[greysnow]

A high VAT tends to either strangle consumption and/or to force dealers to lower their margins, and will thus lead to worse pay / layoffs in the retail sector, and perhaps some dampening in the bulk dealership and producing sectors, especially those that produce everyday goods. In Germany, many see a high VAT as unsocial, and the German left would prefer lowering it and compensating for the loss by raising direct taxes, for instance on high incomes.

You might wanna look at the other side of the pond to see the flaw with that reasoning. The US federal government refuses to tax consumption, and as a result it is chronically starved of funds because federal income tax receipts are close to their upper limit.

Personally, I'm not against a moderate VAT, but raising consumption taxes across the board as compensation for lowering income taxes is unsocial. Maybe the federal government should tax the rich more, introduce/raise taxes on luxury goods and cut down on tax presents to corporations.

[Dr House]

Or maybe they should figure out how to spend less.

[greysnow]

Depends. As I said, cut down on presents to corporations. Don't cut down on infrastructure investments.

[Figlio di Moros]

Or maybe they should figure out how to spend less.

Or more effectively; the US could easily spend 20% of it's GDP and not waste a cent...

Depends. As I said, cut down on presents to corporations. Don't cut down on infrastructure investments.

Like so...

[Dr House]

The bulk of spending in most of Europe is in welfare, retirement and healthcare. The latter is healthy as it prevents employers from taking on that burden (that's not working out too well in the US but that's another matter), but retirement pensions promote dissavings and welfare rewards the indolent at the expense of producers. I would suggest partially or fully reforming pensions and healthcare into provident savings programs (as in Singapore), and cut down on welfare.

Or more effectively; the US could easily spend 20% of it's GDP and not waste a cent...

Hence, less. We're talking about Europe in any case.

[greysnow]

What's the problem if people don't have to save for their own retirement? The money stays in circulation one way or the other.

Anyway, the German pension system works by taking out a part of your income (the employer has to do this) and giving it to the German Pension Insurance. The higher your wages are, the more gets taken out. The more you personally pay in this way, the higher the pension you will receive. The actual money paid into the system is not saved but used to pay the next month's pensions. Any gaps are filled by the state; any unexpected profits (hasn't happened in a long time) are saved and re-invested.

For non-economic reasons I'm pro-welfare and will not budge from that position, so it wouldn't be any use arguing with me there.

[Icon]

But does the pracitical side not measure to you? Wouldn't you rather add encouragement to the unemployed to find employment, to increase their productivity and investment?

The definition of 'unemployment' is the status of desire for work and inability to find it. People who are "unemployed", by definition, are not the ones who choose not to work, they're the ones who want to work but cannot find jobs. The people who are able to work and refuse to do so and live off welfare checks are not considered unemployed.

I hate to get into semantics, but you're conflating two distinct groups of people with distinctly different economic implications.

Income taxes are not a disincentive to work, welfare is. You can have income taxes without welfare.

I suspect an Arthur Laffer would disagree with you, at least at some tax levels.

Math, science and technical (engineering, etc.) college degrees should be fully paid for, including room & board. Other college degrees (such as liberal arts) are generally a waste and should only be partially subsidized if at all. Worker retraining as part of welfare is a good idea though.

Exactly why should we subsidize some fields and not others? Virtually all fields provide some societal benefit. (Even fine arts, assuming the student isn't looking to live out the starving artist stereotype.)

I'm concerned also that if we begin widespread subsidization of undergraduate education in any fields it will decrease the availability of credit for students who choose to pursue fields other than those that the government is subsidizing.

[Wolfman]

Exactly why should we subsidize some fields and not others? Virtually all fields provide some societal benefit. (Even fine arts, assuming the student isn't looking to live out the starving artist stereotype.)

I'm concerned also that if we begin widespread subsidization of undergraduate education in any fields it will decrease the availability of credit for students who choose to pursue fields other than those that the government is subsidizing.

How about making it so a student can volunteer for a government subsid. for any undergrad degree, but they have to pay it back at a 1% income tax? I'm not sure how much inflation over a life time would affect that, but I'm pretty sure it would work out to being about even or a slight gain for the feds (assuming a healthy inflation level).

[Dr House]

What's the problem if people don't have to save for their own retirement? The money stays in circulation one way or the other.

Savings are needed to fund capital investment. Insufficient savings can starve an economy of it and cause the stock of fixed capital to decline, which would adversely impact people's quality of life. This has been happening in the US for decades now.

Anyway, the German pension system works by taking out a part of your income (the employer has to do this) and giving it to the German Pension Insurance. The higher your wages are, the more gets taken out. The more you personally pay in this way, the higher the pension you will receive. The actual money paid into the system is not saved but used to pay the next month's pensions. Any gaps are filled by the state; any unexpected profits (hasn't happened in a long time) are saved and re-invested.

