Wednesday, April 1, 2009

A Conservative Manifesto

"If Western man in the future should recover his analytical ability, our times will be known as the age in which trivia replaced culture and bureaucracy replaced life." – Clyde N. Wilson

It has discouraged me to see how unable or unwilling people in our country are to find constructive change. Instead, public brands are swapped with shallow victories being claimed by either side; the lesser of two evils being still evil.

Then it occurred to me that maybe it's because there's a real shortage of ideas and leadership, afterall, listening to the news and the political parties speak is worse than listening to the bleating of sheep. At least sheep give wool. Maybe the genuine efforts for change have simply not been said outloud enough times to introduce them to people as real possibilities. Maybe it is time to remove the trivia and bureacracy from our lives and push for the substance of culture and a vivid life.

I present to you a common sense, conservative manifesto. This is free for debate, but it is not open to the criticism of being too radical or impossible, those being hollow charges since everything proposed here, at one time, has existed in some form.


Taxation

Taxation should never be a consideration in anyone's life. The fact that it not only weighs on our time and minds every April 15th; the fact that business people actually make otherwise pure business decisions on its consdideration; the fact that politicians are constantly manipulating we the people with the minutia of it all lead to the conclusion that it is a big, huge mess that no politician has ever dealt with. The GOP offers tax cuts, pitting the middle class against the working poor. The Democrats raise taxes on the rich to transfer it to the non-working poor, pitting the poor against the rich and the middle class against eveyone. This absurd policy in combination is designed to keep the average taxpayer dizzy and voting along simplistic lines.

So let me start the proposed tax code off along some simple guiding principles. Every citizen should be taxed in some way – no one is above or below paying their share. Taxes should be simple and easy to pay – there is no comfort or advantage to the people in complexity. The goal is to have every person pay their taxes for the year in what would be a 15 minute ordeal on a form the size of a postcard. The current tax code is over 16,000 pages, and if you order a copy from the guvment, it comes in 20 volumes and costs $974. I see no reason the code can't be simpified to the front and back of single sheet of paper.

The first stab: A flat tax of 15% on the combined income from wages/tips, dividends, interest, and capital gains. If I left anything out, I didn't mean to. All income, including SS, combined into one pot minus 15%. No deductions, no loopholes, no rebates. The rich currently hide their great wealth in trust bundles and other such paid-for loopholes. Many poor currently don't pay taxes (rather receive paychecks from the guvment) and develop bad attitudes that deepen the nasty cycle of poverty and helplessness. This would also apply to all corporate taxes which are currently at record highs in our country.

The 15% reflects a replacement rate as calculated by several economists (who actually estimated the number in the lower teens, but I'm making it simple). Critics who multiply 15% by the stated income of citizens in some year and claim it wouldn't be enough are not doing an accurate estimation. The rich always hide income from high tax rates, thus income declared would go up (this has been proven over and over again).

People who cry for the poor and say they should pay no taxes are free to subsidize any charity they want with their own money and get involved with social work if that is their calling. But our country is in desperate need of a citizen identity, and this is a great way for the poor of our country to take pride and sign up! It will also draw a firm line in the sand between honest citizens and illegal aliens.


National Economics

National Economics is tricky to even talk about because we have been lied to for so long, and our words now have slid around so much that even an honest debate is confusing rather than enlightening. We have been tricked into thinking that the off-shoring of jobs is a good thing since we can now buy cheap crap at Wal-Mart. We have been tricked into thinking that whatever is good for Wall Street or global bankers, must be good for the country since instead of a loan costing 7% interest, it costs 5.5%. We have been tricked into thinking that an invented and construed "Economy" based on 70% consumption is truly creating wealth for anyone but the owners of the companies who have off-shored jobs and pocketed the profits rather than passing on the savings. We have been tricked into thinking that the Consumer Price Index controlled and manipulated by bankers reflects inflation, rather than the actual money supply in our economy. And we have been tricked into thinking we can grow economically through increased debt in order to make our current debt seem smaller - yet this borrowed growth is from buying stuff, not from making good investments.

All of these tricks have worked to the benefit of the tricksters and the harm of the average American. The silence of the middle class bought through inordinately large gains in the stock market for our retirement funds has been shattered when false gain after false gain has been burst like a bubble. The manufacturing base of our country has been auctioned off, and the profits pocketed by the few. The dollar has been debased and weakened to fund this mania and, as a result, our wages and savings have gone down.

First step: dissolve the federal reserve and give Congress direct audit over the money supply of the Treasury. The current federal reserve is actually the third instance of a national bank in our history, the other two having been destroyed by the people for their greed and dishonesty. It can happen again. Interest rates can be controlled by the free market of local and regional bankers, it doesn't need to be "established" by a central authority. We at least have all seen the harm Alan Greenspan has caused that would not have been so easy to do by spreading out risk assessments to all bankers. Not all bankers are foolish, especially if they know they hold their own loans and know there will be no bailouts for them if they go bust.

Return to the gold standard or some hard asset standard. People think this is arcane or foolish, but it had governed our country well until 1971. Read about the Bretton-Woods agreement on your own time. Look at graphs of the value of gold and the dollar and oil since 1971. Gold or precious metals make an ideal backing of currency. They do not prevent inflation by their own virtue, but they give us an honest way to make measurements. Imagine in contrast, if the federal reserve changed the size of a 12-inch foot whenever it wanted to, how that would throw so much uncertainty into the builders across our nation. This is the problem that is most fundamental to the recovery of our currency, or else all other efforts will only have temporary effects and then fail.

Undo all bailouts. Reduce spending at the national level by at least $1 trillion. This would return us to those poor, horrible days of 2006, when we only spent $2.6 trillion. Remember how poor we all were back then, when the government spent so little? It is shocking that so many honest men still think the government has, at any point in history, ever helped spend our way into prosperity – that it controls the economy. What slaves we've become!

The argument over earmarks is silly. If our national budget in 2008 were scaled down to $30,000 (a number we can all understand), earmarks would be $16. A much more prominant part of our budget would be spending on military adventures and security, to the tune of $1 trillion, or in our scaled version, $10,000 – roughly 1/3 of our expenditures. That is insane and needs to be reduced sharply.

Honor all promises for Social Security, yet tourniquet it. We have an outstanding promise of $40-50 TRILLION (4x-5x our current national debt) in benefits that our leaders have ignored. This is a broken system which we need to give people a way out of. Enable people entering the workforce to opt-out. I would gladly do this now, surrendering even what I have already paid in, if it meant I would pay no more and not receive any either.


National Sovereignty and Border Control


Since we have already stated all citizens will pay taxes, then all non-citizens must go. That's right, deport all 12-20 million illegal aliens in this country. This would not only reduce the amount of financial burden on our country but would eliminate huge state costs that are rarely added up and totalled. It would also have the benefit of creating 12-20 million jobs overnight. These jobs are preferable to the jobs the government is claiming to create out of thin air, because these jobs are in demand by industry and are sustainable.

The many troops we have out patrolling the borders of other nations could come home and in relative peace and at a fraction of the cost could patrol our own borders to fill out the remainder of their tours. The situation along the Mexican border is getting really violent, although we'll deal with the causes of that next. But let's also not forget all the terrorists who committed 9/11 came through our friendly northern neighbor's borders.

