Saturday, March 4, 2017

Taxes and Spending

Everyone seems to have this wrong.  Modern Monetary Theorists come close to the correct approach, but don't spell it out like I do.

If the government were to just "print money" and not borrow it from a private bank (the Fed) it would never have to pay interest.  Furthermore, so long as the money so printed (without being canceled by incoming taxes) was being invested wisely, it could so be done without limit.

The problem of course with our current system is that (by Truman's design) we spend vast amounts of money (and that also means brains and time) on "defense" (never seen before WWII) simply to maintain something like the full employment economy of WWII (never mind there were many other regulations in WWII).  All this military spending generally makes us less safe, by creating actual enemies in the rest of the world.  If we simply left the rest of the world to itself, or did our small share that could be agreed to by the UNSC, we would actually be safer, by not creating enemies.  In addition, or diplomatic and other support of Israel creates enemies, and it costs money too.  Some theorize many of the wars in the middle east have to do with Israel, certainly Al Qaeda originally specified US support of Israel as being one of 3 principal reasons it needed to attack the US.  NATO is another big troublemaker, creating trouble that needs to be solved by NATO, ad infinitum.

We would be safer spending as much as Germany does, per capita.  Maybe less, since we have a naturally secure location on earth.

Anyway, none of this military spending is useful spending.  It doesn't create future wealth.  It makes us poorer, and without WWII style regulations it also makes us more unequal.

On the other hand, if we used the same humanpower to build renewable energy and free transportation everywhere, it would be of immense future value and pay for itself in future saving (or otherwise, we basically have no future).

As long as people are unemployed, or not employed to their highest capacity, there is room for more productive spending.

And that is the only limit.

Anyways, if we don't need taxes for investment spending, we do need it for war spending.  And we also need taxes, progressive taxes, to prevent people from getting too rich.

There's an essential problem in capitalism: it's rigged so rich people keep on getting richer, far more than any contribution to society.  In recent times, we've even dropped the idea about contribution to society part, rich people are "supposed" to be getting richer just because they deserve it.

Crap!  Balzac had it correct: behind every great fortune is a great crime.  Nobody deserves to be rich for very long, and especially not to create a dynasty.  Our best tax on wealth, the estate tax, is expressly for that purpose.  This may be the single most important tax, regardless of how much money it brings in (and it does bring in a lot).  And it need only apply to extremely big estates, such as $10M and up.

There should be no tax on spending, as this is a direct tax on the economy itself, and production for that matter.  Spending taxes are almost always regressive.  Remember the purpose of a tax system should be to help restore the justice the economic system, which rewards the powerful for being more powerful, takes away.

Social Security taxes are not properly considered part of the government.  They are part of a self contained retirement system, which has worked well for 75 years, starting from nothing, and can pretty well keep working without large changes forever.  It was originally, and could at any time return to being, a pay as you go system.  Of course, it has now built up a large extra endowment to cover demographic change costs.  Those will help maintain benefits, but actually the tiniest of increased taxes can keep it going as the system it is, which is the best kind of system for a public system, forever.  Angry Bear had a detailed proposal how 10 year reviews could add the required tiny change, simply to keep the next 10 years going, no need to obsess now about 30 years away.  However, the big issue here is pay equity.  If people in the future are paid well, the system is very sound.  We should obsess mainly about keeping good pay for people in the future.  The way to do that is through unions and the like, and full employment in domestic production and investment.  I do favor raising the cap on social security taxes, but also along with a corresponding progressive increase in the maximum benefit too, so nobody can feel this is a welfare system, though it produces enormous added welfare in society through income security for the elderly and others.  I would prefer keeping Social Security as it is and abolishing the rest of the US government to the reverse, not that I prefer abolishing the government at all, only the trillion dollar a year useless and dangerous military.

And the way to maintain the future incomes needed to keep social security healthy, is primarily by achieving optimal employment now, and as much as possible, always.  This is primarily inhibited by concerns about inflation, which should only be a tertiary concern.

Mainly, we got people, and putting them all to good use is only way we can be as wealthy as possible.

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