viernes, 27 de agosto de 2004

Kerry does in fact, go into more detail about his plans on his site.

 I looked at the economy part of the site, and I have a few observations:

1. Kerry's plans call for an estimated (by the Wall Street Journal, and others if I remember correctly) 1.9 trillion dollars of spending (on top of what we have now) over the next ten years. However, it is also part of his promises to lower the deficit in half over four years. This probably means more taxes. But he promises to lower taxes on those making under $200,000 dollars a year, while rolling back whatever tax breaks were given to those making over $200,000 a year by Bush. I see problems.

A. Their seems to be a tacit assumption that those repealed tax cuts (mixed with other tax cuts he plans to repeal; I'll get to those soon) will be enough to not only offset Kerry's new spending proposals, but that there will also be enough to lower the deficit. I saw no specific numbers to back up this possibility.

B. Fairness. A little story to illustrate: three men, of different financial status persuasions, meet together for lunch everyday. The bill is divided like so: the rich man pays 6O% of the total bill, the middle class man 30%, and the poor man, 10%; this is without regard to who ordered what at what price. One day, the maitre'd comes to their table and tells them that not only is lunch free for today, but yesterday's is free, and the money (say $100) will be given back to them. If the order is inverted, and the poor man gets $60, and the rich $10, is that really fair?
This is not to claim that Kerry will neccessarily make this the case, but given that there no specific percentages quoted, I do not know for sure that it won't be.

C. Encouragement. If the taxes on those above the $200,000 threshold become extravagant, where is the motivation to achieve financial success? Without this motivation, there is a loss of enthusiasm for individual achievement, as it will seem to be punished.
Again, I am not stating that this will specifically happen with Kerry, but there is no specific information stating that taxes will be raised within reason.

Sidenote: esp. given that Americans are very charitable people (look at recorded donations to all the different groups, and then think about how many times you see a beggar getting a dollar from a stranger, since there are no accurate records of that kind of donation), the idea of a third party (the government) controlled by people who clearly have their own interests in mind as well as those of others redistibuting wealth as they see fit seems a little unsettling.

2. Kerry has laid out that he wants to "end corporate welfare," and bring factories and jobs back to America. As far as the corporate welfare goes, cutting all of it, will, at best, cover not even a third of his increased spending proposals. Not to say that I'm neccessarily against cutting "corporate welfare," but I'd have to see specifically what is being cut and how it affects things.

As far as bringing jobs back, he cites that American based companies are allowed to avoid paying taxes on profits produced overseas, instead just paying taxes in the countries they reside. This is alluring to companies because, Kerry says, taxes here are 31% compared to 21% abroad. His solution is to have companies pay taxes on profits made in the states from overeseas plants, though still avoiding paying taxes on goods produced in the country that stay in-country (i.e., cars made in Japan and sold in Japan are not taxed, but those made in Japan and sold here are). I suppose the idea is that companies, instead of paying double taxes, will move back here, but I wonder if that will drive companies to solely operate overseas, and arrange a merchant middleman purchasing system to avoid paying taxes (except sale), operating much like those european cigarette outlets so popular at That Anonymous College. If there is no benefit from doing this, and double taxes will have to be paid, I see no reason why they would come back into the U.S., either, as being overseas is probably cheaper on the wage (and thus payroll taxes) and benefits end. Why isn't the alternative of having competitive tax rates explored? If for any reason, then at least to explain why the potential fiscal fallout of lowering taxes dramatically would be more disastrous than the potential fallout of having Kerry's not work, and even possibly backfire.

Sidenote: I don't buy Kerry not giving favors to any allies he makes in the business communities, so I wonder how much "corporate welfare" will really be wiped out. Also, concerning foreign taxes v. ours: it highlights the difference between the government and the market. Foreign nations are just doing what has been done to build up the American economy, but the American government seems to want to remain a monoply, if you will, by resisting competitive tax policy ideas concerning business (at least, according to Kerry's plan, but I also find it to be generally true).

3. Kerry also talks about raising the minimum wage, federally, from $5.15 an hour to $7.00 an hour over the next few years, to keep up with the cost of living. Again, problems

A. Can anyone name one state that has $5.15 as it's minimum wage? I can't think of any; most that I know of are at or above $7.00 as it is, meaning that there might not actually be any wage earning increase whatsoever, at least in a significant number of heavily populated states with large economic numbers (i.e., California).

B. Higher wages can translate into less hiring. A business will not want to hire more people if it's paying more for what it already has, in both wages and payroll taxes.

To his credit, Kerry has talked about adding payroll tax write offs on those employees hired above the current number possessed (at the time of his hypothetically taking office, I suppose), but I'm not sure how effective that will be. Employers will still be covering extra wage costs, and extra benefit costs, even if they are reduced like Kerry is promising. As I see it, payroll taxes are a definite hindrance to hiring, but the lack thereof, although having a positive economic impact of lessening a financial burden on a business owner, will not neccessarily translate into a significant upturn in the number of hirings.

Sidenote: Concerning lowering the cost of living, Pfundstein had interesting things to say (for those of you TACers who have him within reach). He pointed out over regulation (i.e., on house building) as driving up costs (i.e., of housing), thus driving up cost of living. He also talked about the minimum wage as a hindrance to poorer people trying to climb up the economic ladder, as easier, less-than-$5.15 an hour jobs are not available to those seeking any kind of work; coupled with cost of living, this adds to poor people remaining poor. There is of course, the threat of exploitation, but I don't think it would ever be quite as rampant and disastrous as before, esp. given the prescence of unions and the free flow of information. Talk to Pfundstein if you get a chance.

I'll write more, later, on the rest of what Kerry has to say, and also get out an analysis of what Bush has to say.

UPDATE: I'd post a link to their respective sites, but the damn thing keeps giving "tag line not closed" errors despite the fact I'm putting in the SAME DAMN THING I've put before. Hell, I just gave up and it still said I had an error, despite their being no links, and no damn tagline. The blogger help section was not worth a damn on the problem, either.

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