An additional aspect of national sovereignty is to acknowledge that we have an economic border as well. Those people who wish to conduct business across our borders should pay the cost of opening such breaches of physical and economic security. A simple 1% import tax on all goods and services should do the trick and hopefully reinforce the true cost of shipping jobs overseas (which always depends on shipping cheap products back to our large consumption markets). It is not that no jobs should ever be shipped overseas, but we should not overtly encourage this behavior nor subsidize the profitability of it.

A final point about national economics. Nations rich in a diversity of natural resources do not rely upon imports to survive. Nations like Saudi Arabia need imports, so their approach might be different. But technically speaking, we should need to import nothing of basic importance, just luxury items from other cultures. We are capable of producing and supplying all of our own needs in our own free markets. The drive for profits that destroys these markets within is an unpatriotic one. All discussions on "free market" economics are thrown out the window when it comes to international trade; especially, when we do not even allow free markets within our own borders.


Wars on Concepts and Inanimate Objects

We must stop fighting wars on concepts and inanimate objects, like terrorism and drugs or guns. These wars can never be won. They are indeed targeting very big problems to the people of our country, just not problems that should be fought by the military. The war on drugs diverts billions of dollars away from security or paying down the debt and increases the strain on our borders (which costs us more money in border control). The violence it causes within our country is undeniable and rips apart communities even moreso in supply nations throughout Central and northern South America. Yet, the benefits of the war on drugs is not clear at all. Making puritans feel better about themselves or relieving parents of talking to their children about reality do not count.

At least let's start with decriminalizing marijuana. From what I understand, Amsterdam – where pot and other drugs are extremely tolerated – has a lower abuse rate than the U.S. So where is the benefit on that front? We are also missing out on a huge form of tax revenue as well as stomping all over civil liberties with this silly war started by Nixon. Drug addiction, a horrible problem, is mostly a medical one and should be treated as such. The U.S. also has the highest incarceration rate in the world. This does not speak well of a rich, free society; no, this is the same way communist Russia behaved. It is also an unnecessary drain on our taxes. Half of these people in jail are non-violent drug offenders. This policy has especially decimated minority communities to no good end, turning future fathers, business, and commumity leaders into drug-selling criminals.

The War on Terror is no different. The language about it is exactly the same as the language from the War on Drugs. This is not about ignoring the real threats to our people – quite the opposite. This is about not flying off the handle and committing our brave soldiers to doing things the military shouldn't do. The military shouldn't be in charge of building hospitals and schools and other nation-buiding nonsense. The military shouldn't ask our brave soldiers to be sitting duck targets for cowardly terrorists. The military should be in charge of killing as many enemies as possible, blowing up all their assets and coming home job well done.

These unending conflicts are so harmful to our people. Return to the Christian Just War theory, which says at the very least, we should not attack someone who has not attacked us first or who is not very clearly about to (and able to) attack us. The follies in the Middle East, Vietnam, and Korea have all departed from this theory and have all sacrificed the lives of far too many brave and honorable men while squandering our globally deserved good will as a righteous nation. As Eisenhower told JFK when he assumed the presidency, "America is carrying far more than her share of the free world defense." This remains far more caricatured today.


Judges and Governance

We need to return to the Constitution. The Bill of Rights was originally written to constrain the federal government from becoming overbearing against the people. Now, it has been switched around to enable the federal government to constrain our rights! The concept of true liberty is almost dead in our country. Being free is so much more than just being able to go to the mall with a new credit card. Our inner cities are filled with economic slaves living in a rotten culture. Our suburbs are filled with the silence and contentment of paid people. We are more afraid to hurt people's feelings than we are to stand for truth and be critical of falsehoods when we see them.

Our federal government is in a shambles now and has been for at least my whole life. The President is either a hero or scapegoat, but a false idol to all. The Congress stands for almost nothing, as these elected representatives become soft and corrupt after just a few months in D.C. To fill that mushy gap, our judges have been legislating from the benches, interepreting laws based on the effects they have on people, the popularity of the laws, and how they, themselves, feel about politics. Such judges need to be replaced, from the top down, with judges who only seek to square any current rulings with the standard laws of the past.

Presidents need to stop signing into law every piece of dishonest legislation that comes in front of them, which today is almost every single bill. If only a man could be more concerned with his country than his own perceived legacy. Keeping Congress greased and the people dull is a horrible way to waste a legacy. We should only elect honest people to the Congress and Senate. Term limits have not worked, and they have not gotten us off the hook.

***

Our country used to be a free republic, where people could live as they pleased within their own communities. Taxes were not so high so as to make living off of one's own private land impossible. The economics were not so skewed and dishonest so as to make having more than two children nearly impossible. The morality of the people on average was high enough to consider all of us free men without the need for a nanny state.

This republic has been bought and sold like a slave in the name of progress. We are now left with its ruin and the prospects of a crumbling empire. Unless these fundamental problems in our government are dealt with, we will have to settle for more brand-switching and lying manipulation. We will have to have fewer children who will inherit less, financially, morally, and culturally. The founders of our country would not recognize the state of affairs if they could see us now. They would assume their country has been destroyed and a different one stole their name and existed in its place.

We must look to the past to see what has worked, so that we might look to a more enduring future. May God bless us all in these efforts.

34 comments:

Coovo said...

What the f$@* was that?

No seriously, Ryan, when did you let Newt Gingrich start blogging for you?

I kid because I just visited you . . . but what did I just read?

Marty said...

I didn't see anything about the caldera....

kevin said...

my only criticism is that what you said is too radical and impossible.



i liked the article ry - good post. you have a more developed world view than i do. for better or for worse (probably worse), i am less principled in my approach to problem solving, and more improvisational. i do think people should be more principled, but like anything, i fear when people stick to their principles despite situations that call for a more fluid response. (i'm cool if the wife gets to pick the tv show next, but seriously, it's the SERIES FINALE of battlestar galactica!!)

as far as the post:
taxation - i agree that we need to simplify first and foremost. again, i'm a supporter of fairtax.org. it's the most researched tax system ever put together.

econ: i'd be up for getting rid of the fed and returning to a 'real' currency.

however, my basic disagreement with your sentiment is your frequent reference to the dirty politicians and tricksters of wall street. i don't like those people either, but i think they are products of a free society, and not villains trying to take freedom away. if you wipe the slate clean, and set up life the way you want and restore liberty and free markets, my bet is that those people would resurface immediately. with profit as the carrot, and civil liberties as the framework, people will find ways to exploit others legally.

i believe it's the achilles heel of free market caplitalism. for all the freedom and benefits it provides (and i am still unaware of a better system btw), there is certainly a darker side to it that i believe is unavoidable. this is when we start talking about philosophy and nature of man. for the most part, we're good, but there's some nastiness in each of us that's gonna come out one way or another.

my other disagreement is your problem with walmart and imports. again, that's not a result of fraud - that's free market baby. low prices have a value. so does high quality. the market figures out how to weigh the difference.
i don't like that small places go out of business bc of walmart, but i don't think walmart 'cheats'. they are just playing the game. your previous example is when a box store lowers prices (on lumber) in order to drive the small guy out of business, then raise prices again. that's cheating? but businesses of all sizes employ that strategy constantly in a direct effort to hurt their competitors. in other words, 'good businessmen' are good at taking money away from their competitors. it drives innovation and checks prices to consumers. walmart is easy to pick on for various reasons, but they are historically significant in how they've changed how people run businesses (insert a comparison to ford here).

i'm starting to ramble. my point is that i agree with you on most points, and i think a leaner government with more accountability is long overdue. however, the problems in our politics and culture shouldn't be placed solely at the feet of scapegoat crooks. there are inherent problems associated with any system of organization, including our own. tweaks small and large won't get rid of those.

