NST Fair Tax and Two Currencies
Buongiorno specie al mio preferito!
Gov. Huckabee almost has me convinced with the Fair Tax proposal.
I get the uniform minimum exemption, to relieve the burden on the poor.
I get the slick way that it captures currently untaxed economies in our economies.
I get the way that it unburdens incentives on saving and investment, and doesn't punish creation of wealth.
As long as it is an end use tax only, I can see how it might eliminate hidden compound/pass along taxation.
I get the way it eliminates a convoluted tax code and IRS, and replaces it with a what should be simpler and easier to understand NST collection and reporting agency.
I get the way it throws millions of tax accountants out of work. I mean, displaces their efforts.
It has way more positives than negatives, but there is one thorny issue that I've never gotten a Fair Tax advocate to address, and that is, the Transition Problem.
When I bring it up, it gets hand waved away. If that is how it is going to be treated, then if it ever happens, it is going to create an enormous opportunity for displacement of wealth between those paying attention and those not to the fact that the transition is going to create two currencies in the economies for some period of time, PRETAX currency and AFTER TAX currency.
Something tells me that banks and financial institutions are going to be able to figure this out.
Something tells me that an awful lot of just plain folks with money in their checking and savings accounts will be among the folks not figuring this out.
One day, you deposit your hard earned AFTERTAX dollars into your checking account, and some time later, you withdraw your brand new PRETAX dollars, ready to go spend and be taxed again.
One day, you are a retiree living on AFTERTAX assets, and the next day, you are retiree freshly finding out that you are living on PRETAX assets.
I seriously doubt that we are going to go to the trouble of actually issuing a new currency, or establishing an exchange rate between them, and so on. Too complicated.
So...that leaves, opportunities to pay attention and not get hosed, or just live your life and get hosed. IOW, for some of us to game other of us and/or the economies to extract value from the unsuspecting.
Rest assured, banks and lending institutions will pay attention to the details.
For example, if you borrow AFTERTAX dollars from someone, I doubt if they will be happy with being paid back with PRETAX dollars without an adjustment in the interest rate being paid. Got a 30 yr mortgage? Been paying it off with AFTERTAX dollars? It will be a relief to pay it off with PRETAX dollars, won't it?
Of course, that's the way the bank will feel, too, when it has to pony up those demand accounts. You deposited AFTERTAX dollars, but they will deliver PRETAX dollars when you make a withdrawal.
I'm wondering, will you keep your old currency in demand accounts during the transition to Fair Tax? Some will, some won't.
Will you attempt to convert as much of your AFTERTAX assets as possible in the old economies into real/transferable assets of some type and carry them into the new economies?
Will you attempt to borrow as much AFTERTAX credit as you can in the old economies to do same, and then pay back those loans with PRETAX dollars in the new economies?
Of all the things a Fair tax is or isn't, what it clearly also is is an opportunity to tax the same income TWICE during the transition, if folks try to carry AFTERTAX proxies across the transition.
I mean, assuming this complicated transition issue is not addressed by recognition of the two currency problem, and advocates just hand wave it away and claim "it will take care of itself."
Eyes glaze over.
"Not a big problem. It will work itself out."
Then...get ready for more sharks in the water.
Reguarda,
Frediano
Friday, January 25, 2008
Tuesday, January 22, 2008
Fixing Social Security Forever
Buongiorno specie al mio preferito!
It's all in the sales pitch. I think Sen. Obama could sell this one.
We know the problem; nothing but IOUs in the SS Trust Fund. It is and always was a 'pay as you go', revenue in, benefits out, surplus immediately spent program. This was fine during the entire working life of the Boomer demographic, the same already generational surplus paying demographic that was charged an additional surcharge, supposedly to fund this coming rainy day in a sound, actuarial manner.
Well, they couldn't help themselves. Too late to cry over that. So, what to do?
It's easy, if not painless. Here' is the pitch.
