The Economic Recovery Action Package has been presented in DC and there is a rather interesting scenario. A set of people see the Governmental Investments into the crumbling public goods: infrastructure, healthcare, education as money coming out of the pockets of the next generation. Yet these very opposition folks are finally going to vote for this package because it has been stapled with a requisite dose of across-the-board tax cuts that they stand for!
How about actually paying for these projects from our own pockets Rather Than adding to its tab by taking tax cuts and passing it on? Cities, Roads, Bridges that we marvel at anywhere in the World are, without exception, creations of State Organizations, not natural outcomes of the activities of small businesses. All social sectors are languishing - or let's just say that they are just not commensurate with the America's reckoning in the World. A repeat investment into these is required recession or no recession. A strong infra-social sector is the foundation for business vibrancy. And it will not be cobbled together by the private sector, not on the scale on which it's needed to be refurbed and renovated today.
Yet doing it now additionally helps stem the imploding cycle of job losses all around. I do not support consumer credit as a strategy for economic growth - I see that as madness and a loser, desperate approach - But breaking the |Demand destruction -> Job destruction -> Income destruction -> Demand destruction| loop via these public projects is hitting two worthwhile birds with one stone.
"Do Nothing Because Govt. Has No Business Spending Money or Taxing", in these circumstances, will have such annihilatory consequences, especially with the "Right to Bear Arms", that there could well be a new order that is "All Govt., Nothing Else". Nobody wants that - Communist Revolutions, the World over, have always occurred after a "Free Market, or Manipulated Free Market, system gone sour for the common people".
America too has an "Engineered (via fancy ARMs, Derivatives et al) Free Market gone sour" today. But with one blessing - that America is a Democracy. The elected new Govt. can take the steps that spell reform, reconstruction and renewal - What it is proposing to do today.
But it does not make any sense to force adding tax cuts to the investment proposals. It's hypocrisy to say "These Projects are robbing from Our Kids as they will have to pay for it" - yet vote for the investments while extracting across-the-board tax breaks.
How about pay as much as possible for it right now by thoughtful tax increases? Then the kids will inherit paraphernalia to write their own story without the additional debt from their parents. Households with incomes less than say, $70 K/annum can be given tax breaks to better cope with ARMs adjusted upwards, or other economic challenges. But a good proportion of the rest need to see an increase in their taxes towards recouping these Governmental socio-economic foundational investments. And, of course, the delta-taxation needs to be structured progressive. I do not beleive that any household that earns in excess of $100K/annum is cutting-back-on-consumption-and-stifling-growth because of shortage of disposable income. Its few cutbacks are purely related to job insecurity in the air these days. An extra tax saving of dollar thousand or two a year will only go into FDIC insured bank account Not into Macy's store.
It's a wrong notion that people with capital will fly away elsewhere with their money if taxes are increased. The WHOLE WORLD is saddled with overcapacity, there is no market less saturated out there to capture. In fact, America is the best bet to stay put. But you need to pay for the wherewithal that you will use to live and enjoy your life and business in. And with all the exemptions and deductions, and not too high tax rates, USA isn't quite a highly taxed nation from any angle. Of course, you don't want to double the tax on the $180 K + crowd but raising by a few percentage points would definitely be in order.
©2009 Ohm, all rights reserved. You must have written permission from the author in order to republish this work.
Published: Saturday, January 24, 2009
Last modified: Saturday, January 24, 2009
The views expressed in this article are those of Ohm only and do not represent the views of Nolan Chart, LLC or its affiliates. Ohm is solely responsible for the contents of this article and is not an employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.
Report violation by Ohm of Nolan Chart LLC's terms of use policy.
| More Articles By Ohm |
Reader Comments:
Posted By: daddysteve
Date: 2009-01-24 18:15:41
Cities are a creation of the state? Twice more for emphasis ??
Posted By: Jahfre Fire Eater
Date: 2009-01-25 10:25:26
Hi Ohm,
I can see why you are so confused. If you think "America is a Democracy" then the rest of your comments aren't really worth considering. Just curious, you have heard of the US Constitution, haven't you? You may be surprised to learn this, but that document DEFINES what kind of government the US has. You may be shocked to learn that the Constitution goes to exacting detail to ensure that America is NOT a democracy.
Wishing or asserting a thing to be true does not actually change what the thing is in the real world.
Too bad you have to start from where you are. It would be easier if you could just go back to the beginning and learn what kind over government the USA has before someone feeds you full of useless nonsense. Since it is too late for that, learning the basics requires initiative on your part. You have to want to know what is real and what is make believe. I wonder if you do? None of my business either way. Just don't expect to be taken seriously in the real world with your fantasy-based definitions and opinions.
-Jahfre Fire Eater
Posted By: DustoneGT
Date: 2009-01-25 15:22:16
You base all of your argument for a tax increase on the supposition that curbing spending is impossible.
Infrastructure - Congress robbed the highway tax funds for other projects and we wonder why infrastructure is all worn out. Now they want to increase gas taxes to try and 'fix' the problem.
Economic Stimulus - Government has never been able to fix the economy through further spending. Never. Not ever. The New Deal didn't work, so why should we expect New Deal II to be any different?
The solution is to cut government spending, not impose additional taxes to keep our children and grandchildren from inheriting more debt.