Anonymous said...

Ok, so here are my thoughts- I could write forever, but I’ll spare you J



Taxation. You are very close, I like your idea, and mine is just a bit more radical, I’d like to know what you think. Flat tax EVERYTHING to like 23%. Eliminate income tax. Food, cars, all goods. Yes, everyone will freak out about the price of an apple and people will stop spending. Then the pendulum will swing back and everyone will pay their fair share. So, the guy that buys a Mercedes, puts his share into the economy, and not even the illegals will be able to avoid taxation. The ratio is even. Done. Then people will get used to it, and it’ll be fine. No ditching out on taxes, rich or poor.



National Economics. Tricky is RIGHT! I am in agreement with your points on dissolving the Federal Reserve. The bailouts, ugh. I don’t think I can even go there without feeling my blood boil. Let’s leave that for now. But you’re right. Most of the earmarks in the stimulus bill should have been up for the budget instead if they were gonna go there. It’s not stimulus and basically Preston is screwed now. Social Security… interesting point. I’d actually like to hear a little more about that. So how does that work for people who are retired and receiving it already?



National Sovereignty and Border Control. You know how I feel about the illegals. Luckily lots of them are going back to Mexico because the economy. I dig the notion of your economic border. I think that’s the highlight of my day.



Wars on Concepts. You’re BRILLIANT to add this category. Love it. Love it. Love it.



Judges and Governance. Well returning to the constitution would be great. Our President is a Constitutional lawyer. He now fires CEO’s. Your points here are dead on.


Leslita

Anonymous said...

http://news.bbc.co.uk/2/hi/uk_news/magazine/7978822.stm

Jim said...

Ah, Mick. So predictable. But I admire your fire. Honestly, didn't read the whole thing and don't feel like really getting into it. But a couple items of note. All for simplifying the tax system, although it is never that easy in real life. But let's say it is - 15% for everyone across the board. That's a huge tax increase on the bottom 50% of the population and a smaller increase on the next 25% of earners (and, a huge tax reduction for the rich guys). Please feel free to correct if I am missing something. The top 1% of earnings pay about 40% of all income tax. The top 5% pay 60%. It's a progressive system, which frankly is not that controversial. Simplify yes, but (and I know I'm not supposed to say this) the flat tax is not a practical reality.

Agree that an economy built on easy $$, using your over-valued house as a cash register, and consumerism is not a well-established economy. Ultimately, the US must reduce its trade deficit through more exports, fewer imports, or depreciation of the US dollar (likely a combination of all three).

Kevin: i'm not a lawyer, but actually think reducing price of your product (below the actual cost) to drive your competitor out of business, only to raise it after the competitor has closed shop, is illegal. Think it is called dumping (as in, "hey, I just took a dump on Bob's Lumber Yard").

Ryan said...

Jim, glad to see I am not the only predictable soul left on earth. I am still tryiing to figure out your comments, why a flat tax wouldn't be "practical".

Here's a link with lots of links dealing with some of the issues I imagine you're thinking of:

http://www.freedomworks.org/scrapthecode/commentary.php

Basically, a flat tax fits all the desired properties of a tax code I stated. Simple and fair. Low cost of compliance, politically neutral. Everyone pays. Not saying it's perfect.

Do you remember when John Kerry was running for president? He's married to Theresa Heinz Kerry. Some reporter found her tax return and discovered she paid an effective tax rate in the single digits. I have often repeated the story of Warren Buffet challenging the Fortune 400 that he would pay $1 million to anyone on that list who showed they paid a higher effective tax rate than their secretary.

For those of us who depend almost solely on income from an employer, the results would be more calculable.

As for the Fairtax and a Consumption tax, I think those are fine ideas as well. Like to know where Leslita got "23%" from, and there are a couple aspects of fairtax I'm not too fond of.

But the consumption style taxes do two nice things, they shift the burden of compliance to businesses rather than citizens and they encourage savings over consumption -- something I think we all agree is important.

Kev, you need to do more homework on what free markets are. They are not what the neocons,etc, have been saying they are. Free markets are actually sort of delicate and require governments to knock back any bad behavior. They are not "do anything" markets.

You should also rethink your position of just wanting to solve problems ad hoc. If you ignore the underlying principles that we are trying to guarantee, then you run the risk of turning your solution into another future problem, compounding the fact you didn't solve anything in the first place. It's like a doctor treating symptoms instead of the disease.

When you understand what "should" be underneath, you will see what is broken and solve the problem much more properly and cause the least harm.

Nearly all the problems we have today with our economy are due to government officials solving previous problems without regard for what should be, just for what was expedient and "pragmatic". You see the damage it causes unchecked.

And no system is a panacea that you can put on cruise control (this is a great mistake of free market people, acting as if the "invisible hand" is magical, it's not).

However, some systems are more oppressive than others out of the gate, like socialism is far harder to deal with than capitalism. Crooks aren't scapegoats, they're crooks. All systems require upkeep and vigilence, separating wheat from chaff.

Jim said...

Yeah, all I'm saying is that it is just a fact that the top 1% of all filers generate something like 20% of all income and pay 40% of all taxes. The top 5% of all filers earn something like 40% of all income and pay 60% of all taxes. I'm sure that there are individual deviations (I'm guessing Buffett gets most of his income from cap gains??), but in aggregate, our tax system is a progressive one. If everyone pays the same rate, assuming you want to raise the same amount of tax dollars (just make that assumption for a minute), doesn't that mean that the lower income individuals pay more? And, in the fact set I laid out, about 75% of the population would be paying more in taxes. I said that it wasn't a practical solution b/c I would think that the electorate would vote down such a proposition. I'm honestly not trying to pick a fight. If my logic is off, let me know.

kevin said...

ry - thanks for the advice. i spent all last night doing my homework, so now i understand free markets just like you do. feels good. i feel like neo after he learns jiujitsu.

you assume that an improvised approach to problem solving is short sighted and basically compounds future problems. umm, that's not true. a doctor who treats symptoms and ignores the disease isn't necessarily improvisational. he's simply a bad doctor, regardless of his principles.

my warning about being overly principled is that you can get pigeonholed into a belief system. it's like when tucker carlson and begala would say the most ridiculous things because they are conservative/liberal. conservatives need to be able to vote against AK-47s, and liberals need to be able to disagree with illegal aliens. people develop their principles from what they've learned about markets, usually in the last century and more often during their lifetimes. certainly their are important lessons there, but on a broader scale, the sample size is small.
another facet is applying a valid principle to a practical, real world situation. there's not always consensus on how to do that.

jim, that dumping concept is interesting, but i'm not sure it applies to what i was talking about. From Wikipedia:

"In economics, "dumping" can refer to any kind of predatory pricing. However, the word is now generally used only in the context of international trade law, where dumping is defined as the act of a manufacturer in one country exporting a product to another country at a price which is either below the price it charges in its home market or is below its costs of production. The term has a negative connotation, but advocates of free markets see "dumping" as beneficial for consumers and believe that protectionism to prevent it would have net negative consequences."