"Social Security, in its current defined benefits format, was a one time well deserved 'thank you' to the Greatest Generation that preceded us. Without their enormous sacrifices, none of the economies which followed in the free world would have existed. But as they fade into history, America must adjust Social Security so that it will last forever. We can do that easily,by converting it over some period of time to a defined contribution program. As such, it will last forever. What this means is, your future benefits are not defined. They will be determined by the then available revenues in the program. You want higher benefits? Then do what the Greatest Generation did, and have more kids."
"This means that the Boomer generational pain might be back end loaded. Well, the Greatest Generation's pain was front end loaded. But, consider the world without the sacrifices of that generation, if you can. You can't, the debt we owe them is immeasurable."
"So, buck up. Receiving less Social Security is not the same thing as leaving a leg in Normandy."
That will fix SS forever.
reguarda,
Frediano
Buongiorno specie al mio preferito!
It's all in the sales pitch. I think Sen. Obama could sell this one.
We know the problem; nothing but IOUs in the SS Trust Fund. It is and always was a 'pay as you go', revenue in, benefits out, surplus immediately spent program. This was fine during the entire working life of the Boomer demographic, the same already generational surplus paying demographic that was charged an additional surcharge, supposedly to fund this coming rainy day in a sound, actuarial manner.
Well, they couldn't help themselves. Too late to cry over that. So, what to do?
It's easy, if not painless. Here' is the pitch.
"Social Security, in its current defined benefits format, was a one time well deserved 'thank you' to the Greatest Generation that preceded us. Without their enormous sacrifices, none of the economies which followed in the free world would have existed. But as they fade into history, America must adjust Social Security so that it will last forever. We can do that easily,by converting it over some period of time to a defined contribution program. As such, it will last forever. What this means is, your future benefits are not defined. They will be determined by the then available revenues in the program. You want higher benefits? Then do what the Greatest Generation did, and have more kids."
"This means that the Boomer generational pain might be back end loaded. Well, the Greatest Generation's pain was front end loaded. But, consider the world without the sacrifices of that generation, if you can. You can't, the debt we owe them is immeasurable."
"So, buck up. Receiving less Social Security is not the same thing as leaving a leg in Normandy."
That will fix SS forever.
reguarda,
Frediano
The Myth of 'The' Economy
Buongiorno specie al mio preferito!
We hear that phrase all the time, especially in this now continuous political season: "The Economy."
Think about it. No, in fact, that is the slight of hand being pulled. By thinking of 'them' as if they were an 'it', we are all lulled into a false sense of tractability, as if those talking about 'it' have a handle on 'it.'
Alas, 'it' is really a 'them.' Whenever you hear someone talk about 'the Economy', make an effort to actually hear 'the economies.' The former does not lead to understanding, it prohibits it.
Do we talk about 'the' weather in the United States in any meaningful way--meaning, the singular 'weather' that characterizes the entire United States of America? If you think so, then what is 'the' temperature in America right now? Should it be 'hotter' or 'colder'? Let's let the folks in Florida and Alaska duke that one out.
Silly? Then what about 'the' unemployment rate, or 'the' interest rate that best tweaks 'the' Economy?
Do 67 year old pharmacists in Altoona really participate in the same 'the' Economy as 25 year old stock brokers in Manhattan or 43 year old defense contractors in Huntsville?
Then, globally, what of the 28 year old PhD in Beijing? Do we shift a gear, and then think of 'The American Economy' as something yet different than The Global Economy, or in fact, is it just yet ever more economies at ever smaller scales, right down to your very household?
Did the Soviet Union actually win the Cold War, and America has actually conceded the brilliance of a centrally planned command 'The' Economy? I missed that. What I remember hearing about instead was an America half our present size that left over 400,000 of themselves in a meat grinder fighting totalitarianism. I'm not sure the Greatest Generation would have gone to all that trouble if they knew that their clueless kids were going to preside over the political equivalent of Macy's buying Gimbels when it comes to embracing 'totalitarianism.'
