The Truth About The Economy In Two Minutes

Former Labor Secretary Robert Reich said he could explain the problems with the economy in less than 2 minutes, 15 seconds—and he did it. But he left a few things out. The analysis is right but not complete. What is left out is how to correct the course. George Bush and Congress gave tax breaks to those on top of the earnings scale. That seems so "Reagan Conservative" but it is not. Blanket tax cuts don't work as fast as targeted tax cuts. Traditionally the American economy grows when tax laws punish stagnant capital. In short, you can have money but you can't have it and do nothing with it.

Example: If I own an apartment building and I am given a blanket tax break on my income but my expenses on real estate maintenance are discounted from taxes on a seven year schedule... that sends me the message that the state wants me to be a slumlord.

Consider this: why using my money to fix the building and keep it going smoothly? I rather get all the money I can from it, invest nothing in maintenance, and raise rents as much as I can. When the building is no longer good for renting I demolish it and build another one. That way I get a 7 year tax bonanza on top of my permanently low blanket tax rates. It works to my advantage if my investment is lumped in one big number when I pay to rebuild instead of paying for steady maintenance.

That way of operating business ads to the natural boom-bust cycles diminishing the number of people constantly employed in building maintenance. Instead it generates a quick few months of employment for those building the new edifice. That is the way South American economies work: the rich get a pass from government and pay no taxes. Due to corruption, targeted taxation does not work. The result: weak middle class, steep boom-bust peaks and valleys, and a vast number of poor and chronically unemployed. We will get there eventually if we keep electing idiots to run the government. I don't think I have to name any names, especially this week.

We the people need to force capital to move, invest, take risks. Gentle prodding is all that's needed. Capitalists are always willing to risk if the odds are reasonable and there is no punishment for making money. The blanket tax breaks for upper level income individuals simply add to the problem: the money is sucked upwards, fleecing and slowing down the middle class (typically the movers and shakers in a healthy economy.) As the crisis deepens the rich get more cautious with their capital and keep it quiet in safe investments (bonds, government debt, etc.) thus adding to the general scarcity of money. By the way that is why the stimulus did not work: because it runs counter to basic human nature.

The post-Reagan policies have turned a positive cycle into a negative cycle. One of the side effects has been that the price of borrowing has gone down for the U.S. Government. As a consequence politicians have gone into a borrowing spree thus compounding the problem even further. That was totally predictable by the way. Leaving politicians alone with cheap money is like having the fat kid guarding the pie.

Capital has to be punished when it goes safe and rewarded when it takes risks or creates more wealth. Remember the parable of the talents (Matthew 25:14-30; Luke 19:12-28,) a real primer in economics. Basic teaching: bury the talent and the Boss will chew your butt. Government has to cease competing in the money markets with those willing to do creative things with the available money. If you don't want to ever see your talent again, bury it in the Government coffers.

Remedy:

• Cancel the blanket tax cuts and enable targeted tax cuts thus inviting capital from abroad to come and invest, and forcing local capital to come off the caves. Put the tax pressure on stagnant capital. Ease the tax pressure on capital taking risks.

• Stop government from borrowing money. Government should subsist on revenue only. Borrowing is only for times of war or national emergencies.

• Stop taxing labor by means of payroll-based taxation, obsolete labor unions, and other parasitic measures.

This is how a Reagan Conservative should think. Bush Conservatives are nothing but certain bankers and rich people who want to return to the times when there was no middle class. They want cheap servants and no change for the better unless it is for them and them alone. They are not Conservatives, they are simply stupid selfish people that can't see beyond the tip of their own snooty noses. For the most part they have inherited wealth but not the talent that created that wealth. They are simple people unfit to fulfill the duties that came with their station in life.

This entry was posted in Daily Post. Bookmark the permalink. Edit