I've read many articles on herman cains 9-9-9 plan, I understand that it wont work and that if Cain somehow DID get elected he'd never enact it or it would fail miserably during "phase 1" and go into economic rapture.
That said, has anyone from Mises deconstructed the plan yet?
I think people like Wenzel at least deserve a little snarkiness. Sure he's not a journalist, but his blog has a decent amount of traffic, and certanly gets cited more than enough for the plain-text blogspot dot com site that it is. Yet the guy doesn't take 5 minutes to get his facts straight, and writes sensational headlines that he either barely backs up, or are just plain wrong...all the meanwhile berating other people and dishing out plenty of snarkiness of his own. It's certainly irritating, but I think even more so because the guy is supposed to be on the Austro-libertarian team, and he constantly pulls this crap. Just a huge disappointment.
But then again, his economics seem to be wrong just as often as they are right (or at least often enough to be called shoddy), so I'm not so sure it's much of a loss anyway. Just one more reason to feel okay about writing him off.
I shall check out your assessment.
:EDIT:
I figured my response would be best served here...
1. The scheme will will not reduce the amount of taxes actually being collected. Cain said this himself, in Orwellian language, of course.
I have to assume you're referring to his comment that the plan would be "revenue neutral". Saying it will not reduce the taxes collected doesn't paint the whole picture. It's a bit misleading. While it is what "revenue neutral" means, it leaves out the point that the whole reason for saying it that way is to illustrate that taxes can end up being a lower percentage of a person's total wealth...which is kind of a big deal. If sales and incomes and overall GDP rise enough, "being taxed the same amount" could become the 0% utopia Bob is looking for. A $2 trillion tax revenue would not be a problem for me if GDP were $200 Trillion. Obviously this is not realistic but it illustrates my point.
2. A much bigger problem than how the taxes get divvied up is the total amount of taxes being collected.
Again, this completely ignores the GDP of the economy as a whole. This is the whole reason people speak in percentages. You're saying "look how much this guy is paying in income taxes...a million dollars? That's insane." To be perfectly honest, I really don't give a crap if my taxes are $1 million if my income is $1 billion/yr. I'm not saying government taxing/spending isn't important, obviously it should be zero, but my point is it's foolish to ignore proportion.
Note that Wenzel is not saying that the 9-9-9 scheme is worse than what we have now [by this reasoning], only that it is not an improvement.
It sure sounded like he preferred the current system over the 9-9-9. Why else was he so averse to consumption tax, yet had nothing to say about an income tax?
I think Wenzel wins this round, at least till we hear a rebuttal from Peter.
You're going to have to explain this one. I thought I illustrated quite well in the earlier post that it was Wenzel who was completely confused and didn't have an answer for anything...all he had for the majority of the discussion was "taxes should be lower". And finally when Peter pressed him and he comes out with a capitation tax. So Peter questioned him on the whether it would be apportioned, as stipulated in the Constitution or whether the Constitution would be amended, and Wenzel claims he's throwing around legal terms that Wenzel isn't familiar with so he can't answer. So Peter moves on to explain why the founders didn't like Wenzel's tax system and why they made it hard to implement it. And Wenzel has nothing to do but run off to his blog like Krugman and falsely claim Schiff said the tax was unconstitutional.
I don't see how that is considered a win for Wenzel.
3. Peter argued that if sales taxes get too high, people just won't buy as much, and the govt will get less money, so there is a built in ceiling to a sales tax. Of course, the same is true of an income tax, as is well known, so I think Peter's argument here falls short.
I'm sorry, was Wenzel arguing for an income tax? Because I thought the built in ceiling thing was Peter's explanation of the reasoning of the Founding Fathers as to why they didn't like a capitation tax...because no one could avoid any of it. That was the whole reason he brought up that point, because Wenzel said "count up everyone 18 years or over and divide". Obviously if Wenzel had said "tax the public income", Schiff wouldn't have said anything about a built-in ceiling. The whole point was that Wenzel's capitation tax doesn't have a built in ceiling. So I have no idea why you're even bringing up an income tax, or why the fact that it has a ceiling just the same as a consumption tax does, is even relevant.
I think Wenzel wins this round, at least till we hear a rebuttal from Peter. You're going to have to explain this one.
I'm not referring to the radio debate here, but rather to the idea expressed at length by Rothbard, quoted at length on Wenzel's blog, which I don't think Peter has rebutted. As I said in the blog, my impression was that Rothbard's idea was not well expressed in the radio show, so Peter didn't know what he was being asked to reply to.
...I'm sorry, was Wenzel arguing for an income tax? ...
I was referring to an earlier part of the radio show, while they were still discussing sales tax vs income tax, and head tax was not yet brought up.
