITNET>
Subject:      more economics talk for Jason Z
Comments: To: politics@ohstvma.bitnet

>>Well, I will look for exact figures, but I seem to remember hearing a
>>story on NPR about the redistribution of the tax burden since 1978;
>>if I remember correctly the portion of the tax burden paid by
>>corporations dropped 16% of the total tax burden. (Not 16% of what they
>>used to pay but 16% of whatever amount is paid by all revenue sources)

>This is completely extraneous to your point about across-the-board tax cuts
>benefiting the rich.  MY point was that the tax code is currently biased
>against the rich (possibly, at least) so that a tax cut would make the system
>more fair.

My apologies, in the process of editing things I chopped off a bunch of
text including my response to the first paragraph or two of your post. B(

I have since toasted the originals so what I will tell you is that I
wrote a witty and intelligent response that discussed the idea of the
wealthy being able to play a shell game with their money keeping it
out of the hands of the tax collectors.

While the tax schedules may seem to be "biased against the wealthy" the
actuality in terms of the portion of the tax revenues coughed up
by the wealthy does not show the same picture. The 80's show corporate
taxes down and individual taxes up for the wealthy, big deal, it's
the same money, coming out of a different pocket.


>>>You could argue that, but you would be wrong.  When you sum a few hundred
>>>dollars over a few million taxpayers, the ammount adds up pretty quick.  I
>>>agree, though, that such a tax cut probably wouldn't do much to improve the
>>>economies long-run situation.

>>I didn't say that it was an insignificant amount of revenue lost, what I
>>meant is that it is not going to allow/induce somebody to go out and buy
>>a house or a car or start up a small business.

>Consumption includes more than durable goods purchases, and starting up a small
>business doesn't necessarily contribute *anything* to consumption.  Anyway, you
>haven't refuted my point that a few extra hundred dollars *will* increase
>consumption expenditures.

Ok, consumption will increase - happy? But it won't do much long-term good.


>>The investments of the wealthy are doomed to failure in the long run if
>>the great mass of citizens cannot afford to consume the products that
>they create. Even if through driving the cost of labor down to third
>>world levels
>
>Actually, greater investment (additions to the capital stock) causes wages to
>rise, since labor becomes more productive.  But anyway...
>
>>we were able to obtain significantly larger market shares
>>for our products abroad, consumption of our goods would fall off as
>>their economies suffered from the loss of our market for their goods.
>
>Then why hasn't this happened as our international market shares *have*
>increased?

By answering my statement in two sections you have missed the fact that
there is an if..then logical outcome statement.

Our international market share has increased because of the ongoing
devaluation of our currency and the robustness of certain other
countries economies in Europe and Japan. If however, these countries
were no longer able to sell in our market due to a significant
lowering of wages in this country then the whole thing would fall
apart.

As to your statement that additions to capital stock cause wages to
increase, some figures please?

On the face of it this would seem to be false in that the stock market
has been going furiously for quite some time now, all of the government
figures indicate that productivity is up and real wages continue to fall.


>I'm sure, then, that you refused the tax cuts and loopholes which you so
>strenuously oppose.  Or did you take advantage of them just like the "schmuks"
>you dislike?

I am not in a position to take advantage of any of the loopholes that I
oppose. I got a tax cut, and I took it with the knowledge that I or
generations that follow me would have to pay for it; and that "returning
the unused portion" would do no good.


>If you blame Volker for "breaking" unions (from the fed, somehow), then why did
>you lay the blame on Reagan?  Since you are obviously an expert on the fed, you
>must know that Volcker was appointed by Carter.  Do you therefore also hold
>Carter responsible for "breaking" unions?

In a round about way the Wall Street class of people forced Carter to
find a conservative person to chair the Fed or face even more economic
turmoil. Carter, like most Presidents, didn't have much backround in
economics, nor did he have much practical experience.

I don't think that Carter had any idea when he took office of just how
much power Wall Street and the Fed really have, or for that matter
that the Fed is probably more regulated by Wall Street and the banks
than it is the regulator of them.

>>Volcker used to carry a card in his pocket on which he made notes of
>>wage settlements by various unions, his object in keeping track was
>>what he called "wage deceleration." Volcker used Fed policy in essence
>>to break organized labor's ability to demand higher wages, at the behest
>>of the Reaganistas.

>I would sure enjoy an explanation of how this happened.  It seems to me a
>little absurd to argue that Volcker was sitting back thinking "how can I stage
>open market operations so I can bust the unions and help out my buddy Ron?"

Not as absurd as you might think actually...

You are probably familiar with the idea that recessions are (at least
in some instances) caused by Fed policy rather than vice versa. The
recession that occurred in the early portion of Reagan's presidency
(81-82) was an engineered recession, that was deliberately prolonged
by the Fed's tight money policy to drive down inflation.

The Fed's tight money policy was maintained by the Open Market Committee
in late 1981 despite the fact that money growth was well below the
already constrictive targets that the Fed had set up. Given the sort
of rhetoric that Volcker was spouting at the time about "wage deceleration,"
a connection can be reasonably drawn.

I realize that Volcker had no great love for Reagan, but that does not
imply that their goals were all that different. Chances are that Volcker's
primary reason for disliking Reagan had to do with the methods that
Reagan was advocating, rather than the clientele that each was interested
in serving.

>But I don't have to tell you that Volcker and Reagan didn't like one another.
>As an avid fed-watcher, you already know that Reagan initially opposed the idea
>of reappointing Volcker and only did so after enormous political pressure.

Many of Reagan's advisers were dead set against reappointing Volcker, some
were upset over the degree to which he stretched out the recession, this
probably has more to do with their political ambitions (not wanting the
administration to be associated with a sharp, painful recession) rather
than any great care or concern for the millions of workers whose jobs
were liquidated or the industries that were destroyed by the mania to
lower inflation asap.

In the long run what got Volcker reappointed was that there was really
no other person that they could find with Volcker's stature in the
estimation of Wall Streeters, particularly after Alan Greenspan withdrew
and endorsed Volcker. Reagan had no other viable choices.


>>Social Security is indexed for inflation,

>Yes, but that usually isn't the main source of income for retirees.  Many of
>them live off interest on CDs or coupon bonds, which are definately NOT indexed
>and for whom inflation is a serious threat.

Some figures please. I suspect that the numbers of retirees living off of
CD's and bonds is small by comparison to those living off of SS alone
or SS with a relatively smaller contribution from a pension fund.


JasonZ

-other Andy
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