The rest of the article leans heavily on foreign manufacturers selling below cost in order to hurt/wipe out industries (as opposed to stores).

here is more of what i was talking about:

"A loss leader or leader[1] is a product sold at a low price (at cost or below cost)[2] to stimulate other, profitable sales. It is a kind of sales promotion, in other words marketing concentrating on a pricing strategy. The price can even be so low that the product is sold at a loss. A loss leader is often a popular article. Sometimes leader is now used as a synonym for loss leader and means any popular article, in other words one sold at a normal price.[3]"

it's arguable either way, but i stand by my opinion because these box stores get such low prices not because of exporters selling below costs to take over industry, but because the box stores buy in such quantity that commands much lower prices - basic supply and demand. after that, the rest is pricing strategy, which you know is more advanced than the local lumber yard as it is. add to that the rest of the value a home depot provides with selection...

but talking about dumping in a hypothetical sense, i'd still tend to defend it, as long as there are no government subsidies. to deny a manufacturer the right to sell something at a loss in the hopes of future gains doesn't make sense to me.


i don't think a flat tax would ever be passed either. i think it's a shame that some codes are labeled 'regressive' and 'progressive'. definitions aside, there is an obvious connotation to both terms.

the fair tax has a rebate up to the basic necessities (bread, milk, etc). so all citizens get back that money every month. it's like a consumption tax that starts above the poverty limit.

ry - did that tidbit on kerry's wife include property taxes or just income taxes?

i live in WA with no state income tax. they are thinking of adding one only for couples making 500k a year.

btw - anyone see glen beck? i watched his whole show bc i thought colbert was taking him out of context...i still have no idea why that guy was crying so much.

Ryan said...

These are all great comments, exactly the kind of debate I'm trying to generate through these posts.

Jim, I don't think your logic is off at all. However, it's a little unclear by what is meant by "pay more". If you mean some people at the lower end of income earners will pay a higher percentage of their income than they do now (their effective tax rate) then that would probably be true. Would they pay a higher percentage of the taxes paid? I doubt it.

Here's a link to work off of:
http://www.moneychimp.com/features/tax_brackets.htm

The main goal of this is to simplify the loopholes/allowances, etc that the richest people currently use to hide income. This would actually raise their effective tax rate in the cases I mentioned. Yes, Buffet and people like him usually live off of dividends, etc.

The economic stimulation effects of lowering tax rates on the rich has been demonstrated repeatedly in our own country and around the world. The effect is twofold: Rich people declare more income, and that income creates more jobs which actually creates more tax payers. Every example of a tax cut in nominal terms actually increases government revenue afterwards. Sort of counter-intuitive, but a clear trend with solid reasoning.

But beyond that, the primary goal is to *simplify* the code. There is the reason I mentioned above to do this, there is also the reason I mentioned of creating a stronger national identity that way. The fact that some people in our country pay NO taxes is not right to me. Everyone should pay something by virute of their citizenship. If we had a 2-tier system, i wouldn't argue with that as long as it was extremely simple and with no deductions, but I like the flat idea better.

"Progressive" and "Regressive" tax codes are relative terms as well. In the strictest sense, a flat tax is neither, by definition. From my research, a progressive tax system usually shifts more of the burden on the upper middle class - people who earn a lot of money in wages but may not really be "rich". Many argue that a pure flat tax is regressive because 15% of a poor person's wages means more to them than 15% of a rich person's income. I get that, it's a fair critique of the plan.

Whatever the result, the tax code needs to be simplified from the ~700 page document it is to a simple document, primarily based on eliminating all the counter-productive loopholes that help people avoid taxation.

Kev, from the perspective of a small town, let's say, a company like Wal-Mart is a foreign competitor. The wages of a local company go to local workers, and the profits that go to ownership stay relatively local as well. Wal-Mart tends to drive small companies out of business, drives local jobs out of business, replaces them with crappier jobs, and passes the profits on to the Walton family, who don't spend them in the local town. That is a bad thing when it is happening dishonestly.

The economies of scale you mention - buying huge bulks at lower prices - is not the same thing as supply and demand. That is also a great thing about Wal-Mart, which I'm not trying to single out. They also have a superior distribution network that lowers costs. Again, a good thing.

But when part of a business strategy is aimed at putting a local company out of business by *setting* prices artificially low rather than *accepting* prices, the harm can be great. The U.S. steel industry has been devastated by this, for example, by foreign "competition".

I think you would be alone in defending that type of practice as being fair and acceptible. It is definitely not "free market", which is what my comments were aimed at.

You will need to either write more concretely or clarify your own terms, because an improvisational approach as you have defined it would mean one that ignores principle and just deals with context or outcome. And the harms of that are clear.

I agree that sometimes principled people let "the perfect get in the way of the good", and I would be more than happy to not let that happen. Principles are ideals, solutions are not perfect.

Ryan said...

P.S. I like the Fairtax as well. But what I don't like about it is that the government has to have an active role in administering it, e.g., mailing out checks every month? That bureacracy will expand andn politicians will immediately begin playing people off of each other using those checks.

kevin said...

i hate arguing this angle bc it's like arguing for the rights of mr burns.

however, it just goes along with my principles. (boom)

i think you're stretching to label walmart as foreign in terms of a small town's perspective. they're not foreign, just bigger. and that doesn't have to make them the bad guy, even though that label makes it easier to bash them

but why are they bigger? because of evil sam walton? he actually started with a single, small streetside store for what that's worth.

he built his business because he was good at business (good at figuring out what consumers want).

they're bigger because they're better at offering people good things for lower prices.

here's your quote:
"But when part of a business strategy is aimed at putting a local company out of business by *setting* prices artificially low rather than *accepting* prices, the harm can be great."

you talk about "setting" prices. do you mean selling items for lower? again, that happens constantly, and not just from walmart. small guys do it to other small guys. i've seen small guys do it to walmart even. lowes does it to home depot.
walmart isn't trying to put that mom and pop shop out of business - they're trying to put everyone out of business. same with mid size companies.

would you want to work for a company that wasn't trying to expand market share? would you pipe up at a sales meeting and say "I like the new ad campaign, but i'm afraid it may take business away from our competition."

and i've worked with a lot of small town lumber yards actually. you think those owners are putting the profits back into the town? or that the employees make a lot of money? they don't, and they're lucky if they have health insurance. and a lot of the profits are suffocated due to huge inefficiencies with their businesses (that the bigger boys have done away with).

also, i'd challenge you that walmart doesn't help local communities too. they're not dumb, and they want to keep expanding. to do that though, they need to prove to the next town council meeting that they are good for communities. speaking of town meeting, towns are also within their rights to ban companies from moving into town if they please.

but getting back to the basics, they buy lower thus can afford to sell lower, which by itself would put a lot of businesses under. do you have a problem with that? should there be a special tax on them because they negotiate better costs?
and they do buy low because of supply and demand. their demand is so great, that they require an enormous supply. this gives them huge leverage when dealing with vendors. (my old company would have negative margins to certain customers every year! but we owned our mills so they got business and it blocked our competition. we'd also have lower margins on bigger customers, and higher margins on smaller customers).

i think it's strange that you're so against the bailouts because it would save companies that deserve to go under, but then you have a problem when walmart or lowes puts a company out of business. so again, what's so bad about a company choosing to sell at or below cost with the hopes of future gains?

and if you really do have problems with large businesses picking up more business (which in our free market system can result in others going out of business), i'd like to hear exactly how you propose to curb this behavior. the feds? the IRS?

