printFor real, clear economics, it’s hard to beat financier Peter Schiff. Here is some of the text of his testimony to the gathering of crooks known as Congress. Pearls before swine, if you ask me:
“We stimulated our way into this problem [“the housing bubble and the financial crisis of 2008”]. We are not going to stimulate our way out. In fact the stimulus is actually a sedative. The stimulus is preventing the free market from unraveling the problems of years of bad monetary and fiscal policy have created. We don’t need more spending. We need the opposite of spending. We need under consumption, what the economy lacks is savings, investment, production and if we try to preserve the jobs of the bubble economy with more reckless money printing and borrowing and government spending all we are going to succeed in doing is preventing the restructuring that we need and preventing more productive jobs from coming into existence.”
“And I wanna talk specifically about jobs, I’m an employer, I employ about 150 people. I would probably employ a 1000 more if it were not for government regulations that inhibited my ability to hire and grow my business and forced me to move portions of my business overseas in order to escape the regulatory burden here. But the question is why do I hire people where are these jobs coming from, you know, jobs in a free market, ah, they come from two things, they come from profits, or the profit motive or they come from capital. You need both to create jobs. And in a free market there’s gonna be jobs and if they’re aren’t enough jobs, Congress has to ask: ‘What are we doing to inhibit this process? How are we preventing jobs that would normally be here from coming into existence?'”
“Now, in order for me to hire somebody, I have to be able to make a profit. That means that the person I hire has to deliver to me more value than the cost of the employing them. And the cost of employing them is not just the wages I’m paying them but it’s all the mandatory benefits, the taxes, and more importantly the legal liability that I incur when I hire somebody. Source: LYBIO.net In fact, one of the riskiest things you can do in America is to hire somebody. And because of that reason, because of all the liability from Government, from lawsuits, that you have put on employers, most small businesses their main concern is how not to hire people. How can I grow my business and hire as few people as possible. That is not something that happens in the market. That is something that happens as a consequence of Government…”
“…Demand doesn’t come form government spending; inflation comes from government spending. Demand comes from supply. You can’t consume something that isn’t produced. You have to make things first. …”
“There are millions of employed Americans. How do you increase the demand for labor? You decrease the cost of labor. Regulations substantially increase the costs of employing people and as a result fewer people are employed.”
Schiff recommended that no more regulations be added and that congress begins to repeal existing regulations. Minimum-wage laws for example.
“You can’t lose your rights because you hire somebody; you can’t give workers some kind of special privily and then call it a worker’s right. Everybody has individual rights and you shouldn’t lose them because you hire somebody.”
“Bad regulation did not start under Obama. The problem with well meaning regulation is that the consequences are the exact opposite of the intent. Infrastructure spending doesn’t stimulate the economy; it drains the economy of resources. Infrastructure only helps in the long run if it raises the productivity of the nation. China can afford to put in roads. We are broke. We need to start making stuff before we can consider how to make our roads prettier.”
“99% of a [small/medium-size business’ income] is taxed at the marginal rate, so that the marginal rate is my rate. Feds take 35% of my income, another 3% for Medicare, local tax in the state of Connecticut (7%), and this is before I pay any property or sales taxes. I am already moving business to Singapore, the Caribbean. We are a high tax country, not a low tax country.”
“You can only borrow if someone is saving. There is a lender. The has to be something in it for the lender has to have something in it. Currently the banks are getting money from the government and buying treasuries, monetary policy that is stifling the savings that we need to grow the economy. You can always see the jobs that government creates, you can never see the jobs it destroys. All government can do is re-arrange the resources; it cannot create resources.”
“A sales tax should replace income tax. It would be much more conducive to tax people when they spend their wealth, not when they accumulate it.”
“Deficit spending is more damaging than taxation….”
“Interest rates [as we know] are being kept low. When they rise to approximate market rate, what effect till this have on business? banks which are kept afloat by the cheap money from the Fed will go insolvent. Their portfolios are loaded with low-yielding, long-term government bonds … keeping interest low creates inflation…”
“Henry Ford paid his workers $5 a day. Highest in the world at the time; an ounce and a quarter of gold. $2500 a week. They were paying no federal incomes taxes and no payroll taxes; there were no minimum wages and no unions. We paid the highest wages in the world but produces the best least expensive products. that was possible b/c we had the smallest government. Minimal regulations and no taxes. …”
[SNIP]
Notice how silent Dr. Heather Boushey, to Schiff’s right, has fallen—she is a popular panelist on the panel parade that infests cable, PBS, and the other networks.