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It's easy to refute an argument if you first misrepresent it. William Keizer
Smiling Dave:I'm not referring to the radio debate here, but rather to the idea expressed at length by Rothbard, quoted at length on Wenzel's blog, which I don't think Peter has rebutted. As I said in the blog, my impression was that Rothbard's idea was not well expressed in the radio show, so Peter didn't know what he was being asked to reply to.
I'll grant you Wenzel wasn't talking any sense, but even granting the notion that a sales tax is still an income tax, I still don't see how that defeats any of Peter's overall point on this whole tax issue.
Could you please link to the part you're talking about? I want to know where else Peter mentioned a natural ceiling so that I might try to figure out why he would even bring that up outside the context of a capitation tax.
In other news Wenzel appears to have gotten my comment (although he didn't publish it...figures) about him lying about Peter Schiff (possibly just to ease a bruised ego). So naturally he posted again, this time to make himself out to be the victim who got unfairly silenced by the big bad radio host and his mute button. See, Wenzel actually was making a great case in that discussion. He and Peter were "really going at it". He really put Schiff in his place. But alas, his economic prowess was censored by an unfair bully.
Granted, I don't doubt there were times he was still rambling on and we couldn't hear him. But as a commentor with audio experience points out, the fact that we heard Schiff over Wenzel doesn't necessarily mean the latter was being muted.
And he actually does acknowledge he was totally wrong in his claim that Peter said capitation was unconstitutional. He doesn't apologize for falsely accusing Schiff (twice), and he certainly doesn't publicize it, but at least it's there. And of course it's mixed right in with a full explanation of why Wenzel wasn't really wrong, it was just that Schiff was cutting him off and he didn't hear all of Schiff's statements, and that Schiff's statements were totally irrelevent anyway, so of course Wenzel innocently thought Schiff was just ignorant. See Wenzel already addressed Schiff's question before he asked it, we "just didn't hear him", so Schiff's question had nothing to do with the point he was making. And that of course means Schiff said it was unconstitutional. Because that's what asking a question always means.
See? Wenzel's just a hapless victim yet again. Schiff doesn't deserve an apology. It's all his fault Wenzel assumed he was making an ignorant claim in the first place.
Could you please link to the part you're talking about?
You are right. I listened again and he said it in referrence to a head tax. Will modify blog accordingly.
So, reading some of Rothbard's critique, it would appear that Rothbard himself contradicts Wenzel. In the interview Wenzel claimed that "increased costs to the consumer entice him to buy less, leaving extra inventory for the producer, meaning he'll have to lower his prices". It's possible I'm reading this wrong, but it sounds to me like Wenzel's idol says the exact opposite:
"There will therefore be no shift by Jones in favor of savings-and-investment due to a consumption tax. In fact [...] there will be a shift in favor of consumption because a diminished amount of money will shift the taxpayer's time preference rate in the direction of consumption. Hence, paradoxically, a pure tax on consumption will and up taxing savings more than consumption!"
Sounds like Wenzel doesn't know what he's talking about, according to his godsource.
Granted, I haven't read Rothbard's entire critique yet (it's pretty long), but on the surface I just fail to see why the hell it matters in the first place. Claiming that a sales tax "is really just borne by the producer" sounds like nothing more than a tautology...a way of looking at the world. I remember reading Rothbard's explanation of the exact same concept in MES and thinking the same thing...wondering what he was talking about and where he was supposed to be going with all that.
Not only that, but the backbone of Rothbard's whole "taxes can't be shifted forward to consumers" rests on the supposition that the only option the retailer has is to raise prices on those items sold. He says that:
"Prices, at all times, tend to be set at the maximum net revenue point for each seller. If the sellers can simply pass the 20 percent increase in costs onto the consumers, why did they have to wait until a sales tax to raise prices? Prices are already at highest net income levels for each firm. Any increase in cost, therefore, will have to be absorbed by the firm; it cannot be passed forward to the consumers."
I however see no reason these retailers could not (or would not) simply begin charging for something they previously gave away for free. This is precisely what we're seeing in the banking industry right now. All sorts of new fees are popping up in direct response to Dodd-Frank (which is essentially the same as an excise tax). The latest I can think of is the new $5 monthly fee for using your debit card. This is the retailer's way of shifting new costs forward to the consumer...precisely what Rothbard argues cannot be done.
Getting back to Wenzel though...As mentioned earlier, he made note on his blog that Bob Murphy got in the mix and made a post on his own blog concerning the consumption tax...which of course Wenzel sensationally titled "Murphy Atttacks Rothbard on His Consumption Tax View". So of course Murphy had to come back with his own clarification and explain that [surprise surprise] Wenzel claimed Murphy was saying something he in fact wasn't....
