PBS NewsHour: RISING TIDE
January 1, 1996
TRANSCRIPT
http://www.pbs.org/newshour/bb/budget/budget_1-1.html

[snip]

DAVE MacFARLANE, Alden Yachts: I don't know anybody in the Marine industry that didn't know that there was a total disaster to start, and it's still amazing to think how somebody could come up with an idea that would shut off a business, and everybody that was in the business knew this would happen, and yet it floated right through.

KWAME HOLMAN: The theory behind the luxury tax sounded simple enough. Congress believed anyone willing to spend $100,000 or more on a new boat surely would be willing to pay an additional 10 percent to the federal government. But that didn't happen. Rather than pay the tax, many people in the market to buy a boat either didn't buy one, or bought one overseas. As a result, the luxury tax didn't bring in much money at all, and the customers' reluctance to buy put the boat-building business, particularly here in Rhode Island, out of business. We first visited Rhode Island in June of 1992. The luxury tax had been in effect for 18 months. Tens of thousands of jobs had been lost across the country, thousands in Rhode Island alone.

WALTER SCHULZ, Boat Builder: (1992) When that tax came down, I mean, it was just as if, I know the metaphor sounds exaggerated, as if someone turned the faucet off.

KWAME HOLMAN: At that time we talked with Walter Schulz, founder and president of Shannon Yachts. After 17 years of building boats, his company did collapse. Schulz was forced to declare bankruptcy.

WALTER SCHULZ: American boat builders, manufacturers were able to still dominate. We were able to compete head-to-head in terms of price. We were able to compete head-to-head in terms of technology. We were able to make the technological advances that still continue to dominate. We were able to make the design advances that dominate the world market. And that existed, by the way, right up until last year, I mean, and then it vaporized.

KWAME HOLMAN: We talked with Ken Kubic, manager of the East Passage Marine on Narragansett Bay.

KEN KUBIC, East Passage Marina: (1992) We used to do close to $400,000 worth of launching and christening work for these manufacturers, and that, that just dried up to nothing.

KWAME HOLMAN: When we talked with Dave MacFarlane in 1992, Alden Yachts had no new boats on order. MacFarlane had been forced to lay off dozens of skilled workers and at the time concluded the luxury tax was costing the government more money than it was collecting.

DAVE MacFARLANE: (1992) If you look at approximately say 35 or so people laid off at about say two hundred and sixty-five to three hundred and ten dollars a week in unemployment, if you add that up, you know, it comes to about $1/2 million.

KWAME HOLMAN: Some members of Congress realized almost immediately they made a mistake in levying the luxury tax.

SEN. JOHN BREAUX, (D) Louisiana: (1992) Now there's no question that the economy has hurt the boat-building business, but I think that they were just barely treading water. And what Congress did was come up and kind of put our foot on top of their heads and just shoved them under the water line, and as a result, they really are drowning.

KWAME HOLMAN: It took a relentless grassroots lobbying campaign by the boat builders, but Congress finally did repeal the federal luxury tax on boats in August of 1993. We returned to Rhode Island a few weeks ago to see if the boat-building industry had returned. It had for Dave MacFarlane. Joe Dockery ordered his $2 1/2 million yacht from MacFarlane five days after the luxury tax was repealed.

JOE DOCKERY: It was pretty close to immediately. We were just waiting for it to end, and as soon as it ended, we moved.

KWAME HOLMAN: Ray Lavoie, supervisor of all electrical and mechanical work at Alden, was one of the few survivors of the layoffs.

RAY LAVOIE, Alden Yachts: (inspecting yacht) I think we're all set.

KWAME HOLMAN: He said once the luxury tax was repealed, the turnaround in business was instantaneous.

RAY LAVOIE: Almost immediately, almost immediately, we started selling some boats, and interest picked up, and most of the individuals that we called that were working here came back.

KWAME HOLMAN: Alden now has a backlog of half a dozen boats on order, and its full-time work force is nearly back to where it was before the luxury tax was implemented.

RAY LAVOIE: So it's a good feeling.




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"Cindy Alronn" wrote ...

KWAME HOLMAN: The theory behind the luxury tax sounded simple enough.
Congress believed anyone willing to spend $100,000 or more on a new boat
surely would be willing to pay an additional 10 percent to the federal
government. But that didn't happen. Rather than pay the tax, many people in
the market to buy a boat either didn't buy one, or bought one overseas. ....

BS!.

The PO was asking $15,000 for my boat. I offered $10,000 and he accepted.
If he'd held out for $11,000 (10% more) I'd have accepted that too. I've put
well over $5000 (50%) more into her over the past year just to make her fit
my wife and I, so I really cannot believe that 10% makes anybody decide not
to buy or to buy overseas.

