Comments for Bob McTeer's Blog http://www.bob-mcteer-blog.com Bob McTeer's Blog Sat, 17 May 2008 16:40:36 +0000 http://wordpress.org/?v=2.3.3 Comment on Give the “Fair Tax a Fair Chance” by Mark http://www.bob-mcteer-blog.com/give-the-fair-tax-a-fair-chance/#comment-6443 Mark Wed, 14 May 2008 23:11:43 +0000 http://www.bob-mcteer-blog.com/give-the-fair-tax-a-fair-chance/#comment-6443 Fairtax sure sounds great. I wish it was realistic -- or even sane. The sad truth is, for all its good intentions, Fairtax isn't even possible, at least at 23 or 30%. It might work at those rates --- even though there would be terrible problems with it. But since the real rate would be more like 40 or 50%, fairtax is inherently unworkable. One big reason the tax rate can't be "just" 23% is that the Fairtax math that allows them to say 23%, is based on an absurdity. And that absurdity is the federal government paying itself the highest sales tax on earth, and counting it as income. Fairtax really does count as INCOME that which it pays ITSELF. This is preposterous and absurd. The US Navy, or example, could indeed write a check for 3 billion of sales tax on a 12 billion dollars aircraft carrier. But the US Treasury has to PAY the check. True, the check comes TO the treasury, but its not INCOME. There is no new money coming in, its a bogus phantom transaction. Why would Fairtax wizards insist the federal government can pay itself a tax? Because if they don't, they are 800 billion dollars shy on paper. And that would mean the tax rate is more like 45% -- not 30%. If Fairtax admitted the real rate was 45%, no one in their right mind would fall for it. A 45% sales tax on new homes? A 45% sales tax on nursing home patients? Cancer victims? That would be a 45% sales tax on gasoline. The tax is 18 cents now -- under fairtax, the tax on gasoline could be 1.50 or 2.00 per gallon. Plus, this tax - whatever 23 or 45 - would be the world's highest sales tax. Thats not so bad, by itself, but Fairtax applies this to rent. Wont renters be surprised! Home owners will miss that bullet -- but renters will pay this high "sales" tax on their rent, as long as they rent. Fairtax can convince some people that prices will drop 23% when Fairtax kicks in. There are many reasons to believe otherwise. But Fairtax can't convince anyone that prices will drop almost 50%. And thats how much they would have to drop for a 45% sales tax to work. Prices will actually jack knife up considerably underfairtax, even if the rate is by magic 23%. But as explained, since the math is off at least 800 billion, the rate can't be 23%. And regardless of what the rate would be - it would be the worlds highest sales tax. Imagine this sales tax on new homes. Buyers would and could avoid paying 30-40-50% sales tax on new homes, just by chosing existing homes. New home sales would therefore go into the toilet. Most people can understand that if you tax something very high, people tend to buy less of it. New homes, new cars, big ticket items. Not only would this devestate the economy -- and millions of workers -- it means that the fewer sales mean less income for the government. SO when new home sales go into toilet, as they would, the federal government would have to RAISE the rates -- the rates that are already the highest sales tax on earth, would get higher. Its hard to tell how high the rates would have to get, before the public demanded Fairtax be repealed. Personally, I think the Fairtax leaders have no intention of passing this -- or even letting it get studied in Congress. They know its pretty much a farce, and they know it would be a collossal embarrassment to them, if it were to ever pass. So they ACT like they want this to pass -- but they are just selling smoke and mirrors. Fairtax sure sounds great. I wish it was realistic — or even sane.

The sad truth is, for all its good intentions, Fairtax isn’t even possible, at least at 23 or 30%. It might work at those rates — even though there would be terrible problems with it. But since the real rate would be more like 40 or 50%, fairtax is inherently unworkable.

One big reason the tax rate can’t be “just” 23% is that the Fairtax math that allows them to say 23%, is based on an absurdity. And that absurdity is the federal government paying itself the highest sales tax on earth, and counting it as income.

Fairtax really does count as INCOME that which it pays ITSELF. This is preposterous and absurd. The US Navy, or example, could indeed write a check for 3 billion of sales tax on a 12 billion dollars aircraft carrier. But the US Treasury has to PAY the check. True, the check comes TO the treasury, but its not INCOME. There is no new money coming in, its a bogus phantom transaction.

Why would Fairtax wizards insist the federal government can pay itself a tax? Because if they don’t, they are 800 billion dollars shy on paper. And that would mean the tax rate is more like 45% — not 30%.

If Fairtax admitted the real rate was 45%, no one in their right mind would fall for it. A 45% sales tax on new homes? A 45% sales tax on nursing home patients? Cancer victims?