G. Smith said...

Great discussion, and great post Ryan. I was ready to get all riled up about it based on the title, but in terms of things that are seriously flawed with our current economy and political system, I agree on most.

You're spot on with your condemnation of Wars on Concepts - I'd add the point that the War on Drugs disproportionately affects people of color, leading to an unacceptable gap between races in prison.

And I'm ready to campaign for the gold standard. We're off to see/kill the Wizard!

Obviously deporting 12-20 million people is ridiculous, but I'm not supposed to mention that (btw when did that ever happen?)

I'm pleasantly suprised to read

"Free markets are actually sort of delicate and require governments to knock back any bad behavior. They are not "do anything" markets."

The points here about the free market - not tricksters - being responsible for economy crunching beasts like Wal-Mart is important. In many ways an unregulated free market is at odds with the principles of the Constitution - government needs to play a strong role in the economy.

As for Taxation, I'm no expert, but I think that the point that was made about 15% (or 20% or whatever) being a more significant tax on the poor than the rich is important. It's simple - if a family of 4 is at $2,000 a month, they have trouble paying bills, and 15% is going to be a huge burden, no matter how much they believe in the system. Whereas a family at $20,000 a month won't miss it. This is to me the definition of a regressive tax.

So I'm all for a flat tax - simple - one page tax code (except for poor people, see page two, unless you're not poor, but semi-poor, in which case see page 3, but if you're unemployed for part of the year, but the other part are making gagillions, see page 4...) It's not long until we get a much less simple tax code.

In regards to this governing by principle, vs. governing by the seat of our pants - aren't we required to do both? It's not as if there's a reset button we can push, and go back and start governing by principles. We live in a dynamic world where demographics are constantly shifting, so laws need to be passed to reflect the changing nature of our country so that people continue to have the rights guaranteed in the Constitution. Then these laws need to be analyzed to see if they themselves meet the principles of the constitution (which is why that bonus tax idea isn't going anywhere).

And there have been some very bad laws passed in our history using the constitution as justification, that we, on the fly, have removed.

Now this isn't to say that there aren't serious flaw in our electoral system. I agree, many of our elected leaders could be more principled, and less on the fly according to their constituency. But, I can't actually blame the politicians, this is the system they're in. All they need to worry about is getting re-eleted, which means making their constituency happy - which is very much on the fly type of legislating.

But again, I question this concept that we should return to the past to better deal with current or future situations. I'm just not sure how helpful it is to look at the economy, or political or judicial structure of our founding fathers, since our world is now so radically different, and vastly more complex (do I always have to be the one to bring up the fact that the early American economy was based on slave labor?) Governing can never be a matter of adhering to simple principles laid out by our founding fathers, it's dealing with the reality of the current situation in relation to those principles - and the reality is that our society and economy had serious problems that ran contrary to the Constitution long before this economic collapse.

Vanessa said...

So this is my first response to your blog... I think you made some very valid points and it actually made me think about what exactly do I believe in (Still trying to figure that one out). But since I work in the CPG (Consumer Product Goods) Industry I will tag on to what Kevin said about Walmart and Lowes. Both are successful in negotiating what is called an Every Day Low Price Strategy on a few items while making tons of money on electronics or softlines (ie. clothes). Lost leaders are common - usually a well known product such as Windex or Tide. We (Manufacturers) don't sell things below cost; at the same time we don't set price either. We give them a SRP and then it is at the discretion of the retailer. They can decide to lose margin on certain products hoping that when the consumers come in to their stores they will buy other products that will yield higher margins and bigger basket ring. I do think that to some extent its crazy how low they go. But you can't fault them for wanting more people to walk into their stores.

Another thing, that we need as a society is personal responsibility. That's what makes all this bailout stuff so frustrating. How many times did we hear when you were a kid, "If you fall, dust yourself off and try again." Why aren't we letting these organizations do just that. If they can turn themselves around great if they can't then next best company wins. It is frustrating that we have developed a culture that feels entitled to everything. Where did strong work ethics go?

Vanessa said...

OK, I'd like to put to rest the debate over Wal-mart. There's plenty to read about them if you're interested. Here's a decent article:

http://www.fastcompany.com/magazine/77/walmart.html

Wal-mart was only brought up to try to introduce the idea of Economic Sovereignty. This stresses the importance of acknowledging we have economic borders just as well as we do geographical ones. Our politicians seem to have lost regard for both.

Why is deporting 12-20 million illegal people obviously ridiculous? Is it the size? Is it that you don't like the thought of throwing out unwanted guests?

That's like saying there are 20 million speeding violations in our country, you want us to actually enforce those laws?

This mindset becomes more clear in G's additional comments, where it sounds like he says we can take or leave whatever is convenient in our Constitution (let's not follow due course to change it if we need!). This is what I was sure was lurking under these comments defending solving problems without regard for principle.

Indeed our world is more complex now, but human nature hasn't changed an iota. It is more important than ever in new and complex times to use traditional principles when making decisions that could never have been made before. Throwing one's hands up in the air and saying politicians are only trying to get elected so what can we do is a sad statement with no meat to it.

I also find it ironic that one can be so racially obsessed with the past over things like slavery yet wash hands over the 20 million illegal mexican slaves in our country now.

Just because the tax code might again creep out of control after we put it in its place doesn't mean it doesn't need to be done. We don't not cut our lawns because the grass will grow back, rather, that is precisely why we cut them.

Vanessa said...

Leslita brought up a point about Social Security and what does it mean to tourniquet it.

Social Security as a program alone will bankrupt our country if we do nothing about it. We have a forward-promised debt of $40-50 trillion (for reference, our current national debt is about $10 trillion) that our politicians have not stored in a "lockbox" -- contrary to what my SS annual statements insist -- but have used that revenue rather to solve other problems whenever they needed to get reelected (anyone connecting the theme here?). So, something now needs to be done to get us out of another guvment-induced problem.

First off, I don't believe it is right to rip off old people. So we're going to have to pay the piper for the most part. But I think we need to do it while killing SS as a program. So you give young people a way out of it so that it shrinks over time through attrition.

If anyone really believes the government will provide for them in old age, they can stay in the program. But if you're like me and think you will do a better job managing your own money than they can, you should just be able to not take part in the system at all.

WHen i get a job, fill out some tax forms, check the box saying "I do not want to participate in the Social Security program, I thereby understand I am taking my future in my own hands." I then pay no SS taxes and will receive no benefits. It's not that complex really.

As Vanessa said, our country is suffering from a lack of personal responsibility, and programs like these deepen those sad trends while creating impossible financial cycles.

I think maybe to help with the owed money, we could offer buyouts to people, settlements of a sort, where we lump a check down and then kick them out of the system.

Ryan said...

The joys of this complex world!

The last two posts were mine as I was accidentally logged into Vanessa's computer. The one before that is hers.

RMM

Ryan said...

I find it interesting that this candidate of change is not only staying directly on the Neocon path but is missing the boat on smaller issues as well.

He makes Steven Baldwin look poignant:
http://www.youtube.com/watch?v=-GXQ4xSgIuY


Not to mention, he goes on national TV and makes fun of the Special Olympics? That might be worse than any Bush-gaffe or even Dan Quale goof. Can you imagine if Dick Cheney had said that?

