Solving the Deficit Crisis

[Thales750]

The simple answer. NO, it will not stimulate economic growth. Taxes are meant to provide the government with revenue for operating the government. The government also uses the money, like any business, to buy goods and services. So the economy uses tax revenues.

I submit to you Sir, that the very reason for the Revolution that lead to the creation of the Constitution of the United States was fought for one reason.
To end the tyranny of the few; owning everything.

The conservative movement is so focused on “constitutional” rights that it fails to see where the real loss of liberty is occurring.
The people of the United States are encumbered with protecting the country from enemies both within and without.
And right now, the biggest threat to our National Security is economic collapse.

So I ask you, when is it justified to use the power of taxation to save the nation? In the next 2 or 3 years the economies around the globe stand on the brink of utter destruction. I heard one of the candidates in Iowa say that we need to do what we always do to fix this recession.

Really? There has only been one other one like it. The congress at the time forced a balanced budget on the people, and the economic crash lasted 12 years; until finally it was ended by a great global conflict (WWII).
People better wake up. As long as middle class people keep repeating what their betters are telling them, we will move inextricably towards the feudal systems. All proposals you hear from conservatives are designed to enrich the richest and enslave the rest.


By the way, a consumption tax will indeed NOT stimulate growth in the economy, it will have the exact opposite effect. It will encourage even more hording at the top. You know, the top of the "trickle down" economy.

Look to feudal Europe to get a better understanding of the effects of hoarding currency by the very top. Most of those countries’s wealth was in, land, war machines, and jewelry. And the people from the time of the fall of the Roman Empire, to the revolutions in America and Europe, lived under the boot of the feudal lord.

Why?

Because all of the money was hoarded at the top.
Conservative better wakeup.

 

[Steve R.]

The conservative movement is so focused on “constitutional” rights that it fails to see where the real loss of liberty is occurring.

The political right is moving towards a police state in the name of "security".

Additionally, they are moving towards corporatism. That is using the power of the State to further corporate interests. One unfortunate growing outcome of this process has been the ability of Corporations to essentially make "law" and eliminate due process in the name of protecting so-called "intellectual property". I go into more detail here: "The Concept of "Sale" is Under Attack"

So I ask you, when is it justified to use the power of taxation to save the nation?

Taxes are a necessary expense to operate the government. The problem is that our politicians are running a "bread and circuses" economy. They have not made the "tough" decisions of identifying the limits to government services and ensuring that we have sufficient revenue to cover those obligations.

For example, the Republicans loudly proclaim no tax increase yet they refuse to accept cuts to military spending. The Republicans claim to want to reduce "welfare" in the form of entitlements yet they are for increased deficit spending in the form of granting "welfare" to corporations using the euphemistic term "incentives".

By the way, a consumption tax will indeed NOT stimulate growth in the economy, it will have the exact opposite effect. It will encourage even more hording at the top. You know, the top of the "trickle down" economy.

That's the answer I gave in my simple answer. But it will not have a negative impact on economic growth either. I view taxes as a cost of doing business, like salaries, advertising and rent. There are economic benefits derived from government programs.

The simple answer. NO, it will not stimulate economic growth.

It will encourage even more hording at the top. You know, the top of the "trickle down" economy.

I would not call it "hoarding", but you are correct in the sense that the rich would not need to spend the money like the poor. They (the rich) can just sit on it and do nothing.

Now the premise of this thread is to explore how a balanced budget may be achieved. I have put forward using a consumption based tax and reducing government expenditure in the military and certain social service programs. How would you raise the revenue need to operate the government and to what degree should the government be involved in the economy and social services?

 

[Adam Caramon]

Guys,

I had hoped to stimulate a conversation on remedies; absent of the failings of political theatre.

The problem is that the very essence of how to fix something depends on what you think is wrong with it. To me, in order to fix this economy, we would need to raise taxes on the rich, reduce spending, eliminate large parts of the military machine, etc.

A relatively simple question such as: "What size should the government be" will get you a million different answers.

But in general, those who are for smaller government tend to believe in that the wealthiest Americans earned the right to be filthy rich, and we as a country have no right to try and take any of their money. If we want to be rich too, all we have to do is work really hard, and it won't be an issue (and they say that with a straight face).

Those who are for larger government tend to believe that there shouldn't be such a massive difference between the richest and the poorest of individuals. That society should provide for those less fortunate. That healthcare and education should be cheap (or free) and readily available for all.

So, while we can throw out solutions, our solutions are of course going to be different. And we'll have a hard time agreeing on anything as where we think the government should be is ultimately very different.

 

[Steve R.]

The problem is that the very essence of how to fix something depends on what you think is wrong with it. To me, in order to fix this economy, we would need to raise taxes on the rich, reduce spending, eliminate large parts of the military machine, etc.

A relatively simple question such as: "What size should the government be" will get you a million different answers.

But in general, those who are for smaller government tend to believe in that the wealthiest Americans earned the right to be filthy rich, and we as a country have no right to try and take any of their money. If we want to be rich too, all we have to do is work really hard, and it won't be an issue (and they say that with a straight face).

