Tuesday, October 18, 2011

A Static Argument Against a Dynamic Solution

A Static Argument Against a Dynamic Solution
 Just Doesn't Stand Up
by J C Anger

The latest thing the critics are attacking is Herman Cain’s 9-9-9 plan.  This plan REPLACES the current tax code and installs a 9% personal flat income tax, a 9% flat corporate tax, and a 9% sales tax.  Top economists agree that this plan would ignite the American economy so greatly that one of the immediate results would be 6 million new jobs created.  If this is the case why is it getting attacked so badly?  It’s because people are using static arguments in this dynamic world we live in.

I have heard the argument that the tax will raise the taxes on the poor.  I have heard the argument that the plan would double income tax.  I have even heard the argument that the plan will create a 27% tax.  All of these arguments would exist only if we lived in a Socialistic society where the prices were fixed by the Federal government.  Since we live in a free market economy you cannot use the same arguments.

Static economic arguments can only hold water when the prices of goods remain the same while economic factors change.  This occurs when a Socialist government controls the price of goods and prevents a base price in those goods per law and directive.  Once the government raises the taxes, the prices go up based not off the market value of the good since it is a controlled and set price, but instead on the tax burden alone.  This alludes to the ability of a government to control every aspect of life to include the market system as to oppress certain levels of societal class.  It even alludes to the fact that with static economics a government can drive people into a lower class than they are by controlling the overall cost of living factors contained within a society.  Even though there are some who would like to see America turn into this economy, this argument cannot be used because we live within a free market economic society.

,“Herman Cain’s 9-9-9 plan would be a vast improvement over the current tax system and a boon to the U.S. economy. The goal of supply-side tax reform is always a broadening of the tax base and lowering of marginal tax rates. Mr. Cain’s plan is simple, transparent, neutral with respect to capital and labor, and savings and consumption, and also greatly decreases the hidden costs of tax compliance. There is no doubt that economic growth would surge upon implementation of 9-9-9….such a system provides the least avenues to avoid paying taxes, yet also maintains the strongest incentives for work effort, production, and investment.”I think I'll take Laffer's word for it over Michele Bachmann's crazy quip about the 'devil's in the details' if you flip 9-9-9 upside down. 

In a free market society, one must use dynamic economics to predict results from actions taken.  If we apply Socialistic principles within a free market economy, the very fabric of the economy shifts towards a static economic model.  A government that over taxes its people, over spends money with higher regulatory burden, garners more control over its people.  This type of government drives more people into poverty while blocking businesses from freely hiring qualified personnel due to the uncertainty contained within higher taxes and over regulation.  This type of government is incompatible with a free market economy and it must derail the very economy by oppressing its people.  A static economy is n economy where the people can only survive, they cannot thrive.

A free market economy is best developed through dynamic economic conditions.  Dynamic conditions are established once compared to the level of economic conditions of like economies.  There are multiple levels of economy that each person lives in.  The highest levels affect the levels below them.  The levels of economy include but are not limited to: World Economy (highest), National Economy, State Economy, Local Economy, and Personal Economy (lowest).  Since nations are sovereign, the world economy is exasperated by the full of each individual National Economy.  The National Economy is the driving force over State Economy, Local Economy, and Personal Economy.  So if the National Economy is oppressive, every economy under it will be threatened to the point where it becomes controlled and Socialism is formed.

Stephen Moore, WSJ economist: His argument for a "9-9-9" plan puts the current income and payroll taxes in the shredder and replaces them with a 9% personal income tax with no deductions, a 9% net business income tax, and a 9% national sales tax.That would be rocket fuel for the economy......http://online.wsj.com/article/SB10001...

So when a National Economy is a free market system it needs to be fed those conditions that will make it thrive so that every economy it touches will thrive.  This is done by becoming competitive with other national economies to the point where the conditions are greater than those other nations.  If a nation has a lower corporate tax than any other nation in the world it will bring business into its borders.  When the jobs come into its borders the unemployment rate will go down.  More people will be employed to put more money into the economy. Businesses will compete for the best workers so salaries will go up.  This is an example of the dynamics of a free market system.

With the concept of a free market system lets figure out what will happen when the 9-9-9 plan is introduced.  With the corporate tax rate being reduced to 9% the US will have the lowest corporate rate in the world by half.  This will lower the price of good so much that the entire nation will pay less for goods per dollar even with a 9% National sales tax.  This will also bring in many companies wanting to start new businesses in the purest free market system on Earth.  With the introduction of these new businesses coming into America the immediate impact is that the unemployment rate will drop so dramatically that it could be halved in the first 90 days.  As time goes on even more jobs will be needed to keep up with the increase in business growth so much that the jobs become competitive and the salaries increase.  All this and we expand the tax base to offset the National debt while increasing the value of the National currency.  With government spending cuts involved, 9-9-9 has been said to eliminate the National debt in 9 years!  All of this and we don’t even mention that we lower the overall income tax to the people who will hold better paying jobs.  9-9-9 is a winner!

House Budget Committee chairman Paul Ryan said in an interview with The Daily Caller that he “loves” the idea of having “specific and credible” plans, like presidential candidate Herman Cain’s signature “9-9-9″ proposal, in the national debate about tax policy.Ryan told The Daily Caller in an exclusive interview that Cain’s plan is a good starting point for debate, and shows the GOP presidential campaign season has entered into a more advanced stage where ideas — not just personalities — have come to the forefront.“We need more bold ideas like this because it is specific and credible,” Ryan said. “I’m more of a flat-tax kind of a guy.”The budget chairman went on to say that ideas like Cain’s plan could help shape the debate over tax reform moving into 2013.“It’s great to see such bold ideas,” Ryan told TheDC.Commenting on the sniping among the candidates and their criticism directed at Cain’s plan, Ryan said the entire process would make the eventual GOP nominee stronger going into the general election.Contacted by TheDC on Thursday, Herman Cain’s campaign was appreciative of the unexpected comments.“I consider Paul Ryan to be one of the brightest minds in Washington, D.C.,” said Mark Block, Cain’s chief of staff, “Mr. Cain looks forward to sitting down with Congressman Ryan.

9-9-9 is a replacement for the current broken tax code.  Once we apply the idea of the dynamics behind the plan it holds nothing but a prosperous future for this nation.  So the next time someone argues against 9-9-9 using a static argument, you will have the ability to realize that their argument holds no truth.  We live in a free market society.  Free market societies are based on dynamics.  9-9-9 is dynamics supercharged!

1 comment:

  1. Static vs dynamic
    What is the difference? Imagine trying to plan for roads and traffic by taking a photo of I-75. Based on the number of cars you see in the photo, you make a decision to build or not build a road or to add a traffic light. Pretty stupid huh? Was the photo taken at 5:00 rush hour or at 3:00 in the morning?
    That is static analysis. It makes revenue assumptions based on a single snapshot of data. Now if I said lets put a tax of 100% on all incomes over 100k, static analysis would tell us government would make a load of revenue. ( Sen. Bob Packwood did just this in the 90's to prove the JCT's estimates were nuts)
    Dynamic analysis takes human nature into account. Under this scenario, the normal man would work unitl he makes $99,000 then quit for the rest of the year or figure out some way to defer income until Jan 1 of the next year.