Obama is a very weird man, I still can't figure him out.

kevin said...

welcome vanessa! i hope you chime in more.

i guess if people want to get away from walmart, that's fine, but i read that article and i'm not sure what exactly the point is - it certainly proves nothing to me. articles like that are interesting, but it leaves the reader with some vague sense of "this is a big problem" bc it hones in on the part of business where people lose jobs. i think that's unfair, esp because it offers zero solutions on what to do about it. it is an example of how globalization works, but it doesn't show any positive effects, only negative.

the reason it offers no solution is that walmart flourishes under free market capitalism, and the solution to "fixing the walmart problem" is to have the government stop them from selling goods at such low costs. or to prevent them from importing certain goods. the 'solution' is basically admitting there's something very wrong with the fabric of our way of life.

and poor levi strauss. the company is going under, so they throw in with walmart out of desperation. then they complain because they can't sell their high-end jeans at walmart? ummm, have they ever walkded into a walmart? not exactly a boutique. then the journalist pulls our heart strings by appealing to our sense of history and nostalgia bc of how long levis have been around. but again, they don't have to do business with walmart if they don't want to, and the company was already failing before it signed on! their problem is that no one wants their expensive jeans - it doesn't have to do with walmart.

walmart also leans on vendors to lower prices, and threatens with pulling the other business if they don't. i think this is a journalist who hasn't ever worked in a real business, because this happens constantly. that's why every real company has purchasers. that's their job. it's not evil, it's pretty standard negotiations.

vendors have to play ball or walmart will figure out a way to manufacture the item for less. that's not evil either.

again, i think focusing on giant businesses and casting them as the big evil bully is an easy task. but these articles always back down at the end and they don't extend their own logic. they don't answer "what has walmart done wrong?" or "what should we do to walmart?".



just watched this btw. it's with a head regulator who is calling BS on the bailouts, and calling paulson and geitner fraudsters for letting it happen. this financial meltdown was obviously the result of fraud. no two ways about it. the fact that it isn't being uncovered is a crime. he draws a lot of interesting comparisons to the S&L crisis of the 80s. (i find bill moyers annoying, but his guest is very smart and blunt and easy to understand).
http://www.pbs.org/moyers/journal/04032009/watch.html

Ryan said...

Kev, thanks for the link. Great interview. The fact that there isn't more outrage based on raw knowledge of what these people have done is a testament to the slide our people are on.

This is our country. As Ben Franklin responded to Mrs. Powell, "[It's] a republic, if you can keep it."

G. Smith said...

Don't get me wrong, I love principles - some of my best friends are principles. I just think that when you find yourself adhereing to a certain set of principles, and thereby violating another, there is a problem that needs a more creative solution.

This question of mass deportation illustrates this well.

Deporting anyone here without proper documentation is ridiculous at the very least because of the sheer size. The logistics of rounding up 20 million, or 12 million, or even 6 million people, putting them on a bus or train, or boat, and shipping them off to different countries would be incomprehensibly complex, and amazingly expensive. And if we want to try to ensure we don't violate any basic human rights in the process, it will be even harder.

Now if you're just talking about driving around, grabbing people off the street that look illegal and putting them on buses, maybe it's possible. Or maybe we could just ask people on the street who look suspicious - are you illegal? - and if they say yes, tag them and put them on the bus.

No, to do this right, you'd have to find some way that everyone else would have to verify citizenship (since no one gets an "illegal" stamp in their passport) and anyone not able to produce that verification would be put on the bus.

Even this, though, is very difficult due to the huge number of citizens born at home or other situation where a proper birth record isn't obtained, or who's document have been lost in fire, or other damage, and just people who aren't connected in mainstream ways. It would be very difficult, and expensive, to verify the stories of everyone who can't produce an identity document. The consequences of getting even one case wrong, and a citizen deported, would seem to be a pretty big deal. Not to mention the fact that it would likely be the poor who would most often be mistakenly deported.

Pres. Bush already tried something like this last year and failed. Right along with the Lou Dobbs campaign of xenophobia, he instituted a new requirement for people getting federal health care to prove each year that they are citizens. (This was in addition to the citizenship verification process that was already in place.) The Pres. was apparently responding to the common misconception that Mexicans are draining public dollars. After less than a year, however, the new requirement was removed (returned back to the previous verification) because the data clearly showed that 99% of those affected by the new policy were citizens who just couldn't find their right documents. The consequences, however, of that mistake meant that ordinary citizens were denied access to a doctor until they cleared out their mother's old filing cabinet. I guess if they took more personal responsibility they the cabinet wouldn't have gotten so mucked up in the first place, but that's another misplaced conversation.

The other serious issue is that many, many families have mixed status - so this mass deportation exercise would in many many instances would involve splitting families, separating siblings, and removing parents from children, and if that doesn't grind against your Christian morals, it would also, in many cases, involve removing the sole bread-winner in a household full of people who are here with the right papers. How does that help anyone?

It's not to say that illegal immigration isn't a problem. It is a problem when people are able to be exploited b/c they have no rights. It is a problem when a family doesn't report a domestic violence situation to the police b/c someone else in the family doesn't have papers. And it's a problem for everyone that there are entire industries that depend on labor that will work for less than a living wage.

But the solution has to respect the rights of citizens and non-citizens alike.

Which brings me back to this principle vs. reality question.

I agree that we need, and should develop a sound, principled immigration policy that effectively keeps track of folks coming in and out of the country and appropriately punishes people who violate such policy. Whatever the Constitution says about immigration, we should develop our policy accordingly.

In the meantime, the reality is that our current and previous immigration policy has, and is continuing to fail, evidenced by the 12-20 million people in our communities NOW, who call for a reality based solution.

There are in fact more reasonable solutions to illegal immigration out there that adhere to principles of justice and human rights. Most of the ones I like involve a process of normalization that allows people to come out of the shadows and have some basic rights.

There's plenty of discussion on real immigration solutions to be had, and I am interested in what people think.

But my main point here is this - living by principle alone is a bad idea. You always need a reality check, especially when dealing with people's lives. Just because the tax code is complicated now doesn't mean we should wipe it clean on principle if that would make poor families poorer. Those aren't blades of grass you're cutting, those are people's paychecks. I'm not clear, Ryan, if you're arguing against that.

One last thing - the comparison of mass deportation and mass ticketing is as true as it is false, and brings up a little known fact. The comparison is false because it's obviously a much bigger deal to deport people than hand out speeding tickets, but true b/c entering the country without proper papers is exactly the same level of "illegality" as getting a speeding ticket - it's a civil offense.

(maybe the Walmart conversation is over, but I found this website to give some background on why Walmart sucks, and what communities can do about it. http://wakeupwalmart.com/)

kevin said...

