Volume 2, Issue 31

At least it isn’t anything important like hatred — there’s still hope for us then. Obviously money is what has brought the two major political parties into greater animus than I can ever remember existing before.

The Republican Party insists it will not back legislation that adds any tax burden to the rich, but instead wants to close loopholes. Why not do both? Unacceptable, is the hard line taken up front. As if there is something in principle wrong about asking for help from the most able at a time of crisis?

Undoubtedly the hard line rests instead on the idea that swollen government is the main problem so it must be starved.* Or maybe there’s another explanation that would make sense if explained to me.

A long dispute means that both parties are wrong.

— Voltaire

 In our last post we wrote about creative compromise. The kind of creative compromise that we need to make in the tax domain is exactly where we draw the line between “the people with enough money to do more” and “people who make a decent living but whose retirement is by no means certain”.

One nicety that has already come to public awareness is that of small corporations — where the proprietors are filing taxes combining the business with the personal — which makes these individuals appear to be wealthy. There should be a way to word the legislation so that mistake does not happen. Jobs will not be stimulated by heavier taxes on such folks.

Not sure that $250K/year is any kind of magic number that signifies ability to pay more taxes. That’s the top 4.2 percent of taxpayers. However, in our October 25 post I shared the IRS stat that the top 0.1% received 7.8% of all U.S. income in 2009. Maybe we don’t need to come all the way down to include 4.2% of taxpayers to accomplish our goals of deficit reduction and investment in America’s future? Perhaps it can be just 1%, and perhaps we can offer psychological inducements, by encouraging investments as we’ve discussed here many times.

If the government budget contains too much money for people who need that money for survival, we cannot take it away from them — we need to use that money to retrain them, another idea you’ve heard here and elsewhere.

The need to take from the rich and give to the poor is a good idea from the standpoint of making the whole country an even greater success, but only if it is a temporary idea not a way of life.** Hence the importance of training people or even investing in their family business rather than just keeping them on subsistence existence of no value to themselves or others.

Robert A. Heinlein wrote a utopian novel called For Us, The Living  in which he projects a future where the government prints and gives us all the money we need. The idea came from economist C. H. Douglas in the 20’s — he called it Social Credit. When the Depression came it was actually put into being, in 1935, as the economy of Alberta, Canada, with Douglas as the economic advisor. It never had a chance to succeed or fail because it was shut down by the courts — i.e. for ideological reasons, without letting the experiment play out.

Farfetched ideas like this need to be given careful consideration by economists. I invite any economists reading this to post their comments in answer to the following question:

If the U.S. started doing Social Credit and people within the U.S. were fine with giving and taking these dollars from each other so hyperinflation did not occur domestically (though foreign trade would be hard hit), could the country do just fine using only its own resources or what further refinements in such an idea would make it workable and desirable to all?

Sure, I know it sounds like Communism. Heinlein admitted the same but emphasized that it does not stifle individuality the way Communism does. People in his story are independent, do what they want to do with their lives, and tend to wind up not being takers but instead giving greater value to others.

What if we did a test? Only do it as an investment, and only to those people who show a plan of what they intend to do for that money, with a diverse nonpartisan board or Internet voting to decide which plans were worthy of backing. We could budget for a million households as a test of the idea. If people knew they had so high as about a 1 in 100 chance of being selected, a lot of people would be motivated to write plans of what they would do with their time for their own enjoyment and the good of others — if only they had enough money to pay their modest bills. It would focus us all on positive solutions. Since it would be an investment, the money would be repaid in the normal way that investors recoup. If the idea worked, it could be rolled out.

Another crazy idea scenario for economists to play with and form into something workable: forgiving all debt every 50 years starting now. Leviticus in the Bible advises that every 50 years mortgage debt is to be forgiven, which was called a Jubilee Year. Economists could run computer simulations or whatever would provide a trial-and-error feedback mechanism to tinker this advice into potentially workable models.

Again, whatever we do has to be done domestically first (and test-piloted) because the idea of getting the whole world to do something radical with money seems a bit over the top. If the hunch that the U.S. needs to experiment monetarily on its own is right then it has to be built into whatever strategy we creatively and unifyingly come up with in the days ahead. Now is the time for creativity and consensus building, not for naysaying. We are hard up against it.

But we shall prevail.

Best to all,

Bill

*”Starve the beast” was an idea first promulgated by Republicans in the late 70s and 80s. “The beast” refers to welfare, Social Security, and Medicare, and does not usually refer to spending on the military, law enforcement or prisons (per Wikipedia). You might find this Forbes commentary of interest:
http://www.forbes.com/2010/05/06/tax-cuts-republicans-starve-the-beast-columnists-bruce-bartlett.html

**Although CEO compensation has skyrocketed off the chart while average wages are flat, and this in itself appears to be a prima facie social ill.