That would be a 45% sales tax on gasoline. The tax is 18 cents now — under fairtax, the tax on gasoline could be 1.50 or 2.00 per gallon.

Plus, this tax - whatever 23 or 45 - would be the world’s highest sales tax. Thats not so bad, by itself, but Fairtax applies this to rent. Wont renters be surprised! Home owners will miss that bullet — but renters will pay this high “sales” tax on their rent, as long as they rent.

Fairtax can convince some people that prices will drop 23% when Fairtax kicks in. There are many reasons to believe otherwise. But Fairtax can’t convince anyone that prices will drop almost 50%. And thats how much they would have to drop for a 45% sales tax to work.

Prices will actually jack knife up considerably underfairtax, even if the rate is by magic 23%. But as explained, since the math is off at least 800 billion, the rate can’t be 23%.

And regardless of what the rate would be - it would be the worlds highest sales tax. Imagine this sales tax on new homes. Buyers would and could avoid paying 30-40-50% sales tax on new homes, just by chosing existing homes. New home sales would therefore go into the toilet.

Most people can understand that if you tax something very high, people tend to buy less of it. New homes, new cars, big ticket items. Not only would this devestate the economy — and millions of workers — it means that the fewer sales mean less income for the government.

SO when new home sales go into toilet, as they would, the federal government would have to RAISE the rates — the rates that are already the highest sales tax on earth, would get higher.

Its hard to tell how high the rates would have to get, before the public demanded Fairtax be repealed.

Personally, I think the Fairtax leaders have no intention of passing this — or even letting it get studied in Congress. They know its pretty much a farce, and they know it would be a collossal embarrassment to them, if it were to ever pass. So they ACT like they want this to pass — but they are just selling smoke and mirrors.

]]> Comment on My Subprime Haiku by bob aitken http://www.bob-mcteer-blog.com/my-subprime-haiku/#comment-6442 bob aitken Wed, 14 May 2008 19:44:45 +0000 http://www.bob-mcteer-blog.com/my-subprime-haiku/#comment-6442 Trilling's shortest: Oy vay OJ Trilling’s shortest: Oy vay
OJ

]]> Comment on Dollars and Sense by LaVern Isely http://www.bob-mcteer-blog.com/dollars-and-sense/#comment-6414 LaVern Isely Wed, 07 May 2008 19:54:52 +0000 http://www.bob-mcteer-blog.com/dollars-and-sense/#comment-6414 Dear Sir, In reading your article, the best comment was "The balance of payments always balances." When you are using DERIVATIVES which is something they are trying to define over in Basel, Switzerland on April 16 which was called Basel II where they are trying to get world-wide regulations on EXOTIC DERIVATIVES, I believe they are just trying to be nice because when you mix the income and expense together, there is no way to have a balanced budget. When you are trading a commodity for a DERIVATIVE that is virtually worthless, it's not good business. This is what David Cay Johnston wrote in his book "Free Lunch." If that wasn't bad enough, you should read the latest GAO report (GAO-08-25) of October 2007. Senators Clinton and Obama are getting campaign money from the HEDGE FUND DEALERS but both of them say that the HEDGE FUND DEALERS SHOULD BE TAXED and until they do, the HEDGE FUND DEALERS which are sometimes headquartered down in the Caribbean, will be getting a free lunch at the expense of the middleclass taxpayers. the Parade magazine of April 13, 2008 entitled "Are You Paying For Corporate Fat Cats?" says "61% of U.S. corporations paid no taxes." Unless the Democrats bring up the issue, I don't think the Republicans will. I'm just wondering if the paid corporate lobbyists or the voters control our democracy. Yours truly, Disgusted Middleclass Taxpayer Dear Sir,
In reading your article, the best comment was “The balance of payments always balances.” When you are using DERIVATIVES which is something they are trying to define over in Basel, Switzerland on April 16 which was called Basel II where they are trying to get world-wide regulations on EXOTIC DERIVATIVES, I believe they are just trying to be nice because when you mix the income and expense together, there is no way to have a balanced budget. When you are trading a commodity for a DERIVATIVE that is virtually worthless, it’s not good business. This is what David Cay Johnston wrote in his book “Free Lunch.” If that wasn’t bad enough, you should read the latest GAO report (GAO-08-25) of October 2007. Senators Clinton and Obama are getting campaign money from the HEDGE FUND DEALERS but both of them say that the HEDGE FUND DEALERS SHOULD BE TAXED and until they do, the HEDGE FUND DEALERS which are sometimes headquartered down in the Caribbean, will be getting a free lunch at the expense of the middleclass taxpayers. the Parade magazine of April 13, 2008 entitled “Are You Paying For Corporate Fat Cats?” says “61% of U.S. corporations paid no taxes.” Unless the Democrats bring up the issue, I don’t think the Republicans will. I’m just wondering if the paid corporate lobbyists or the voters control our democracy.
Yours truly, Disgusted Middleclass Taxpayer

