I agree with much of the article, but other parts are ludicrous. It's a long response, and I'm too tired to proof it, so I hope it makes some sense.
As for McCain's economics, one defining moment for him was during the 2000 debates. In response to a question about Alan Greenspan, McCain stated something along the lines of, “If Greenspan passed away, I'd have him stuffed and put back in as Fed Chairman.” Unfortunately, being ignorant, most politicians would, at the time, given a similar answer. Heck, Bill Clinton at the time appointed the moron to another six g*dforsaken years. I am thrilled that finally even the wonderdummies in the media have recognized that the “Maestro,” as an individual, is one of the worst to ever hold a position of power or influence in our history. Heck, even today's Barrons had this to say about Greenspan (original source sited):
"In America (the place where lying with statistics achieved official government status, thanks to the loathsome Alan Greenspan, the worst central banker in the history of central banking,"
Daily ReckoningSince I've despised Greenspan since he was first appointed by Reagan, hearing McCain make this statement didn't win him any points with me. But, as for the spending cuts, I do believe McCain is on the right track, I just have some doubts as to whether he knows why. More on this in a bit.
When Myerson makes the supposition that Americans are concerned with the immediate soundness of the economy, he stumbles across a major problem without recognizing it. That problem is that most Americans are only concerned about the immediate soundness of the economy, and don't think of the consequences of their desires for instant gratification. When compounded with the ignorance of economics, and a political system that prefers to keep the populace in the dark, it permits the politician to provide horrendous solutions that make for good sound bytes without ever entering the realm of reality. This is a major problem, and is one sited in the aforementioned Barron's article.
Myersons concern about about the foreign control of our financial infrastructure are real. One of the consequences of our massive spending and debt is an abundance of weak $US in foreign hands. The GCC countries just put together $2 trillion is Sovereign Wealth Funds – money used to buy US assets. In the last hour of trading today, the DJIA rose well over 500 points. Yet, the funds didn't come from commodities or the bond markets. Hmm, did Americans have a few trillion dollar stuck in our pockets, or did this all come from offshore? Worse, while the collapse has been very broadbased, todays little bounce was primarily our financial infrastructure companies (JP Morgan Chase lead all with over nearly a 12% gain, followed by Citi with 8%. A question in a Republican, I believe the October 9 debate, was if there were any national security concerns with the Middle East SWFs taking over our financial instructure. Paul, Huckabee, and I think it was Tancredo, were the only ones who recognized any danger in this. The others, including McCain, all had virtually no national security concerns about it. In addition to McCain, Romney and Giuliani, as well as drop-outs Thompson, Brownback, Hunter, all flunked miserably on that question. We've already lost control over the value of our currency, and these morons not only didn't recognize that, they are willing to cede control over our financial markets and banking system as well. In short, they are willing to cede total control of all aspects of the economy other than our tax code to the GCC states.
The tax code and spending – this is where Myerson has no business writing on topic for which he has shown no understanding. I could write a book on this, and have already written yet another dissertation, so I'll try to keep this short (yeah, right).
There are two types of taxes that I believe should be eliminated immediately: payroll taxes and corporate income taxes. Our payroll taxes, as stated in another thread, make us less competitive than all other industrialized countries by forcing taxes into the production cost of our goods and services. If we can eliminate those taxes, as well as corporate income taxes, from our production cost, with our productivity, our labor cost would be 8% less than that of Mexico. Further, payroll taxes are the most unfair taxes in our system. Most workers pay 7.65% (6.2% social security, 1.45% medicare) of their gross income every friggin day of the year to payroll taxes. Worse yet, they pay income taxes on those payroll taxes they never receive. Now, take somebody making $250,000. They pay social security taxes for a little over five months of the year. Somebody making $500,000 is done paying those taxes in mid-March. The Wall Streeters that Myerson is so worried about appeasing on the average, pay those taxes for a whopping 10 days a year. The payroll taxes are the most unfair of all taxes we have, and also hurt our productivity the most.
As for corporate income taxes, corporations don't pay income taxes. People do. When you tax Exxon, Exxon isn't paying the taxes. The taxes shown on Exxon's income statement are paid by the shareholders, the vast majority of which are retirement funds. Hey, if you want to knock Ali's 401(k) down a bit more, vote for Hillary. Further still, like the payroll taxes, those income taxes are built into the cost of everything we manufacture, with the cost passed on to the consumer. I wouldn't cut corporate income taxes, I'd eliminate them. This would also provide the benefit of bringing corporate operations back to this country. We are the only country that taxes corporations on their foreign income. When Daimler and Chrysler merged, the headquarters went to Germany because, as their VP and tax counsel testified to Congress, our corporate income tax code would result in them paying a total of 67.5% in corporate income taxes, and Germany's code would put them in a 44% bracket. Get rid of our corporate income taxes, and well have to have a lottery to see which companies are allowed to move (back) to the US. Our tax code is what is driving businesses off our shores.