"What I was getting at in my post—and yes here I did explicitly disagree with Rothbard on one particular point—is that Rothbard somewhere challenged the standard supply-side critique of an income tax, on the grounds that it “discourages savings.”[...] That is the argument from Rothbard I was criticizing. In response, Wenzel didn’t get that distinction, and instead thinks I was attacking the claim about consumption taxes being shifted onto productive factors (the claim I specifically said I would have to think about)."
Well well well, whatya know, Wenzel puts words in someone's mouth so that he can make them out to be foolish. Never saw that one coming. And in fact, I'm obviously not the only one who recognizes Wenzel's MO, as Murphy closes out the post with:
Are you Wenzel fans sure you want to go with him on this one? Now a consumption tax doesn’t hurt the consumer at all? So retired people (who no longer work), who have all their assets in gold bonds or actual cash* (so they won’t be hurt by declining corporate earnings or land rents) will be unaffected if Cain institutes a 9%, or for that matter a 99%, national sales tax? Do you Wenzel fans really think that can possibly be correct? If so, Cain should incorporate that into his schtick.
(NOTE: I am NOT here saying that Rothbard said a consumption tax doesn’t hurt consumers at all. As I said all along, I need to go study that argument again, because there are a lot of moving parts. I’m saying that Wenzel’s quick reaction to my post, implies such an absurdity.)
* EDIT: I originally had “gold” as the asset, but changed it to “bonds or actual cash” because the retired people would get hit with the national sales tax (perhaps) when selling off their gold holdings. Now I’m waiting for a new Wenzel post: “Murphy says holding US fiat dollars a better investment than gold!!”
Ain't life grand.
Oh look who's back. Now Wenzel's got another post regarding the show (making it an even 6 now). This time he's going to tell us "how it really went down". He quotes from the audio hobbiest who posted in the comments explaining how the audio setup on radio generally works, and that basically anytime Peter talks, the audio of the other person gets drowned out...and even Peter can't hear them. Kind of like a walkie-talkie. Let's hear how Wenzel deals with this:
Although it sounds like I stopped talking, Peter interrupted me three times during the first part of the interview. He just talked over me. The first time it happened I thought it was rude, but, hey, I have had worse things happen. I waited for him to finish and then continued with a point. He interrupted me again, this time I thought I was not letting him get away with it. I said, "Peter...Peter...Peter...Peter." Trying to indicate that I did not give up the floor when he interrupted me. I was amazed that Peter didn't respond, since I thought it would show how rude Peter was being. Especially, when I called out Peter's name four times and gave him opportunity to stop between each time I called out his name. Now, I realize why he was unconcerned.
Oh really, Bob? You realize why he was "unconcerned"? You mean, because he couldn't hear you? Jeez this guy's bitter. And of course Peter cut him off, he wouldn't talk any sense or answer the question he was asked. He would just keep going on and on with the same confused nonsense. It's one thing when you're having a private conversation with someone...but when you're broadcasting live on the air (in an audio-only medium, especially) attention has to be given to the quality of the conversation. No one wants to listen to some old geezer continuously miss the boat and keep rambling on about the same non-point...and then when he can't come up with anything else to say, keep trying to change the subject. It's bad radio.
Hosts have to deal with crappy guests all the time. Directing the conversation is one of the biggest parts of their job. I don't doubt that Peter is usually more interested in what he has to say that what his guests have to say...but it's The Peter Schiff Show. People tune in to listen to him. And if you know anything about Schiff and his background and the history of the show, it's pretty obvious he does the show more than anything, for himself. It's his therapy. It's his de-stress time. He gets 80 minutes a day to talk about whatever's on his mind, and express his opinions, and hear from people who are interested in the same things he is. I wouldn't be surprised if the show barely breaks even, even by now, having been around a year already. It's obviously not about money. I guarantee you there's plenty of more profitable things a guy like Peter Schiff could be doing with 2 hours every weekday.
It's his show, he's doing it for him, but also for the listeners, and if they don't tune in, there's little point to him continuing to do the show...certainly not in paying for it. So he's gonna run the show his way and he's gonna talk when he feels like it, but he's also gonna do what he can to try and keep it entertaining. And I think in cases like this, those are one in the same. I wouldn't even be surprised if Schiff wasn't even thinking about the quality of the broadcast when he was interrupting Wenzel, he was just thinking how annoying it is when someone is so stuck on their own idea that they can't take two seconds and answer a question that takes them outside of their comfortable little box. He was thinking how boring it is to have to listen to someone ramble on and on explaining something that you not only already understand, but that isn't even relevant. Of course he's going to try to steer the conversation back to an intelligble dialogue. And it just happens that in the radio setting, any time he has to do that, he loses the audio of the other person.