The herdists/statists running loose among us would prefer us to believe in the Myth of The Economy. It is a political argument for OnesSizeFitsAll management of that which is inherently not a single entity, but a complex aggregate of systems, some of which have no bearing whatsoever on each other, no linkage at all.
If we believe in that Myth, then we are one required step closer to believing also in the ability of Cargo Cult scientists, aka soft scientists, to manage it.
Flip a perfect coin a million times, and keep track of the net number of heads vs the net number of tails. The probability that you flip 'heads' on every even throw and 'tails' on every odd throw, or vice verse, is effectively 0%. This means, simply at random, there will be periods of 'net heads throws' and 'net tails throws' at any given time, and in fact, 'no net heads/tails throws' for a very small % of time.
We could pretend to look at those periods of net heads and net tails and predict the future with certainty, but with a perfect coin, we'd have no clue.
So, here's the God's truth: modern day state of the art economic science can't even reach a consensus and tell us what just happened, much less, what is going to happen.
Compare it with 'weather prediction.' Weather prediction has a model and a predicted outcome. Every day, yesterday's model can be compared with today's outcome. Models can be calibrated daily. And still, state of the art is about 2 weeks, tops.
How are economic models calibrated? They aren't. Consider the LTCM fiasco. Unknown/unknowable/unmeasurable terms were simply ignored. What was left amounted to a model that said "the weather in San Diego will be pleasant, sunny and warm tomorrow.' Which was true, right up until the moment it wasn't.
That leaves, Cargo Cult scientific 'modeling'. I mean, the same age old ritualistic voodoo witch doctor sacrifices at the base of the volcano. If a model guesses right, the high priests are validated. If a model guesses wrong, then the sacrifice must have been tainted.
What really drives economies? The same things that drive everything in the universe: gradients, only in the case of the economies, there is not just one gradient, there are myriad gradients, most of which are unmeasured and unmeasurable.
At most, we can hand wave about economies. As in, economies are not fundamentally driven by 'money', but by the energetic circulation of human exchange of value for value. Unlike cartoon dogma from the 19th century, value does not fall from the sky, unabetted, nor is it largely laying on the ground waiting to be effortlessly scooped up. Value is inevitably the crass, warm afterglow left over from the creative exertion of actual human beings. It is not sufficient to 'stimulate' economies--if healthy economies are our goal--simply by handing out value proxies for consumption based on borrowing from the future, or any mere credit based consumption side 'stimulation.' What needs to be stimulated is the human circulation of exchange of value for value, and that means, exertion of human creative effort. Humans taking intelligent risk, humans exerting effort, humans creating value circulates the exchange of value in healthy economies, and creates additional opportunities for creating value.
Otherwise, simply printing and handing out money to people would stimulate economies. That stimulates only one thing; some noise before the next dark ages.
Do yourself a favor, and see the world differently, with your eyes open; there is no such thing as 'The Economy.' So, ask yourself, why is it so front and center in our politics?
reguarda,
Frediano
Buongiorno specie al mio preferito!
We hear that phrase all the time, especially in this now continuous political season: "The Economy."
Think about it. No, in fact, that is the slight of hand being pulled. By thinking of 'them' as if they were an 'it', we are all lulled into a false sense of tractability, as if those talking about 'it' have a handle on 'it.'
Alas, 'it' is really a 'them.' Whenever you hear someone talk about 'the Economy', make an effort to actually hear 'the economies.' The former does not lead to understanding, it prohibits it.
Do we talk about 'the' weather in the United States in any meaningful way--meaning, the singular 'weather' that characterizes the entire United States of America? If you think so, then what is 'the' temperature in America right now? Should it be 'hotter' or 'colder'? Let's let the folks in Florida and Alaska duke that one out.
Silly? Then what about 'the' unemployment rate, or 'the' interest rate that best tweaks 'the' Economy?