Those who are for larger government tend to believe that there shouldn't be such a massive difference between the richest and the poorest of individuals. That society should provide for those less fortunate. That healthcare and education should be cheap (or free) and readily available for all.

So, while we can throw out solutions, our solutions are of course going to be different. And we'll have a hard time agreeing on anything as where we think the government should be is ultimately very different.

Good response.

 

[Thales750]

The problem is that the very essence of how to fix something depends on what you think is wrong with it. To me, in order to fix this economy, we would need to raise taxes on the rich, reduce spending, eliminate large parts of the military machine, etc.

A relatively simple question such as: "What size should the government be" will get you a million different answers.

But in general, those who are for smaller government tend to believe in that the wealthiest Americans earned the right to be filthy rich, and we as a country have no right to try and take any of their money. If we want to be rich too, all we have to do is work really hard, and it won't be an issue (and they say that with a straight face).

Those who are for larger government tend to believe that there shouldn't be such a massive difference between the richest and the poorest of individuals. That society should provide for those less fortunate. That healthcare and education should be cheap (or free) and readily available for all.

So, while we can throw out solutions, our solutions are of course going to be different. And we'll have a hard time agreeing on anything as where we think the government should be is ultimately very different.

The use of “throw out solutions” creates a diminutive impression of the value of finding solutions.

It has been my experience that great leaders seldom lament the conditions of a situation, more often they look for and find solutions.

In this case, to follow your lead, on the varying degree that people look at the size of government . You will find that the vast majority are obviously much towards a balance then either the Socialist or the Tea Partiers.

That leave lots of room for solutions. No matter which ideology you follow the country will be broke if we continue down the path we are taking.

Ultimately the solution is simple, all currencies will float. But that will come a huge cost to most of us. Those that live in cities and were not raised on a farm or were not taught old wisdoms will most likely perish or at least suffer great hardship.

So we can continue to allow our ideologies to direct our behavior or we can start a movement that will speak directly to the problem of getting people back to work in wealth producing jobs.

Trade imbalances are the root cause of all of our problems. This is where we should insist that out politicians focus their time.

Politics and size of government are irrelevant.

 

[Steve R.]

Trade imbalances are the root cause of all of our problems. This is where we should insist that out politicians focus their time.

Resolving the trade balance issue would be a must. The preferred solution would be to have the standard of living of our trading partners rise so that it would equal that of the United States. The politically unpalatable solution would be to devalue the dollar, which is what is happening anyway.

Politics and size of government are irrelevant.

The size of government is very germaine. Essentially, the larger a government, society, or corporation becomes - the more rule bound they become to resolve management complexities. (The most effective decisions are those made by a relatively few decision makers. But that is an anathema in this country.)

The age of a government, society or corporation is also of significant concern. Governments, society and corporations (like people) move through life stages. When young they are relatively freewheeling. As they age they become increasingly obsessed with maintaining the status quo and protecting assets. Microsoft is a good corporate example of this aging process. The US is also exhibiting increasing symptoms of protectionism, indecision, increased security (police state), and loss of vision.

 

[Adam Caramon]

The use of “throw out solutions” creates a diminutive impression of the value of finding solutions.

I wouldn't say so. My intent was to point out that there is no silver bullet that will fix everything. So, the things we are and have suggested on this thread and on others have been suggested in the past. Some have been implemented on varying scales with varying amounts of success or failure.

Take the idea of trickle-down economics. Or the idea that tax cuts for the rich generate jobs. In my opinion, these two theories have been throughly debunked. There are others who have looked at the same evidence as I have, and drawn the conclusions that both work.

So, ultimately, why we can come up with solutions, little will actually happen unless you can gin up a large following of people who support you.

It has been my experience that great leaders seldom lament the conditions of a situation, more often they look for and find solutions.

I hate to sound so dramatic, but I think that is the past. I think all of the anger and fury that President Bush's presidency caused both domestic and foreign, turned the political landscape very brittle. The election of the first biracial president shattered that landscape. It is harder now to find compromise in the US congress that any other time in modern history.

You will find that the vast majority are obviously much towards a balance then either the Socialist or the Tea Partiers.

Agreed.

That leave lots of room for solutions.

Sure. But to be effective, they're going to need to be instituted on a wide-scale level, i.e. legislation. And passing legislation these days is an exercise in futility.

So we can continue to allow our ideologies to direct our behavior or we can start a movement that will speak directly to the problem of getting people back to work in wealth producing jobs.

Start a movement? You mean that if you just tell everyone how bad things are or will be, they'll come together as a country? That sounds like a movie, not reality.

Keep in mind that there are 10 million different groups out there, all pushing various agendas based on what they think is the correct solution. Find one (or more) that you agree with, and join them.

Politics and size of government are irrelevant.

I would disagree. I would say that politics are everything when it comes to finding solutions for a country's problems.

 

[Thales750]

I would not agree with politics being the root cause, but certainly the tax code is.

Or rather, the broken tax code.

We're out of time; the end of our economy is upon us. I’m working on a thesis, I will present it by the end of this week.

In the mean time please continue to discuss this. I wish some of the conservatives would present their rational for decreased tax on the rich, and how they see reducing entitlements affects the country.