G - i'm with you regarding deportation. i think it would be an enormous disaster. it's great example of what i was talking about, because in principle, i understand how crucial it is to enforce laws.

we do need to do something, and i think it starts with patching the leak. fix the borders (which isn't easy either), then we can worry about the US citizen children with alien parents.

as far as walmart, that site was put up by the labor union group. that doesn't mean what they say is wrong, but it will surely give a one sided argument at best, but more than likely it uses stats to persuade and even distort the reality.

don't get me wrong, i'm glad these groups exist, and i'm sure walmart has made their fair share of transgressions. i hope this groups keeps the spotlight on those. i still think though, that they are fundamentally a positive company and they should be allowed to leverage their success and money in order to supply americans with low cost goods. in other words, i think they should be allowed to import cheap goods (that's what this whole thing is basically about).

this is copied from what looked like a bloomberg-esque site that pulled info from financial records:

Wal-Mart's FYE 2009 giving breakdown:

In the U.S., Wal-Mart gave more than $378 million in cash and in-kind gifts, up from $296 million in 2007.
In international markets, Wal-Mart gave $45.5 million in cash and in-kind gifts, up from $41 million in 2007.
Globally, Wal-Mart's customers and associates gave more than $106 million through in-store giving programs that benefit local charities.
In total, Wal-Mart, its Foundations, its customers and its associates supported communities around the globe with nearly $530 million in charitable contributions during FYE 2009.
In the U.S., Wal-Mart is standing shoulder-to-shoulder with those on Main Street who have turned to organizations like Feeding America to make ends meet. For example, Wal-Mart's food donation program has provided more than 33 million pounds of fresh produce, meat and other nutritious foods to U.S. food banks. These in-kind contributions have an estimated value of more than $85 million. Walmart stores and Sam's Club locations remain on track to donate 90 million pounds of food by November 2009.

Ryan said...

G, you make some good points to the extent that principles can't be flawlessly adhered to while solving problems. I think we've all come to agreement over that.

The last thing anyone wants is to lay a foundation for some fascist witch hunt.

Kev got nearer the point when he mentioned sealing the borders while straightening out the "illegals" situations. Doing anything less would be futile.

I apologize for bringing up the traffic analogy. Never justify a stronger argument with a weaker one!

I do, however, think a lot of your suggestions are weak as well. In other words you don't really argue that other more powerful principles would be compromised just that the feasibility would be difficult. Saying someone's documents may have been lost in a fire is a ridiculous impediment.

The main obstacle to this problem is the unclear definition on what it means to be a citizen and how is that condition proven? Is a passport enough? A birth certificate?

This may be out of our reach, but there are clearly standards that IMS has to follow. All of my friends who are here from other countries know exactly what they have to do (and what they can't do) to get that status.

The burden of compliance could easily fall on businesses and schools. But deporting someone who is here illegally raises no human rights problems that I can see, regardless of them being a breadwinner, etc.

And insisting that poor people pay some taxes is not a violation of anything either. The tax system is not an income redistribution system, so the argument that it would make poor people poorer is moot.

Basically, there are no principled arguments against what I have said. There is just the common sense idea of not letting the solution become worse than the problem. That's fine.

G. Smith said...

I suppose my overall point is this - you present some very simple solutions to very complex problems. The problem with this approach is that the details matter, and usually matter the most to people with the least power, or voice.

Luckily for us, policy isn't being written here on TLATL.

"But deporting someone who is here illegally raises no human rights problems that I can see, regardless of them being a breadwinner, etc."

http://www.nytimes.com/2009/01/28/us/28detain.html?_r=2&hp

Ryan said...

Yeah, I should have said, 'no principled human rights' problems. The U.S. is not responsible for the kind of situation an adult put their family in.

If we started a massive program to deport people who should not be here, then I'm sure a problem like basic medical supervision could easily be overcome. The level of processing is so much smaller than even criminal trials, so the detainee systems would be way simpler.

I am also pretty sure that far fewer people would die being kicked out of the U.S. than have already died trying to sneak in, or sneaking in and dying from exposure and lack of legal protection, etc.

I guess I'm not pretending to propose full solutions here. I'm starting with principle and working towards solutions. The problem is our nation's status quo is so devoid of principle and so wrought with bureaucracy (which is the vast majority of the "complexity" you speak of) that our "pragmatic" solutions tend to cause problems or make them worse, not solve them. Now is a crucial time in our history where people need to be reacquainted with first principles and history.

Perhaps a more dangerous consequence of not guiding this process in a principled manner is a heavy-handed fascist response, which will come soon if we don't solve this and other problems responsibly.

If you want to start from the principle that 12-20 million illegal aliens should become citizens, then we have a debate on a different level. I don't think you're saying that. But there are many in our country who have been so dumbed down as to why anything matters at all, that they may think that's fine and that massive illegal immigration isn't really a problem.

FYI, the NYT should probably find a better hero than a child-molesting illegal alien. I just couldn't muster a lot of sympathy for Guido.

G. Smith said...
This comment has been removed by the author.
G. Smith said...

yea - Guido doesn't really pull on the heartstrings, although I don't think he deserved to die.

there are lots more stories like this:

http://topics.nytimes.com/top/reference/timestopics/subjects/i/immigration_detention_us/incustody_deaths/index.html

I actually do think that the best solution for all these folks here without documents is a clear path to citizenship. But, you're right, that's a whole other debate.

Jim said...

Guys: just really quickly, a few misc points -

1. Re: Wal-Mart. Keep in mind that most Wal-Mart locations are in non-urban locations (like my hometown of Cuba, MO). Wal-Mart moved in there in the mid or late 80s - can't remember exactly when, although I do remember it was a big deal. And I honestly can' recall any "local businesses" that went under. I think there was some small "dime store" (seriously), but the thing is, Wal-Mart is able to come in and provide consumers with a much larger assortment of product at a lower price. It saves the local people a lot of $$, which is important as the vast majority of people in the area don't have much (in this or any economy). And, as Kevin pointed out, they actually do give back to local communities (my mom has taken advantage of this). All of this does not excuse their failure to pay a living wage to their employees. I understand the need to maintain cost discipline, but a smart business considers all of its stakeholders (including employees) and makes sure employees are not so underpaid that they qualify for Medicaid. If Wal-Mart would have been smarter on this point and not so focused on costs, they may have avoided the reputational damage that has now resulted in massive public debates and legislative action that keeps them out of certain communities (like Chicago).

2. You might not think our tax system should be used to redistribute wealth, but it obviously is, and as I stated before, I don't think this is very controversial. Those that benefit the most in our society should be expected to contribute more. Really, the mainstream tax debate is about how progressive the system should be (not whether it should be progressive). I know this is "reality based" rather than "principal based", but just humor me.

3. I didn't get through that entire NPR interview w/ that bank regulator guy, but understand his points. A lot of good points, mistakes made all around. Where does greed end and fraud begin? Clearly mortgage brokers were originating loans that they knew the borrowers couldn't repay, but they did so b/c they knew there was a buyer on the other end. They weren't taking the risk. I guess the buyers of the securities have an argument against the rating agencies (I think it is a strong argument in fact), but again, not sure you can really prove the fraud. And frankly, all the buyers of mortgage CDOs are sophisticated institutional investors. Your grandmother wasn't going out and buying it (although her $$ were in the pension fund that was). I like to think the problem was more a combination of incompetence, greed, mis-incentives, and high leverage, with some fraud mixed in. By the way, know who owns a big chuck of Moody's (one of the big rating agencies)? Buffet.

Also, while the S&L crisis is an obvious touchstone, it's scale isn't even close to what we are dealing with now. Total cost of the S&L problem was about $120BN. Clearly we have far surpassed that here (and don't be so naive to think that we are done).

Finally, while it is distasteful to say the least that we are bailing out these big institutions (Banks) that are private companies, took stupid risks, and lost, we can't let them fail. Simply can't. We tried that with Lehman and the results were not good. And Citi and B of A (Both of whom are effectively insolvent) dwarf Lehman. As a taxpayer, one regulation I would like to see in the future is a cap on the size of these financial institutions. If a company is "too big to fail", I say it is too big and should be forced to break up.

