Will Greenspan's message be heard and acted upon?

Imagine that: a bunch of MBA's running this country, and we are currently going broke.

Why can't they just be fired like the former HP CEO, or others who don't perform up to their stockholder's standards...

They're not a bunch of MBAs running this country; it's the guys with PhDs that are advising this president and congress - made up mostly by attorneys.

And because he favored spending cuts over tax increases, there is little chance of that happening. As we all know, politicians would rather give up thier children than cut any spending.

I'd say the same applies to raising taxes when it comes to politicians.

Perhaps, but wasn't it the Bush Administration who boasted that they'd run this country like a business?

And I suppose they did, following what was the trend at the time, if you know what I mean.

I listened to some of Greenspan's double talk and all I can say he is a lot smarter than those questioning him and knows how to say a lot and commit to nothing.

Whatever changes that do take place, and based on the trend by the Bush administration to dedistribute America's wealth, I'd say the Middle Class and those bordering on poverty are pretty much screwed.

The young'uns still haven't learned much; those in the age bracket between 18 and 29 still thinks Bush's social security privatization plan is a good one. All other age groups disapprove his plan.

New Poll Finds Bush Priorities Are Out of Step With Americans
By ADAM NAGOURNEY and JANET ELDER

Published: March 3, 2005


Americans say President Bush does not share the priorities of most of the country on either domestic or foreign issues, are increasingly resistant to his proposal to revamp Social Security and say they are uneasy with Mr. Bush's ability to make the right decisions about the retirement program, according to the latest New York Times/CBS News poll.


The poll underscores just how little headway Mr. Bush has made in his effort to build popular support as his proposal for overhauling Social Security struggles to gain footing in Congress. At the same time, there has been an increase in respondents who say that efforts to restore order in Iraq are going well, even as an overwhelming number of Americans say Mr. Bush has no clear plan for getting out of Iraq.

On Social Security, 51 percent said permitting individuals to invest part of their Social Security taxes in private accounts, the centerpiece of Mr. Bush's plan, was a bad idea, even as a majority said they agreed with Mr. Bush that the program would become insolvent near the middle of the century if nothing was done. The number who thought private accounts were a bad idea jumped to 69 percent if respondents were told that the private accounts would result in a reduction in guaranteed benefits. And 45 percent said Mr. Bush's private account plan would actually weaken the economic underpinnings of the nation's retirement system.

I just heard on the radio that Greenspan advocates a national sales tax instead of the income tax. If it is so,that should take care of the working poor who now get away without paying tax.

Not so fast, au. They could write in exemptions for the poor in the legislation that authorizes a national sales tax as refunds.

You mean to tell me that letting people keep the money they make is a bad thing? Last time I checked, people made the money and the govt took it away.

Why are you against peole being able to keep the money they make? Do they owe you something?

C.I.
You will have to explain how you think that could be done? It would seem that the poor and middle class will be the losers. Simply put A bottle of coke costs the same for the rich as it does for the poor.

Cato Policy Analysis No. 193 April 15, 1993



The Economic Impact Of Replacing Federal Income Taxes With a Sales Tax
by Laurence J. Kotlikoff

Laurence J. Kotlikoff is a professor of economics at Boston University and a research associate of the National Bureau of Economic Research.


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Executive Summary

This study examines the crisis in U.S. saving, its implications for the nation's economic performance, and the contribution our current tax structure has made to the crisis. A computer simulation model is used to evaluate a proposal to raise U.S. saving by replacing all federal personaland corporate income taxes with a national retail sales tax.

The findings are quite dramatic. The shift in tax structures is predicted, in the long run, to raise the stock of U.S. capital by at least 29 percent and potentially by as much as 49 percent and to raise U.S. living standards by at least 7 percent and potentially by as much as 14 percent.

A national sales tax would eliminate many of the distortions of current income taxes. It would do away with the differential tax treatment of corporate and noncorporate businesses, which distorts business decisions; of capital gains and dividends, which affects decisions about retaining earnings; and of investment in equipment, structures, and inventories. A sales tax would also end encouragement of current relative to future consumption, the tax exemption for health insurance premiums, and the work disincentive associated with the progressivity of the present tax structure.

A national sales tax could be made progressive by combining it with a refundable tax credit. Each household could file a form requesting the tax credit and receive a check from the Internal Revenue Service equal to the amount of credit for which the household qualified.

Introduction

This study considers the impact on U.S. saving, investment, and growth of the total elimination of federal personal and corporate income taxes in favor of a uniform national sales tax. The national sales tax would be paid at the cash register by all consumers when they purchased goods and services from retail establishments. Sales of all goods and services would be taxed at the same rate. Elimination of all federal income taxation in the United States would end taxation of all capital income, including capital gains. In the short run, the rate of the proposed national sales tax would be roughly 17 percent. Over time, as the replacement of the income tax by the sales tax stimulated economic growth, the national sales tax rate would, according to the predictions of this study, fall to 11 percent.

A full switch to a national sales tax would represent a radical departure from current fiscal arrangements, but nothing short of radical change will ever transform the tangled provisions of the income tax code into a clear and simple system of taxation. A national sales tax might be the one tax that would have enough clarity and simplicity to put an end to our politicians' constant, and very costly, tinkering with taxes. In choosing a national sales tax we also would finally be making a choice between taxing consumption and taxing income, and we would be picking the tax base, namely consumption, that is most conducive to growth of saving, investment, labor supply, and output.