Again I think Wenzel is just bitter because he got out-debated. He begins to close out the blog post with
At this point I had figured out The Peter Schiff Show game, which was that I had the opportunity to get one sentence out before Peter could technically take me out of the conversation. Since Peter wasn't going to allow me to completely express my view on the consumption tax on his show, despite his inviting me on the show for just that purpose, I decided to take the debate over here to EPJ.
Give me a break. Wenzel expressed his view. Multiple times. "A consumption tax doesn't affect the consumer, it's carried by land and production." We got it. And he wasn't there to discuss the consumption tax, he was there to explain his ridiculous claim that Schiff endorses the 9-9-9 plan, and explain why it's not an improvement over the system we currently have. All Schiff was trying to do was get to the point of "Okay, you say 9-9-9 is no good, and now you're saying consumption tax in general is no good...what tax system would you have?" Wenzel just didn't have an answer for that so he did what most confused old men do when they don't have an answer...just keep re-explaining something they do know. And then when that doesn't work any more, they change the subject. Surely I'm not the only one who has noticed this in senile people? (But then again, I guess this is a tactic of young ignorant people too...but I don't think Wenzel fits into those categories.)
And even taking into consideration his appeal that "he really was making great points, we just couldn't hear them", I seriously doubt it. I just don't see how he could be talking almost total irrelevant nonsense on the air the whole time and everytime Peter moves in to redirect the focus, the minute Schiff starts talking and Wenzel is drowned out he starts speaking spades. I just don't buy it. There's no way anything the guy said off the air was that much better than what got on the air.
Schiff responds to Wenzel's blog-a-thon...
I don't understand something Peter said in today's show.
He explains that a profit tax is not passed on to the consumer, because the profit maximizing price is usually the one set before the tax. Changing that price because of the tax will bring in less money. He restates this as "If $10 per widget brings you the most profit, and then a profits tax lets you keep only 75% of your profits, well 75% of profits is also maximized at $10 a widget."
All of which I understand. What I don't get is the next part, where he says that the above analysis only applies to a profits tax, not to a sales tax. A sales tax, he says, is passed on totally to the consumer, [just as a payroll tax is passed on totally to the employees].
I don't get it. Won't passing the sales tax on to the consumer also reduce total sales, exactly and for the same reason as when it's a profits tax?
I heard that too. In fact, his point about price being always set at the profit-maximizing level is exactly the point Rothbard was making about why a sales tax couldn't be passed on to the consumer (i.e. if you have a sales tax that adds 20% on to the purchase price, you're not going to make the same amount of sales, because if people were willing to purchase the same amount at a 20% higher price, why did you need a tax to raise your price? Why didn't you already have it that high?)
But of course Schiff debunks this as an argument against scrapping our current tax code and instituting a sales tax instead right away by pointing out that without an income tax, (and a payroll tax, and a capital gains tax, and an estate tax, etc.), people are going to have a lot more money to spend in the first place, so higher prices aren't going to affect them all that much (if at all.)
But yes, Schiff does spend a good 6 minutes reiterating some of what Rothbard says in his critique. Schiff even echoes Rothbard's point that in the long run, the tax could disincentivise producers to a point at which they simply produce less, thus getting the equalibrium back to a level of profitability at the higher tax rate.
As to your question, I can't figure it either. It would certainly seem that, ceteris paribus, a sales tax would be ultimately absorbed in the same way (i.e. by the same people) as a profits tax.
But ultimately, as important as that part of the tax discussion is, it isn't relevant for this particular debate in question. And the bottom line for me is, I still don't buy Wenzel's beef. I see no reason why he should be against 9-9-9 when compared to what we currently have, and in all his time on Schiff's show, and all his 7 or 8 blog posts about it, he has given absolutely nothing to defend his position of being against Schiff (let alone offered anything to suggest Schiff is wrong about any of it.) All Peter's been saying is...
1) We want government spending to be essentially zero, so that taxes are essentially zero. That's ideal.
2) Recognizing that government is not going to disappear any time soon, certainly not overnight, we recognize that it will continue to exist for a while and will therefore have to be funded.
3) Granting that government will have to be funded, there are better and worse ways of doing it.
4) Recognizing that 9-9-9 is not as great as Cain makes it out to be, it's still better than what we have now, and a good step toward something even better than itself. i.e. No tax > FairTax > 9-9-9 > what we have now.
That's Schiff's whole argument. And I have heard nothing from the old codger that hurts any of it. The best he's been able to come up with (aside from a bunch of whining and Krugman-esque sensationalizing and nonsense characterizing), is "The greatest economist of all time, Murray Rothbard said—did I mention he's the greatest economist of all time? Cuz he is—anyway, he said that any sales tax really doesn't affect the consumer, it just hurts the producer and the land owner. So..uh...yeah. Sales tax is no good. Rothbard!"
If he's actually presented something of substance that I've missed, someone please enlighten me.