We've been looking at boats in the $150-200,000 range just in case we decide
to sell the house after we retire. Trust me, if we find a boat we want, 10%
isn't going to deter us.

Moreover, it's not as though the so called "conservatives" would quit
spending the money if/when that tax went away. They'd just borrow it and
leave our kids to pay the interest. Clinton was a tax-and-spend Democrat.
Bush is a borrow and spend even more Republican. Which is worse?

Your point is well taken. It is crucial that the
government downsize itself and become fiscally
responsible. That will not happen until the next
crash when it will be unavoidable.

The economic reason for the current spending is it is
believed to forestall recession. And the big fear is of
course the inevitable upcoming depression--which can
be delayed, but not prevented. Unfortunately, delaying
tactics only extend the term of economic crashes. The
balloon will break at some point, consumer confidence
will be lost and we will all be hit hard as real estate prices
crash. Those with liquid assets will be in the best situation
to capitalize. Those in weak positions will lose out.

Indicators of this are the following:
1. A rising percentage of debt compared to nominal GNP.
2. The furious efforts of the banking industry to roll
unsecured debt into secured real estate.
3. A record of extraodinarily high returns in many
forms of investment a decade or more ago which
typically cycles to normal returns and then far below
average returns.
4. Debt compunding faster than income.
5. Foreign debt defaults.
6. Financial scandals. Research the Hatry Scandal
and the famous frauds of Ivar Kreuger, and the Credit
Moblier Scandal, and compare them to their respective
economic environments.

It would be far better for the government to adopt
conservative spending habits, but they never do, each
group points to the other when things are bad, and takes
credit when things are good. The truth is all governments
tend to be both irresponsible and inept.

A smart person will reduce expenditures, increase
savings and open a Swiss Bank account.

Vito wrote

leave our kids to pay the interest. Clinton was a tax-and-spend Democrat.
Bush is a borrow and spend even more Republican. Which is worse?

There is no upcoming depression. That's wacko. Despite
bu**** and company, it's just not going to happen. All
of the recommendations (except the Swiss account)
are worth doing anyway. Any smart person who can do
it, should do it. Many people cannot in a large measure
because of the current administration.

--
"j" ganz @@
www.sailnow.com

"Bart Senior" wrote in message
et...
Your point is well taken. It is crucial that the
government downsize itself and become fiscally
responsible. That will not happen until the next
crash when it will be unavoidable.

The economic reason for the current spending is it is
believed to forestall recession. And the big fear is of
course the inevitable upcoming depression--which can
be delayed, but not prevented. Unfortunately, delaying
tactics only extend the term of economic crashes. The
balloon will break at some point, consumer confidence
will be lost and we will all be hit hard as real estate prices
crash. Those with liquid assets will be in the best situation
to capitalize. Those in weak positions will lose out.

Indicators of this are the following:
1. A rising percentage of debt compared to nominal GNP.
2. The furious efforts of the banking industry to roll
unsecured debt into secured real estate.
3. A record of extraodinarily high returns in many
forms of investment a decade or more ago which
typically cycles to normal returns and then far below
average returns.
4. Debt compunding faster than income.
5. Foreign debt defaults.
6. Financial scandals. Research the Hatry Scandal
and the famous frauds of Ivar Kreuger, and the Credit
Moblier Scandal, and compare them to their respective
economic environments.

It would be far better for the government to adopt
conservative spending habits, but they never do, each
group points to the other when things are bad, and takes
credit when things are good. The truth is all governments
tend to be both irresponsible and inept.

A smart person will reduce expenditures, increase
savings and open a Swiss Bank account.

Vito wrote

leave our kids to pay the interest. Clinton was a tax-and-spend
Democrat.
Bush is a borrow and spend even more Republican. Which is worse?

"Jonathan Ganz" wrote in message
...
There is no upcoming depression. That's wacko.....

I wish ....

Well, so do I but it's not going to happen in all reasonable likelyhood.
There's no evidence of something cataclysmic like that. The world
economy is relatively stable, certain the 1st world is in economic terms.
While there are major problems, India and Pakistan seem to be
headed in the right direction, at least not threatening each other on
a daily basis. China and Taiwan are not being beligerant. North Korea
isn't any more unstable than usual. The US and the rest of the 1st world
economies are generally doing ok.

What do you base that on?


--
"j" ganz @@
www.sailnow.com

"Vito" wrote in message
...
"Jonathan Ganz" wrote in message
...
There is no upcoming depression. That's wacko.....

I wish ....