I think most of them have no clue how much our freedom has been eroded by the recreation of the feudal system.

But they will, oh so soon.

Look to Mexico; for a model of the future of The USA.

 

[Steve R.]

Take the idea of trickle-down economics. Or the idea that tax cuts for the rich generate jobs. In my opinion, these two theories have been throughly debunked. There are others who have looked at the same evidence as I have, and drawn the conclusions that both work.

True.

Nevertheless these concepts retain a lot of traction and populist support because they sound good. Furthermore, much of the support obtained by politicians comes from the beneficiaries of these policies. Of course the politicians are here to "help".

The logical flaw in supply side (Voodoo) economics is that companies hire in response to demand, not in anticipation of demand. So giving "money" (in the form of incentives, tax credits, or whatever) to corporations will not cause the companies to hire more employees and trickle down the wealth.

The economic malaise that we are currently experience demonstrates both the failure of supply side economics and Keynesian stimulus. The Government is flooding the economy with money and interest rates are at record lows, yet the economy only sputters instead of blossoming.

I will advocate, that the economy is sputtering as an expression of the bad logic behind supply side economics. Essentially, we can only consume so much. One car is good, two may be even better; but three, four, five ?????

The Washington Post ran the article below that raises structural issues (such as an aging population) for why the economy is not taking-off. Regretfully, the article ends with the usual call to focus on growth despite the fact that the article is pointing to why growth is not occurring. I guess it is too politically unpalatable not to make those assertions even in the face of the evidence. America’s debt is not its biggest problem

So when you stimulate purchases (such as cash-for-clunkers or incentive programs for housing) you do initially stimulate the economy. And the supply side crowd bullhorns their supposed success.

But guess what!! After the purchases are made people stop buying because there is no need to by that sixth car. In the case of home ownership, people found out that they could not afford the homes. The economy now crashes. Supply side economics may initially promote purchasing, but in the end it simply cannibalizes future sales. Of course the supply side crowd refuses to acknowledge that people stop consuming when their basic needs are met.

 

[Adam Caramon]

I think most of them have no clue how much our freedom has been eroded by the recreation of the feudal system.

But they will, oh so soon.

Look to Mexico; for a model of the future of The USA.

The feudal-style system, as you're describing, is exactly what some of them want. They truly believe that poor people are poor because they are lazy and do not want to work. They believe that middle class people are not rich because they do not want to work overtime.

They have convinced people that opportunities abound, and that when things don't go well it is actually because of all those "leaches" living off of government assistance.

A good example of this is unions. There are many people who are rabidly against unions. They believe that unions promote laziness, force everyone else to pay higher prices for goods and services, and protect incompetent workers.

The rich owners of companies who have to bargain with the unions have convinced many in the general public that it is all the fault of unions. The company wants to sell you a cheap car, but because of the union costs, they can't.

When it comes right down to it, though, most people who don't like unions are against them because they don't think they're fair. The individual that makes $20 for doing a job compared to a union worker that is making $25 for doing the same job is furious. Its not fair to them. Why should that union worker make $5 more? The union is holding the poor, innocent company owners hostage.

The people who promote this type of thinking are very good at getting these non-union workers worked up into a furor over this. They can shape the conversation this way instead of as "Why aren't the non-union workers making $25 as well?"

The logical flaw in supply side (Voodoo) economics is that companies hire in response to demand, not in anticipation of demand. So giving "money" (in the form of incentives, tax credits, or whatever) to corporations will not cause the companies to hire more employees and trickle down the wealth.

100% correct. It has been said time and time again. If you could get people to understand this one paragraph of yours, you could radically change the conversation of the economy, taxation, etc. But you won't, because those who have the most to gain from voodoo economics have far more money pumped in to convince everyone otherwise.

 

[Steve R.]

The logical flaw in supply side (Voodoo) economics is that companies hire in response to demand, not in anticipation of demand. So giving "money" (in the form of incentives, tax credits, or whatever) to corporations will not cause the companies to hire more employees and trickle down the wealth.

...

I will advocate, that the economy is sputtering as an expression of the bad logic behind supply side economics. Essentially, we can only consume so much. One car is good, two may be even better; but three, four, five ?????
...

So when you stimulate purchases (such as cash-for-clunkers or incentive programs for housing) you do initially stimulate the economy. And the supply side crowd bullhorns their supposed success.

But guess what!! After the purchases are made people stop buying because there is no need to by that sixth car. In the case of home ownership, people found out that they could not afford the homes. The economy now crashes. Supply side economics may initially promote purchasing, but in the end it simply cannibalizes future sales. Of course the supply side crowd refuses to acknowledge that people stop consuming when their basic needs are met.

This morning, CNBC had an interview with Stephen Roach who coincidentally reiterated what I have been saying. So I made a point of tracking down thie interview. The short synopsis "consumers got hammered in a crisis largely because they overspent, they borrowed more than they ever should've."

It is extremely unfortunate that the concept of over-stimulation has no traction. Obama's proposals to stimulate the economy are a non-solution and will ultimately fail.

Global Recession: Begins & Ends With U.S.? The interview begins 50 seconds into the video.