The German pension fund, like all pension funds in the West, has a shelf life due to adverse demographics. It additionally creates a disincentive to save, which creates the problems I mentioned earlier.

For non-economic reasons I'm pro-welfare and will not budge from that position, so it wouldn't be any use arguing with me there.

A non-economic argument against welfare would be that it reduces the economic role of the family, which fractures the community and creates atomistic, materialistic individuals. Paying people to do nothing additionally destroys their self-worth by making them feel useless.

I would say welfare conditional on people performing community work, art, or otherwise contributing in some way to society would be much better than no-strings welfare.

Exactly why should we subsidize some fields and not others?

Because college education is costly, and education in general needs to first and foremost provide positive economic returns. Ideally, very few people should go to college.

Virtually all fields provide some societal benefit. (Even fine arts, assuming the student isn't looking to live out the starving artist stereotype.)

While intellectual and artistic people are very beneficial to society, they are not needed in very large numbers, and Bachelors of Arts currently attract a very large number of people who simply lack the technical intelligence to go into math, science or technical fields. People who should instead learn skilled trades that are being abandoned in the US (The average age of US machinists is 55, and there are only 2,000 tool and die apprentices in the entire nation). Europe does well at this, and only about 15% of Western Europeans have a 4-year degree compared to 35% of Americans.

[Wolfman]

The German pension fund, like all pension funds in the West, has a shelf life due to adverse demographics. It additionally creates a disincentive to save, which creates the problems I mentioned earlier.

As far as I'm aware the major problem with the US's pension fund is that there are too many people retiring and not enough people working. The solution is pretty simple -- raise the age you can retire at to 70.

[Dr House]

And then, what? Keep raising it as the population keeps getting older?

That additionally does not solve the dissavings problem.

[Wolfman]

And then, what? Keep raising it as the population keeps getting older?

Retirement age was orginally 50, if I'm not mistaken, and life expenctency was around 55. You had 5 years to chill and do nothing. At some point the retirement age was increased 15 years (retirement being 65, average life expectency being 77). As life expectency increases, retirement age should increase likewise so that you have 3-5 years of retirement before you are likely to die.

That additionally does not solve the dissavings problem

Most of the people I know that are retired or are getting there have either savings or investments. The rest have a nice sized income and aren't worried about it. But, I'm sure you have a source that goes to show that. So, since pensions are based on your own income, it amounts to a forced savings system. That aside, it's only 1 part of what would be a larger overall system.

[Figlio di Moros]

Most of the people I know that are retired or are getting there have either savings or investments. The rest have a nice sized income and aren't worried about it. But, I'm sure you have a source that goes to show that. So, since pensions are based on your own income, it amounts to a forced savings system. That aside, it's only 1 part of what would be a larger overall system.

And that shows the futiliy of our system as is; SS doesn't provide enough for retirement, and you lose benefits for having prepared or only being in partial-retirement. Fucked up system.

[Icon]

How about making it so a student can volunteer for a government subsid. for any undergrad degree, but they have to pay it back at a 1% income tax? I'm not sure how much inflation over a life time would affect that, but I'm pretty sure it would work out to being about even or a slight gain for the feds (assuming a healthy inflation level).

It would need to be higher than 1%. If we assume the average cost of a college education in the united states is $120,000, even if we ignore inflation/discounting we still end up with a situation where it wouldn't be paid back in a lifetime.

At a 1% income tax rate, a person who gets paid $20,000 a year would take 600 years at a 1% income tax rate to pay the tuition back. Even person who gets paid $100,000 a year would take 120 years to pay back their tuition at a 1% tax rate.

If we assume the average person is in the professional workforce for 43-45 years, if the government were seriously interested in getting paid the tuition back, they would have to set the additional 'college' income tax rate such that most workers will pay their tuition back within their time in the workforce, and refuse to subsidize any fields where the pay is possible.

If we ignore inflation, an 8% tax rate would allow the government to recollect the tuitions for people who make more than $40,000 a year.

Of course, in the real world we would index the tuition principals to inflation, and alter the remaining balance due based on the rate of inflation. Ideally we could also modify the individual's the income tax rate directly if they still have a significant remaining balance and are nearing the typical retirement age or be able to withhold social security benefits and medicare to keep them in the workforce until they've paid their debt to society.

I'm not suggesting we do that, just working your idea through my head.

Because college education is costly, and education in general needs to first and foremost provide positive economic returns. Ideally, very few people should go to college.

I disagree, particularly because the US economy is shifting to the service sector and we need highly-educated people in the workforce.

