The Spinach Wars

Reality has a tendency of intruding on financial models.

By

Brian Riedl, also known as the “balanced budget good government guy,” is back on the Remnant to answer a pertinent question: Should we believe that the GOP suddenly cares about fiscal responsibility? He and Jonah also provide some wonkified commentary on a whole host of other economic issues. What’s to be done about the national debt? How should conservatives approach the IRS? And is it possible to reform the tax system?

Show Notes:

– Jonah: “The GOP’s Spending Fight Is More About Fighting Than Spending”

– Brian Riedl: “How Republicans Can Get Serious on Spending”

Keep reading with a free account
Create a free Dispatch account to keep reading Get Started ALREADY HAVE AN ACCOUNT? SIGN IN
By
Comments (19)
Join The Dispatch to participate in the comments.
 
  1. Avatar photo
    Tom Kalbach

    I'm curious if there is any thinking on one of my pet theories out there. It runs something like this:
    1. There is no political will to address entitlement spending.
    2. Reality eventually asserts itself.
    3. A large portion of reality asserting itself will come in the form of massive inflation (there will be no cuts in entitlement spending, but beneficiaries will be lucky to buy a stick of gum with their checks)

    Collapse
  2. Echack

    I'm not sure that eliminating the tax exemption on employer health insurance would result in greater efficiency in the health care system. Employers aggressively shop for cheaper insurance for their employees, which puts price pressure on hospitals and other health care providers. The major insurers aggressively negotiate lower prices with providers in order to have lower rates. In fact, that negotiation is the major benefit they provide - they have the information to get lower fees.

    Collapse
  3. Flaggirl2

    Excellent podcast. Always enjoy Brian's explanations. His discussion of our debt & deficit should be mandatory reading/listening for any citizen eligible to vote! Could we please give $$ to IRS to modernize their systems so they can actually provide customer service. Also am sure their security is antiquated which should scare taxpayers. On another note, I am not a fan of VAT - it's regressive and as Brian noted, easy for federal lawmakers to raise at will. Keep up the good work.

    Collapse
  4. Avatar photo
    Ed Graham

    At the 50:00 mark Brian Riedl starts talking about national sales tax, if he's talking about FAIRtax and not some other sales tax, he made at least one significant misrepresentation.
    Specifically, he talks about how companies will merge to avoid paying sales tax, which means he's missed that FAIRtax doesn't tax Business to Business sales, only final point of sale of new products.

    VAT hides the tax and adds multiple layers of tax on each stage of domestic production, disadvantaging local manufacturing vs imports.  FAIRtax would advantage US production, since local productions would have not tax until final point of sale at the same rate as the import (which would also have any taxes collected in the countries where it was made).

    I'm curious about the countries that switched from Sale Tax to VAT.  Without knowing the details (and details matter) I could easily see any system which hides how much tax a country collects or distributes 5% here, 5% there will go over easier than one that shows people all in one place, here's how much we're taking.  (like payroll deductions vs annual)

    Sources:

    https://fairtax.org/faq  under "What is taxed?"
    "The FairTax is a single-rate, federal retail sales tax collected only once, at the final point of purchase of new goods and services for personal consumption. Used items are not taxed. Business-to-business purchases for the production of goods and services are not taxed. A prebate makes the effective rate progressive. "

    See Also "Since business purchases are not taxable, how does the FAIRtax keep individuals from pretending to have a business so they can buy things tax-free?"

    https://www.moneycrashers.com/fair-tax-act-explained-pros-cons/ Advantages Section point 4.  

    For what FAIRtax might look like in practice by someone who's not a true believer.

    https://www.forbes.com/sites/peterjreilly/2023/01/20/what-would-the-fair-tax-really-be-like-/?sh=2e6ecc1863f2

    Collapse
  5. Avatar photo
    Ben Connelly

    Very interesting. This strikes me as the one issue where fiscal hawks are the only adults in the room (and even some of them are being unreasonable). It’s shocking how stupid Joy Reid’s comments were - even worse when you realize how many Americans believe them.