]]> Comment on The Dollar by MW http://www.bob-mcteer-blog.com/the-dollar/#comment-6356 MW Tue, 29 Apr 2008 12:26:37 +0000 http://www.bob-mcteer-blog.com/the-dollar/#comment-6356 Mention of tradables/non-tradables would be good, as would mention of how tariffs, quotas, subsidies et. al. distort prices. Do you mean "numeraire", rather than "numerare"? Numerare is an Italian verb, meaning 'to count'. Mention of tradables/non-tradables would be good, as would mention of how tariffs, quotas, subsidies et. al. distort prices.

Do you mean “numeraire”, rather than “numerare”? Numerare is an Italian verb, meaning ‘to count’.

]]> Comment on The Budget Deficit, the Current Account Deficit and the Saving Deficit by Mike Hinton http://www.bob-mcteer-blog.com/the-budget-deficit-the-current-account-deficit-and-the-saving-deficit/#comment-6345 Mike Hinton Thu, 24 Apr 2008 18:15:03 +0000 http://www.bob-mcteer-blog.com/the-budget-deficit-the-current-account-deficit-and-the-saving-deficit/#comment-6345 I was under the impression that our deficits were nothing to worry about. Foreigners own only a small portion of the overall debt for instance, and the demand for our bonds means we're paying 3-4% for what we're borrowing. I'm all for tax cuts wherever we can get them, but I don't think we are at risk for people dumping dollars. It would take a worldwide panic to depress the dollar that way. The resent dollar drop is mostly due to monetary policy, once that turns around in the near future so will the value of the dollar. I don't think there's much to worry about in our current situation. But then again, I'm a physicist, not an economist. I was under the impression that our deficits were nothing to worry about. Foreigners own only a small portion of the overall debt for instance, and the demand for our bonds means we’re paying 3-4% for what we’re borrowing. I’m all for tax cuts wherever we can get them, but I don’t think we are at risk for people dumping dollars. It would take a worldwide panic to depress the dollar that way. The resent dollar drop is mostly due to monetary policy, once that turns around in the near future so will the value of the dollar. I don’t think there’s much to worry about in our current situation. But then again, I’m a physicist, not an economist.

]]> Comment on Valuing the Dollar by Claude Mathieu http://www.bob-mcteer-blog.com/valuing-the-dollar/#comment-6344 Claude Mathieu Thu, 24 Apr 2008 15:01:00 +0000 http://www.bob-mcteer-blog.com/valuing-the-dollar/#comment-6344 As you indicated, I wish the US currency to remain low. I am now looking to invest in real estate in US. The strenght of the Canadian dollar makes me want to invest in the US. I am wondering though. How soon do you expect the appreciation of the US dollar ? I guess it is a one million dollar question, but I am curious to read your response. As you indicated, I wish the US currency to remain low. I am now looking to invest in real estate in US. The strenght of the Canadian dollar makes me want to invest in the US. I am wondering though. How soon do you expect the appreciation of the US dollar ? I guess it is a one million dollar question, but I am curious to read your response.

]]> Comment on Free Trade: Here We Go Again by LVTfan http://www.bob-mcteer-blog.com/free-trade-here-we-go-again/#comment-6329 LVTfan Fri, 18 Apr 2008 17:19:31 +0000 http://www.bob-mcteer-blog.com/free-trade-here-we-go-again/#comment-6329 Were we to follow Henry George's recommendations, many of our employment problems would likely melt away. Landholders would be motivated to put their well-located land to its highest and best use, and first the construction process and then the resulting buildings would create all sorts of jobs and opportunities -- not to mention more housing close to the center of activity. Why on earth would we want all those good things, instead of letting land speculators pocket the treasure we create. We might get lucky one day, and we wouldn't want to see those privileges taken away from them, now would we? Were we to follow Henry George’s recommendations, many of our employment problems would likely melt away. Landholders would be motivated to put their well-located land to its highest and best use, and first the construction process and then the resulting buildings would create all sorts of jobs and opportunities — not to mention more housing close to the center of activity.

Why on earth would we want all those good things, instead of letting land speculators pocket the treasure we create. We might get lucky one day, and we wouldn’t want to see those privileges taken away from them, now would we?