Switching to a national sales tax from the income tax would also improve the efficiency of the economy by eliminating a host of economic distortions that have arisen under our current tax structure. Of course, a national sales tax would introduce distortions of its own, but the net impact of replacing federal income taxes with a national sales tax would, it appears, be a significant overall reduction in the misallocation of economic resources.

There are two main arguments against a proportional national sales tax. The first is that it would reduce the progressivity of the tax system. The second is that an immediate switch from the existing tax system to a national sales tax would lead to the shifting of tax burdens to older generations that have already paid income taxes on their earnings and now would have to pay a second large tax on their earnings as they consumed them during retirement.

The first concern--the lack of progressivity of a proportional national sales tax--has been overstated, because progressivity has been measured in terms of annual, rather than lifetime, income. At some point, all income is consumed. In any case, a national sales tax could be made progressive by combining it with a refundable tax credit. Each household would file a form requesting the tax credit and receive a check from the Internal Revenue Service equal to the amount of the credit for which the household qualified. The value of the tax credit could be fixed per household, independent of the household's income, or graduated (made to decline as the household's income increased). In addition, the value of the household credit might depend on the number of children and other dependents in the household.

C.I.
It seems to me a tax system where the rich get richer and everyone else gets taken for a ride. But what do I know?

All gov'ments are misguided and do not know what they're do'n most of the time. The pension plan for safety officers in San Jose, California, provides them with an 85 percent retirement after 30 years of service, and a lt. will retire with more than $110,000/year - this while the city cuts back on other essential services. They're all brain-dead. Using the words "common sense" is an oxymoron when it comes to gov'ments.

Deficits and Deceit

By PAUL KRUGMAN

Published: March 4, 2005

Four years ago, Alan Greenspan urged Congress to cut taxes, asserting that the federal government was in imminent danger of paying off too much debt.

On Wednesday the Fed chairman warned Congress of the opposite fiscal danger: he asserted that there would be large budget deficits for the foreseeable future, leading to an unsustainable rise in federal debt. But he counseled against reversing the tax cuts, calling instead for cuts in Social Security, Medicare and Medicaid.

Does anyone still take Mr. Greenspan's pose as a nonpartisan font of wisdom seriously?

When Mr. Greenspan made his contorted argument for tax cuts back in 2001, his reputation made it hard for many observers to admit the obvious: he was mainly looking for some way to do the Bush administration a political favor. But there's no reason to be taken in by his equally weak, contorted argument against reversing those cuts today.

To put Mr. Greenspan's game of fiscal three-card monte in perspective, remember that the push for Social Security privatization is only part of the right's strategy for dismantling the New Deal and the Great Society. The other big piece of that strategy is the use of tax cuts to "starve the beast."

Until the 1970's conservatives tended to be open about their disdain for Social Security and Medicare. But honesty was bad politics, because voters value those programs.

So conservative intellectuals proposed a bait-and-switch strategy: First, advocate tax cuts, using whatever tactics you think may work - supply-side economics, inflated budget projections, whatever. Then use the resulting deficits to argue for slashing government spending.

And that's the story of the last four years. In 2001, President Bush and Mr. Greenspan justified tax cuts with sunny predictions that the budget would remain comfortably in surplus. But Mr. Bush's advisers knew that the tax cuts would probably cause budget problems, and welcomed the prospect.

In fact, Mr. Bush celebrated the budget's initial slide into deficit. In the summer of 2001 he called plunging federal revenue "incredibly positive news" because it would "put a straitjacket" on federal spending.

To keep that straitjacket on, however, those who sold tax cuts with the assurance that they were easily affordable must convince the public that the cuts can't be reversed now that those assurances have proved false. And Mr. Greenspan has once again tried to come to the president's aid, insisting this week that we should deal with deficits "primarily, if not wholly," by slashing Social Security and Medicare because tax increases would "pose significant risks to economic growth."

Really? America prospered for half a century under a level of federal taxes higher than the one we face today. According to the administration's own estimates, Mr. Bush's second term will see the lowest tax take as a percentage of G.D.P. since the Truman administration. And don't forget that President Clinton's 1993 tax increase ushered in an economic boom. Why, exactly, are tax increases out of the question?

O.K., enough about Mr. Greenspan. The real news is the growing evidence that the political theory behind the Bush tax cuts was as wrong as the economic theory.

According to starve-the-beast doctrine, right-wing politicians can use the big deficits generated by tax cuts as an excuse to slash social insurance programs. Mr. Bush's advisers thought that it would prove especially easy to sell benefit cuts in the context of Social Security privatization because the president could pretend that a plan that sharply cut benefits would actually be good for workers.

But the theory isn't working. As soon as voters heard that privatization would involve benefit cuts, support for Social Security "reform" plunged. Another sign of the theory's falsity: across the nation, Republican governors, finding that voters really want adequate public services, are talking about tax increases.

The best bet now is that Mr. Bush will manage to make the poor suffer, but fail to make a dent in the great middle-class entitlement programs.

And the consequence of the failure of the starve-the-beast theory is a looming fiscal crisis - Mr. Greenspan isn't wrong about that. The middle class won't give up programs that are essential to its financial security; the right won't give up tax cuts that it sold on false pretenses. The only question now is when foreign investors, who have financed our deficits so far, will decide to pull the plug.

Someone needs to pull the master of doublespeak Greenspan's plug.

And the consequence of the Bush Tax Cuts makes us one of the country's with the highest children poverty rates in the industrialized world. Quite a feat if you ask me!