While intellectual and artistic people are very beneficial to society, they are not needed in very large numbers, and Bachelors of Arts currently attract a very large number of people who simply lack the technical intelligence to go into math, science or technical fields. People who should instead learn skilled trades that are being abandoned in the US (The average age of US machinists is 55, and there are only 2,000 tool and die apprentices in the entire nation). Europe does well at this, and only about 15% of Western Europeans have a 4-year degree compared to 35% of Americans.

Exactly why do we need to save manufacturing? I know there's a certain degree of nationalist sentiment in American manufacturing, but I fail to see any real economic rationale.

[Wolfman]

$120,000 for college? WTF? My total cost is $8,000! Granted thats an associates and I'm a state resident, but still? WTF? Are you talking about getting a doctoral degree, cause I said 'undergrad' as I recall.

[Icon]

I'm speaking of private colleges, generally, with a tuition of ~$25,000/yr 4.5 years in school for a B.A. or B.S., obviously with no financial aid.

Where are you going to school for $8000 total? I could live with going back in time and re-doing a few years of my life.

[Dr House]

I disagree, particularly because the US economy is shifting to the service sector and we need highly-educated people in the workforce.

The US is shifting from manufacturing into financial services which are underpinned by increasing consumer debt and artificially created asset price inflation (which is obviously unsustainable), as well as by manufacturing done abroad. This shift has caused a decline in wages and a sharp rise in inequality, because as you noted valuable financial sector jobs are reserved for professionals, and most people lack the capacity to become so highly educated. The number of college graduates has tripled in the last 30 years relative to the population, but the number of professionals has not increased at all.

Exactly why do we need to save manufacturing? I know there's a certain degree of nationalist sentiment in American manufacturing, but I fail to see any real economic rationale.

1) The service sector exists to service physical instruments, and does not create original value. An airline cannot exist without aircraft, a plumber cannot exist without indoor plumbing, a mechanic cannot exist without cars, et al. More goods being produced bolsters the service sector and service sector labor demand and wages. It's estimated that each additional manufacturing job in the US results in approximately 7,000 new service sector jobs.

2) For obvious reasons, an economy needs goods to function. Because the majority of services cannot be exported, especially in very large countries, the economy needs to either make all the goods it consumes, or export goods to create export receipts that can be spent abroad. The alternative is permanent trade deficits, which create increasing debt and ultimately necessitate national bankruptcy.

3) Manufacturing is one hundred times more capital-intensive than services on average, and therefore offers greater median wages both in absolute terms and relative to skill level than the general economy.

[Wolfman]

I'm speaking of private colleges, generally, with a tuition of ~$25,000/yr 4.5 years in school for a B.A. or B.S., obviously with no financial aid.

Where are you going to school for $8000 total? I could live with going back in time and re-doing a few years of my life.

I live in Nebraska, it's a Community College (or a 'Junior College' depending on where you are), and that rate assumes you've lived here atleast 7 years (something like that), and I'm going for a Associates Degree. Not to mention, my college is subsidised by State, County, and City.

Also, fuck private college. I checked, public college here as an in state resident, it's about $30,000 here. Yah, fuck private college.

[Icon]

The US is shifting from manufacturing into financial services which are underpinned by increasing consumer debt and artificially created asset price inflation (which is obviously unsustainable), as well as by manufacturing done abroad.

Not all of the 'service sector' is finance. Retail, health care, logistics, transportation, legal services, etc. are all 'service' fields as well.

I'd also hesitate to call Microsoft a 'manufacturing' company even though it does produce a physical product.

This shift has caused a decline in wages and a sharp rise in inequality,

Not a surprising result under even the most simplistic international trade models.

because as you noted valuable financial sector jobs are reserved for professionals, and most people lack the capacity to become so highly educated.

I'm not convinced said people are incapable of education, so much as economic and non-economic factors make it impossible for them to pursue such and apply themselves enough.

[Dr House]

Not all of the 'service sector' is finance. Retail, health care, logistics, transportation, legal services, etc. are all 'service' fields as well.

All of these require physical instruments, which must be manufactured. Logistics in particular, directly services manufacturing companies. I mentioned finance because finance has been the primary driver of GDP growth (replacing manufacturing in this role) for the last 25 years.

I'd also hesitate to call Microsoft a 'manufacturing' company even though it does produce a physical product.

Microsoft is not a manufacturing company, and does not produce a physical product. It adds value to electronics manufacturing by producing the software it requires.

I'm not convinced said people are incapable of education, so much as economic and non-economic factors make it impossible for them to pursue such and apply themselves enough.

Over a third of the US population have four-year degrees. The majority of people with four-year degrees opt for useless degrees however, because they are not smart enough to pursue elite professional training. The median IQ of college students has declined in the last 30 years from 120 to 106.