]]> Comment on Free Trade: Here We Go Again by Divina Westerfield http://www.bob-mcteer-blog.com/free-trade-here-we-go-again/#comment-6328 Divina Westerfield Fri, 18 Apr 2008 17:02:28 +0000 http://www.bob-mcteer-blog.com/free-trade-here-we-go-again/#comment-6328 You said, "Free trade helps almost everyone a little bit, but hurts a few a lot. Furthermore, the higher standard of living associated with, and attributable to, free trade is not easily identified — while a job lost at a plant moving to China is easily associated with it. Theoretically, those benefited could use a portion of those benefits to help those harmed get trained for the new jobs created by trade." The problem, and one that I hope and believe Obama will address, is the fact that those benefited from free trade have NOT used a portion of those benefits to help those harmed get retrained. Instead, they have lined their corporate pockets, specifically their C-level pockets. Redress is desparately needed and required particularly in the so called, "rust-belt" states that relied on this manufacturing base. I may be ill-informed as to McCain's position regarding this issue, but my guess is that he has ignored it as he tried ignore the national foreclosure issue. Or, as McCain himself stated, "The issue of economics is not something I've understood as well as I should..." See: http://www.boston.com/news/politics/politicalintelligence/2007/12/mccain_its_abou.html While I agree in the long term free trade may be good, we cannot abandon those families left without economic recourse. The candidate that focuses on this redress, is the candidate that can resolve the problem. Divina Westerfield You said, “Free trade helps almost everyone a little bit, but hurts a few a lot. Furthermore, the higher standard of living associated with, and attributable to, free trade is not easily identified — while a job lost at a plant moving to China is easily associated with it. Theoretically, those benefited could use a portion of those benefits to help those harmed get trained for the new jobs created by trade.”

The problem, and one that I hope and believe Obama will address, is the fact that those benefited from free trade have NOT used a portion of those benefits to help those harmed get retrained. Instead, they have lined their corporate pockets, specifically their C-level pockets. Redress is desparately needed and required particularly in the so called, “rust-belt” states that relied on this manufacturing base. I may be ill-informed as to McCain’s position regarding this issue, but my guess is that he has ignored it as he tried ignore the national foreclosure issue. Or, as McCain himself stated, “The issue of economics is not something I’ve understood as well as I should…” See: http://www.boston.com/news/politics/politicalintelligence/2007/12/mccain_its_abou.html

While I agree in the long term free trade may be good, we cannot abandon those families left without economic recourse. The candidate that focuses on this redress, is the candidate that can resolve the problem.

Divina Westerfield

]]> Comment on The Budget Deficit, the Current Account Deficit and the Saving Deficit by MiltonF http://www.bob-mcteer-blog.com/the-budget-deficit-the-current-account-deficit-and-the-saving-deficit/#comment-6325 MiltonF Wed, 16 Apr 2008 23:01:17 +0000 http://www.bob-mcteer-blog.com/the-budget-deficit-the-current-account-deficit-and-the-saving-deficit/#comment-6325 Thank you, Mr. McTeer. Nice, concise review. I'll bookmark this one. Question: Do you think the current recession (if it is one) will bring consumers back to reality and inspire them to save more and spend less? There is evidence PCE is falling, but there is no guarantee this adjustment will last. Also, how much do the recent changes in pension law and resultant practice of companies to automatically enroll new employess in defined contribution plans, play into helping increase the savings rate? Again, well done. Thank you, Mr. McTeer. Nice, concise review. I’ll bookmark this one.

Question:
Do you think the current recession (if it is one) will bring consumers back to reality and inspire them to save more and spend less? There is evidence PCE is falling, but there is no guarantee this adjustment will last.
Also, how much do the recent changes in pension law and resultant practice of companies to automatically enroll new employess in defined contribution plans, play into helping increase the savings rate?

Again, well done.

]]> Comment on The Budget Deficit, the Current Account Deficit and the Saving Deficit by The Budget Deficit, the Current Account Deficit and the Saving Deficit at Curious Cat Investing and Economics Blog http://www.bob-mcteer-blog.com/the-budget-deficit-the-current-account-deficit-and-the-saving-deficit/#comment-6321 The Budget Deficit, the Current Account Deficit and the Saving Deficit at Curious Cat Investing and Economics Blog Tue, 15 Apr 2008 12:40:43 +0000 http://www.bob-mcteer-blog.com/the-budget-deficit-the-current-account-deficit-and-the-saving-deficit/#comment-6321 [...] a nice review of The Budget Deficit, the Current Account Deficit and the Saving Deficit: Reducing the Deficits. What are the policy implications of these interdependent imbalances? Here [...] […] a nice review of The Budget Deficit, the Current Account Deficit and the Saving Deficit: Reducing the Deficits. What are the policy implications of these interdependent imbalances? Here […]

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