Another thought: Ron Paul, who does not argue nearly as crisply and clearly as Schiff does, will need to make common cause with Mr. Schiff. Peter Schiff: United States Secretary of the Treasury in a future Paul cabinet.
(The partial transcript is provided by LIBIO. I improvised the rest.)
“Peter Schiff: United States Secretary of the Treasury.”
That I can get behind. I do agree, sometimes Ron Paul needs to tighten up his message, especially during the debates. I understand it must be difficult to explain fiat money, hard currency, etc. in two minute sound bites. (90 to 95 percent of the voting base in this country have no idea about such matters.)
Capital is like water.
It seeks the path of least resistance.
Such resistance includes the marginal tax he has mentioned, but also regulatory overkill like OSHA, the EPA, EEOC, etc.
Dr. Boushey, even if she grasps the concept intellectually, will probably not admit this.
After all, she is a parasite. That is, someone or something that feeds off its host. Could be malign or benign. In her case it is the former.
Were it not for the parasitic State folks like her would not have jobs as talking heads.
So, she has a vested interest in maintaining the status quo.
Or at least until the Republic does a carbon copy of Greece’s economic death rattle.
Most important thing is to cut SPENDING. Cutting taxes comes later. I disagree about a national sales tax for 3 reasons: (1) shifts too much burden to the poor and middle class who can ill afford it and (2) civil liberties issues (the government knowing all that you spend), (3) easy to abuse to favor some spending over other spending. Most of what he said is sound and it is hard to hire someone given all the hassles to shift jobs (look at Boeing) etc. There are many regulations, insurance mandates, etc. that are probably more onerous than the minimum wage (that is basically a limitation for the McDonalds level).
@Myron I understand your position regarding introducing a sales tax, but I differ from you. As far as I can tell, the US taxes everyone’s income, from poor, right throught the middleclass and rich, right up to the wealthy. Eliminating income tax will leave all these groups with more money in their pockets, which will only be taken away again when they buy stuff.
A sales tax of, say 10%, would amount to the same thing as a flat income tax rate of 10% across the board. Granted, the more money you have, the higher the percentage you could save and avoid a sales tax. But I don’t think the rich still put money under the mattress. (2) Sales tax is just as anonymous as whatever systems your government currently uses to track spending patterns. (3) Government has always had ways of favouring certain spending over other spending.
Ok- I see the recommendations so far are good in a way. Unfortunately they are mere frosting on a heavy cake. Someone like the Grace Commission needs to step back and look at the country as a whole. We have virtually tons of laws that impede the ability of business to operate. We have taxes, tariffs, surcharges and taxes within taxes that need to be defined, exposed and eradicated. Plus we have an ‘out of control government that says we have to approve laws before they are written and micro-managers galore. This same commission has to hold the government up to the light- compare it to the US Constitution- and determine what size government we should be assessed. Since I hold common sense above all others, I know that this is just not going to happen. I do expect that we will get a national sales tax eventually- ON TOP OF EVERYTHING ELSE. That is the American way and we have to be true to form.
Good Morning.
Please take note of the following:
1. http://mises.org/daily/5641/Its-Not-about-Consumption
2. http://www.boortz.com
3. If you truly wish to know how Byzantine it is to start a business in most cities and states, choose three different types and proceed as if you were starting each one. I had a really bizarre experience when I and my partners opened a Handicapper Commuter Van Service in Detroit, Michigan…try that for one of the types! As for other types, check with all the professionals with whom you must work and get estimates of what it will cost you just to setup. The various government entities will TELL you what Fees, Permits, Inspections, Records, etc. you will need…visit their offices.
http://WWW.BOORTZ.COM is there for FAIR TAX – some answers without reading the entire book – which is the best source.
Schiff sees the Big Picture and the Politicians and many of the “Intelligentsia” Commentators do not / do not wish to see it or speak of it.