Ryan said...

"You might not think our tax system should be used to redistribute wealth, but it obviously is, and as I stated before, I don't think this is very controversial. Those that benefit the most in our society should be expected to contribute more."

It has nothing to do with what I think. It has to do with the function of the tax system in a supposedly non socialist country. If we are socialist or want that, then you are right, we should allow the government to redistribute wealth/income and manage their version of economic justice. Those who "benefit" most from our society do pay the most, especially under a flat system with no loopholes. Or under a consumption tax. The incredible influx of money into the economy alone would much more immediately benefit the unemployed than would any of these giant gov't programs or the current tax code.

If an individual feels they benefit too much from a free society, they are free to donate as much of their income as they want that they wish had been taxed instead to a charity of their choice. They do not have the right to force their beliefs on you though. Or they could move to Europe, etc.

I only offer the belief that everbody who benefits by virtue of their citizenship should at least pay something. Saying that a low, simple, and "fair" tax code makes the poor poorer is like saying buying food and paying rent makes them poorer as well. Charity is charity. Taxes are not. Progressive tax systems have done nothing but cause poverty and increase wealth disparity.

"Really, the mainstream tax debate is about how progressive the system should be (not whether it should be progressive)."

This is presumptuous and untrue. I'm not saying there's no debate about maybe a low income cutoff (which I disagree with, but that's where the debate is), I'm saying that the flat tax and fairtax plans are now the most debated in our country, and the current corrupt system is what is being rejected.

3) Jim, I consider you an expert in your area of finance. And I have other friends in finance as well. And I've listened to insane amounts of TV experts and read incredible volumes about it.

I have not heard one argument why letting these companies fail would have been a worse option than funding their failure in an effort to continue to falsify prices, create more uncertainty in the market and the economy, and make sure the bailout goes primarily to the priviledged people who caused it.

Financial experts have only resorted to hysteria when challenged as such. "Trust me's" and "the whole world would explode" are two common sentiments, neither of which I believe anymore.

Letting Lehman brothers fail for example had no effect on anyone except for people who lost their jobs in that company and who lost money with them.

The bailouts have not worked and have prolonged the current pain by disguising the damage done rather than behing honest, wasting the resources we have, and shoveling our children in even more debt. Bailouts throughout all of our history have not worked. Bailouts prolonged the great depression. But the do nothing policies only about a decade before that let a one year depression happen, then heal, then unleash the roaring 20s. We hear nothing about it because it healed itself without any heroics on the part of the government or elites.

Imagine you flood the economy with $700 billion, and then $700 billion more. You immediately debase the currency and cause future inflation, which affects poor people the most because they save less and their wages rise slowly if at all.

That chunk of money takes time to trickle down through the economy and cause prices to rise. But the people who get access to it first, enjoy it at the dollar's current value. Imagine you put a red 'x' on each of those bills (if they were in cash). It would take a long time for all those red 'x's to show up in our pockets. And although I agree with you that sheer fraud was probably low on the totem pole, we are still rewarding a sub-culture of people in our country who have extremely bad judgment, are ruled by greed, and are insulated by the politicians they buy and we elect.

So, I don't fault you for arguing on behalf of what might literally be your job at stake, I would too, but there needs to be a better argument for people not in finance to understand.

I have not yet heard one.

kevin said...

i think our tax code is hugely important to how our country is run. however, i don't see the debate happening, be it fairtax or anything. during our last 2 year election process, it just wasn't on the table. it gets mentioned, sure, but it's just not a core issue unfortunately. not only is it not a common thread in the main media, but i don't hear about it at more social events when politics comes up. it's funny that we (our countrymen) focus on social issues that by and large literally don't affect us (gay marriage, gun rights, even deporting illegals), but taxation is boring and not really brought up.

something interesting about taxation, is that there aren't really easy party positions/platforms to spit out at cocktail parites. it's one of those things where a carefully worded poll would have results that didn't correlate neatly to political parties. to me, that means a meaningful debate is possible.

i don't like our tax system now, but to say that it has "done nothing but cause poverty and increase wealth disparity" is going a bit far.
anyone know how much it costs us to comply with our current tax code?
"$265 billion that we spend each year measuring, tracking, sheltering, documenting, and filing our annual income." how is that not insane...

here's one more quote. if this interests you at all, check out the faq page for fairtax. it fixes so many absurdities we deal with today:
http://www.fairtax.org/site/PageServer?pagename=about_faq

"The old aphorism that nothing is certain except death and taxes should be modified to include tax evasion. Tax evasion is chronic under any system so complex as to be incomprehensible. As a percentage of gross domestic product (GDP), tax evasion in 2001 is beyond 2.6 percent, compared to 1.6 percent in 1991. This represents over 16 percent of taxes due. Almost 40 percent of the public, according to the IRS, is out of compliance with the present tax system, mostly unintentionally due to the enormous complexity of the present system. These IRS figures do not include taxes lost on illegal sources of income with a criminal economy estimated at a trillion dollars [KM's note - this is mostly the drug and porn industries]. All this, despite a major enforcement effort and assessment of tens of millions of civil penalties on American taxpayers in an effort to force compliance with the tax system. Disrespect for the tax system and the law has reached dangerous levels and makes a system based on taxpayer self-assessment less and less viable.

The FairTax reduces rather than increases the problem of tax evasion. The increased fairness, transparency, and legitimacy of the system induces more compliance. The roughly 90-percent reduction in filers enables tax administrators more narrowly and effectively to address noncompliance and increases the likelihood of tax evasion discovery. The relative simplicity of the FairTax promotes compliance. Businesses need answer only one question to determine the tax due: How much was sold to consumers? Finally, because tax rates decrease, tax evasion is less profitable; and because of the dramatic reduction in the number of tax filers, tax evaders are more easily monitored and caught under the FairTax system."



jim - that regulator did mention that our current crisis dwarfs the S&L scandals (Madoff alone did more damage than the S&Ls). he also noted that there are significantly fewer feds trying to figure out what happened (i think like 80% fewer?). after 9/11, white collar crime was depleted in order to focus on terrorism. but those spots were never filled afterwards. that, coupled with decreasing regulations, is a bad recipe. the best point he brings up is, where's the investigation?
you also mention the rating agencies. from what i've heard they were acting in concert with the investment banks. more reason to investigate for fraud.

Ryan said...

Kev, your points about tax evasion are dead on. Our own Money Czar Comrade Geithner was guilty of tax evasion. If you take him at his word, he said it was just too complex to comply.

With all the jazz I've posted, the main debates seem to be over taxation and illegal immigration.

Perhaps I'll do separate posts for each, perhaps combined. They need a little more exploration than this he-said/she-said type debate.

So think about what is important about citizenship and taxation.

But before then, I still need to do my taxes!

kevin said...

isn't it nuts that basically everybody goes out to H&R or gets turbo tax, and spends 60 bucks in order to do their taxes.

people spending money to pay taxes.

i also think you're allowed to write that off, which i think is hilarious.

just a strange concept when you back up and take another look at it.

Coovo said...

Yes, please do separate posts.

kevin said...

from today's WSJ:

http://online.wsj.com/article/SB123933106888707793.html#mod=article-outset-box