    Brian may be right that what we are in for is a financial crisis triggered by a debt crisis. I’m curious as to what exactly Brian thinks that would look like and how bad it would be. Experience is the teacher of mankind and humans will learn their lessons no other way - to paraphrase Edmund Burke.

    As far as the competent bureaucrats thing goes: I’d love to have bureaucrats so competent they eliminate ten other bureaucratic jobs.

    Collapse
  6. Wakernan

    U need to boost your baseline volumn. Good podcast when I could hear it.

    Collapse
  7. Francislyo

    Extremely informative podcast! Detailed explanation (one might say wonky) helps those who are new to these waters navigate - much appreciated!

    Collapse
  8. Joe1776

    I don't think the fact that the IRS is so incompetently managed, that they have people literally typing in forms instead of scanning them, justifies more spending. It reminds of the story where an economist sees all these people using shovels to dig this huge pit. And he asks why not use a tractor? And the response is this creates more jobs. So he asks, if that is the goal why not give them spoons instead of shovels?

    Private businesses do not need *more* money to use technology to reduce staff. The whole point is it costs less money to do that. The same is true for government. So the fact that they are so inefficient just shows they do not need all the money they are getting already, not that we should pay more to hire more people.

    The regulations are getting to be unbearable for small businesses. Running a small business sometimes feels like running through a mine field. Between minimum wage requirements, 401k forms with draconian penalties for failing to file forms on time, health care plans, payroll taxes and exceptions and unemployment rules and forms for everything.

    It reminds me of a story I heard in Peru. Someone tried to comply with all of Peru's regulations to open a business and it took them 2 years and it still wasn't done. So everyone just completely ignores the rules and sells stuff they lay out on a blanket on the sidewalk at night! I think you see this in other countries as well. Once you get to a point where the government is so intrusive and onerous no one complies fully and then the government picks and chooses who it wants to prosecute. So not surprisingly you have corruption.

    Collapse
    1. Avatar photo
      Ben Connelly

      You might like The Death of Common Sense if you haven’t read it before. It’s a bit dated (1994) but I don’t think the central insight is wrong. Philip K. Howard (the author) at one point says that the proliferation of regulation has reached a point where it “resembles central planning.” I would agree.

      Totally agree with your first point. More money isn’t necessarily the right incentive - there needs to be a penalty for incompetence and inefficiency. Rather than throw money at the IRS, we should introduce negative incentives (ie penalties) to force them to make archaic systems (transferring paper forms to digital by typing them) more efficient.

      Collapse
  9. Avatar photo
    The Bell Tower

    Great podcast as always. You have to have competent bureaucrats but you don’t have to have an income tax at all. The income tax is intrusive, inefficient and terrible for Americans. If you could replace it with a VAT making sure to replace revenue and do it fairly, I’d be for it.

    However, I’m glad you had Brian on to set us straight on the complexities of making such a change. Realists are critical to serious conversations. I think the American people collectively could be convinced to scrap the income tax and go with a VAT if they had competent leaders making compelling and serious arguments to do it correctly.

    So much for that. One thing is certain: we can’t let the government have both. Unfortunately, history shows that when large empires have severe financial problems and nobody wants to tell the truth about it or address the issues at hand, bad things happen. You can ask Louis XVI about it.

    Collapse
  10. Billhenley351

    Instead of using the word "insolvent" with respect to Social Security (and Medicare), we should get in the habit of saying something like this: Benefit payments currently exceed payroll tax receipts. Treasury is currently authorized to fund the shortfall. That authorization will expire in 2035. The solution will require some combination of borrowing, benefit cuts, and payroll tax hikes.

    The word "insolvent" is objectionable because is implies there is currently a balance sheet of assets and liabilities. In fact the Social Security Administration and Medicare have no assets with which to pay current benefits. Rather, they have a statutory right to require Treasury to transfer general fund money sufficient to cover the gap between current benefits and payroll taxes. To characterize this statutory right as an asset is misleading.

    Collapse
Load More