Re Minimum Wages / Living Wages…they must be eliminated because they prevent youth from being employed by small businesses where most kids usually get their first jobs, learn how to work, learn what to do with their money, i.e. learn to make wise choices between Instant Gratification vs Delayed Gratification. They also earn early on what is taken in TAXATION.
Oops! Last sentence s/b: “They also learn early on what is taken in TAXATION”.
I don’t like a sales tax piled on to other taxes. However a sales tax in place of other taxes is an interesting thought. That’s the only way we’ll ever get a large portion of the populace to pay taxes.
As usual, your commentary is a joy to read. Would that the ones we send to Congress even understand & grasp what Schiff is talking about, sigh.
I’m baffled by discussions of how we should change the income tax or replace it with something else. They seem to me to merely be arguments about what form of enslavement the authors prefer.
I believe that the income tax as applied to wages is immoral and therefore can’t be an obligation of any man. I say end it now and don’t replace it with anything. Making no other changes the Federal Government would still have well over one trillion dollars of general revenue per year—more than enough to cover constitutionally sanctioned activity.
Our system of government is supposed to be based on checks and balances. Surely the profligate popinjay that sits in the oval office has demonstrated that there aren’t enough checks at present. The additional check of limiting revenue is an idea whose time has come.
To tax a man’s wages is to tax his life. If we believe that a man owns his life, we must allow him to trade pieces of it (periods of work) for equal value (wages) without the government getting a piece of the action. Government may properly tax privileged activity (profits of government sponsored limited liability corporations, some business income after paying wages, mining on government land, etc.) but not rights. It may not legitimately tax the necessary exercise of your right of life. Sustaining your life through working for wages is an obvious necessity.
When government does tax your wages it is in effect taxing your labor and therefore your life. The founding document of the American Revolution says you have an unalienable right to life.
If you may properly be put in jail for failure to pay a tax on your life your right of life is not unalienable.
Good Morning! Just a few notes re some of the Comments…
1. RE a FEDERAL SALES TAX: VATs are what Europeans generally use, also Canada with General and Provincial sales taxes. These are extra, i.e. Income Taxes are also applied. The FAIR TAX eliminates Income Taxes and many more taxes and applies at the end of the supply chain sale. Please read the book.
2 The Federal Government – Article 1, Sections 8 thru 10 – specify duties, impost, excise, etc taxes that the Feds may apply. In the Federal Code of Regulations, Title 19 addresses Imports, HTSUS – Harmonized Tariff System of the United States – details duties, fees, MPF, HMF, etc. In addition, there are numerous Country Specific TRADE AGREEMENTS to consider. But, will increasing duties lead to a SMOOT-HAWLEY environment???
3. A 10% Sales Tax, in my opinion, does not equal a 10% across the board Income Tax. It would be less since I do not know many who spend 100% of their income on taxable consumption items. Again, please read FAIR TAX.
4. Income Taxes – if in the aggregate appropriate more than 50% of wages, salaries, income – reduce a person to SLAVE STATUS. You end-up working to have money given to others without your consent.
5. Payment of Income Taxes is an affront, but I personally know someone who refused to pay them…eventually spent 2 years in prison. Choose your actions wisely.
I gladly accept any and all reductions involving taxation since those may lead to a better system, i.e. FAIR TAX, and since FedGov takes 80% of monies for most programs leaving just 20% for the intended beneficiaries, this may chop them down to size and scope and return authority to the States.
A more stable economy (e.g. less Federal Reserve meddling), a sound currency, and economic deregulation will do more for hiring than shifting tax burdens around. Until the government stops spending $ 4 Trillion, we will have to heist money from people to pay for it.
As for the FAIR tax – the income tax is insidious enough and applies merely to wage statements and bank/stock earning statements. The FAIR tax will tax every item one buys – and, undoubtebly, Congress will decide how to make the FAIR tax “fairer”. Will carrots be taxed the same as potato chips?? Will a “corporate car” be taxed the same as a “personal car” ??? – well, leave those decisions in the hands of Congress, lobbyists, and bureaucrats. This “FAIR TAX” is a golden opportunity to go from bad to worse.
And that is not getting into the “prebate” which will be a magnet for illegal aliens to come here while Americans purchase all their goods on the other side of the border!