Now, you want a boost the the economy? The proposals made by our leaders and wannabes for president have worthless one-time rebates of $70 to $150 billion. With the taxes I just eliminated, I put a recurring $500 billion in tax preparation and planning savings back into the economy.
Of course, those taxes would have to be replaced. Just be sure to replace them with post-production taxes, preferably the plan that Huckabee supports. Short of that, since all taxes are eventually assessed on individuals, it would most likely have to come in the form of an income tax. Just be sure to put the entire increase on the upper end, and let the lower end drive the economy, and hopefully even save a little bit, with the additional 7.65% of their gross pay they are taking home. One other thing, replacing the corporate income taxes will not be that difficult – they are a small percentage of our tax collections.
The payroll taxes are more substantial, and have another problem associated with them. Under our current laws, social security and medicare must be paid from taxes collected for those purposes (however, Johnson made it so taxes collected for those purposes can be used for any purposes). At the end of fiscal 2000, our liability for social security payments was $20 trillion. At the end of 2007, that had jumped to $53 trillion. It's going up at 15% annually. Since this liability, which starts being paid this year, is growing so rapidly and must be funded from payroll taxes, are you ready for a doubling or tripling of the payroll taxes? That will not only bankrupt our middle and lower classes, it will destroy our ability to compete in the global market.
As for the spending cuts, they are necessary in order to achieve any semblance of economic stability. The uncontrolled spending has saturated the world with $US, and then destroyed the value of the $US. That is what created the security problem of having the foreign countries take control over our infrastructure (and, contrary to Myerson's belief, corporations didn't move offshore on a whim, they did so for a reason – our asinine tax code that makes us non-competitive). We no longer have the relative luxury of even shrinking our deficits – they must be turned into surpluses. The tax code revisions I mentioned above would expand our economy immensely, which would generate more revenues, which could be used to cut spending
if we have a president and a Congress that are fiscally responsible and don't use new revenues on new spending programs.
Under our current system, any new spending programs are going to result in higher interest rates are our foreign investment funding is dwindling quite rapidly, falling way short last year. So, if we can't borrow, we have two solutions: hyper-inflation or raising taxes. Just as tax cuts, especially well targeted tax cuts unlike those Bush has implemented, can provide a stimulus, tax hikes do the opposite and are detrimental to the economy – especially since our tax system is pre-production, and will drive even more jobs offshore.
Also, government spending take away monies that could be in the marketplace already stimulating the economy. When the government gets a dollar, it reduces the number of times that dollar turns over in a year by 67%. Turnover is when you earn a dollar, and buy a loaf of bread. That dollar is then used to pay somebody else, who then uses it and pays somebody else. In short, that one dollar is spent in the marketplace over 20 times in a year. That one dollar added $20 to the economy. When that dollar goes to the government, it turns over an average of about 7 times a year, adding only $7 to the economy. That little government spending program actually cut the economic stimulus by 67%. Every dollar cut from spending and added to the marketplace provides and economic stimulus. McCain is correct, but I doubt he knows why.
Additionally, with the necessary changes to our tax code unlikely since we haven't had a statesman in DC in in decades, we are faced with either cutting spending or being extraordinarily stupid and raising taxes. We cannot just spend like we have for the past seven years. And, giving out these stupid tax rebates is worthless. One the average, every household will get about $1,300. We don't have a demand problem, we have a problem in that for 3 straight years we have had a negative savings rate – with our insatiable appetites, as individuals we've followed our government's example and spent more than we've earned for three straight years. Where will most of this go? To pay bills to the banking industry and financial services companies that our politicians are catering to. It's another bail-out disguised as as stimulus package. We just took 1% of our GDP, and handed it over to the financial services industry. There is nothing whatsoever in the package that will create a single new job. There is not one single thing in the package, or any of the proposed packages, that has any long-term impact other than to further devalue the $US and create inflation.
However, for the long term, significantly cutting the annual deficits, or preferably running surpluses, will have a long-term impact on our economy, provide stability, increase our economic and national security, our economic sovereignty, and thus provide a permanent foundation for economic stimulus.
