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Budget Economics 101: The Essence of Life is Junk February 26, 2009

Posted by aetiusromulous in Commentary, news, politics, Uncategorized.
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the-scream-commentsIt seems rather odd that the battle lines are taking shape over a one trillion dollar tax increase on very wealthy people, which doesn’t come into effect until 2011, is spread over a decade, and does nothing more than reset to levels the country lived quite happily with for years. Despite all the fire and brimstone, the long-term effects will be negligible to those who will pay, but historic to those who don’t.

The principle argument appears to be, that adding a few percentage points of tax redistribution to someone earning stratospheric amounts of false wealth will somehow collapse the economy of the free world. Which is just silly talk. After all, has not the economy already collapsed, and under the aegis of the system currently in place? If the argument is that lower taxes for the top 5% spurs investment and jobs, one would expect that to be happening now. But it’s not, nor has it.

Economics is infinitely complex, and beware the pundit with the one fix solution. Economic theory does indeed hold that leaving money in the hands of people spurs growth, however it is less clear how effective that tactic is when mixed with politics and culture. Economic weaponry is not one of blunt objects, but rather scalpels. Political economics is the place for bloodied clubs, and as this debate heats up it will be the political troglodytes who do the most damage. And that theory they wield, is garbage.

America is no longer a producer of things. That horse has left the barn. In fact, the entire political and socioeconomic structure of the planet depends entirely on Americans building less and less, and buying more and more. That was exactly the bait Hillary Clinton held out to China not three days ago when she proffered that China buying Americas junk bonds would be mightily returned in endless orders for Chinese junk in the future. America is and always will be an import nation.

In the past, there really was some heft to the trickle down argument, that keeping the rich rich, would benefit lesser mortals in the productive investments they would make to the economy with their zillions, spinning off productivity, exports, jobs, and taxes. And for a while, that appeared to be the case – but just long enough for certain political economists to etch it in stone on Reagan’s tablets. However, in the end, the nations upper tier investors found something infinitely more palatable and lucrative than building messy dirty things. They invested their tax windfalls – and everything else it appears – in thin air. At no time since Richard Nixon has any group of flush investors done anything but ship the work overseas, and invest in it there. Had Bush III lowered the rates further, America would have nothing to show for it but more deposits for the Bad Bank.

In fact, it now appears the reverse is true – that a nation of consumers simply must consume – and consume and consume and consume. And for that they need money, or, as it has become painfully clear, credit. No money or credit, no shiny happy stuff from Pottery Barn. It just seems obvious that getting those corner cash machines humming again depends entirely on the average American, and his propensity to buy astonishing amounts of shit. Redistributing some liquidity from the thin air accounts and into the till at Wal Mart appears to be the tonic America needs.

The only thing standing in the way is antiquated economic textbooks, and those who cling to them like “guns and religion”.

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