Do 67 year old pharmacists in Altoona really participate in the same 'the' Economy as 25 year old stock brokers in Manhattan or 43 year old defense contractors in Huntsville?
Then, globally, what of the 28 year old PhD in Beijing? Do we shift a gear, and then think of 'The American Economy' as something yet different than The Global Economy, or in fact, is it just yet ever more economies at ever smaller scales, right down to your very household?
Did the Soviet Union actually win the Cold War, and America has actually conceded the brilliance of a centrally planned command 'The' Economy? I missed that. What I remember hearing about instead was an America half our present size that left over 400,000 of themselves in a meat grinder fighting totalitarianism. I'm not sure the Greatest Generation would have gone to all that trouble if they knew that their clueless kids were going to preside over the political equivalent of Macy's buying Gimbels when it comes to embracing 'totalitarianism.'
The herdists/statists running loose among us would prefer us to believe in the Myth of The Economy. It is a political argument for OnesSizeFitsAll management of that which is inherently not a single entity, but a complex aggregate of systems, some of which have no bearing whatsoever on each other, no linkage at all.
If we believe in that Myth, then we are one required step closer to believing also in the ability of Cargo Cult scientists, aka soft scientists, to manage it.
Flip a perfect coin a million times, and keep track of the net number of heads vs the net number of tails. The probability that you flip 'heads' on every even throw and 'tails' on every odd throw, or vice verse, is effectively 0%. This means, simply at random, there will be periods of 'net heads throws' and 'net tails throws' at any given time, and in fact, 'no net heads/tails throws' for a very small % of time.
We could pretend to look at those periods of net heads and net tails and predict the future with certainty, but with a perfect coin, we'd have no clue.
So, here's the God's truth: modern day state of the art economic science can't even reach a consensus and tell us what just happened, much less, what is going to happen.
Compare it with 'weather prediction.' Weather prediction has a model and a predicted outcome. Every day, yesterday's model can be compared with today's outcome. Models can be calibrated daily. And still, state of the art is about 2 weeks, tops.
How are economic models calibrated? They aren't. Consider the LTCM fiasco. Unknown/unknowable/unmeasurable terms were simply ignored. What was left amounted to a model that said "the weather in San Diego will be pleasant, sunny and warm tomorrow.' Which was true, right up until the moment it wasn't.
That leaves, Cargo Cult scientific 'modeling'. I mean, the same age old ritualistic voodoo witch doctor sacrifices at the base of the volcano. If a model guesses right, the high priests are validated. If a model guesses wrong, then the sacrifice must have been tainted.
What really drives economies? The same things that drive everything in the universe: gradients, only in the case of the economies, there is not just one gradient, there are myriad gradients, most of which are unmeasured and unmeasurable.
At most, we can hand wave about economies. As in, economies are not fundamentally driven by 'money', but by the energetic circulation of human exchange of value for value. Unlike cartoon dogma from the 19th century, value does not fall from the sky, unabetted, nor is it largely laying on the ground waiting to be effortlessly scooped up. Value is inevitably the crass, warm afterglow left over from the creative exertion of actual human beings. It is not sufficient to 'stimulate' economies--if healthy economies are our goal--simply by handing out value proxies for consumption based on borrowing from the future, or any mere credit based consumption side 'stimulation.' What needs to be stimulated is the human circulation of exchange of value for value, and that means, exertion of human creative effort. Humans taking intelligent risk, humans exerting effort, humans creating value circulates the exchange of value in healthy economies, and creates additional opportunities for creating value.
Otherwise, simply printing and handing out money to people would stimulate economies. That stimulates only one thing; some noise before the next dark ages.
Do yourself a favor, and see the world differently, with your eyes open; there is no such thing as 'The Economy.' So, ask yourself, why is it so front and center in our politics?
reguarda,
Frediano
Subscribe to:
Posts (Atom)
