On December 7, 2012, John Cassidy writes in The New Yorker magazine:
With all the theatrics going on in Washington, you might well have missed the most important political and economic news of the week: an official confirmation from the United Kingdom that austerity policies don’t work.
In making his annual Autumn Statement to the House of Commons on Wednesday, George Osborne, the Chancellor of the Exchequer, was forced to admit that his government has failed to meet a series of targets it set for itself back in June of 2010, when it slashed the budgets of various government departments by up to thirty per cent. Back then, Osborne said that his austerity policies would cut his country’s budget deficit to zero within four years, enable Britain to begin relieving itself of its public debt, and generate healthy economic growth. None of these things have happened. Britain’s deficit remains stubbornly high, its people have been suffering through a double-dip recession, and many observers nowexpect the country to lose its “AAA” credit rating.
The International Monetary Fund also analyzed the impact of tax cuts vs. increased government spending for 6 countries – Canada, France, UK, Germany, Japan and the U.S. over the course of various events in history to understand what worked and what didn’t; they wrote a working paper on their findings HERE. Their study found that different solutions worked for different countries depending on various factors.
In the U.S. (already a low tax country) they found that tax cuts produced statistically insignificant impacts during economic downturns whereas increased government spending produced “significantly” better results. In fact – for every $1 spent in government spending – the U.S. economy experienced $1.80 in economic output; conversely – cutting government spending right now would have a significantly negative impact on the economy. In other words – austerity would be devastating right now. Those were the facts.
Former Reagan adviser Bruce Bartlett also is advocating more stimulus without tax rate cuts, but as with American economist Paul Krugman and Australian economist Steve Keen he does not address the issue of OWNERSHIP CONCENTRATION and discusses national debt without ANY stipulation of new OWNERSHIP CREATION. Thus Keen fails to address the issue of Who Should Own America. Keen does acknowledge that government stimulus via debt is crucial to further economic growth, but does not address who will benefit in terms of ownership creation.Bartlett states “Republicans have talked themselves into believing that that the only thing that matters to a business is its tax rate and that its sails, its customers and things of that sort are irrelevant. And that’s absorb!”Paul Krugman states “…despite years of warnings from the usual suspects about the dangers of deficits and debt, our government can borrow at incredibly low interest rates — interest rates on inflation-protected U.S. bonds are actually negative, so investors are paying our government to make use of their money. And don’t tell me that markets may suddenly turn on us. Remember, the U.S. government can’t run out of cash (it prints the stuff), so the worst that could happen would be a fall in the dollar, which wouldn’t be a terrible thing and might actually help the economy.”
The result is deficit financing and ever-growing national debt prop ups the economy in the name of JOB CREATION. The national debt that appears to be never-ending will never be paid down to elimination under current Democratic and Republican leadership. The system must be reformed to eliminate deficits and reward growth. At present, further borrowing, even at 0 percent interest, will ONLY work if new OWNERS of the productive capital asset growth are created. Neither Keen or Krugman address this scenario.
What is required is to focus on OWNERSHIP CREATION with respect to the formation of new non-human productive capital assets as a means of realizing economic growth and enriching EVERY child, woman and man through capital ownership. As tectonic shifts in the technologies of production march on jobs will be destroyed and degraded due to the injection of human-intelligent machines, superautomation, robotics, digital computerized operations, etc. in the processes that produce our products and services.
The following is a Letter to The Washington Post from my colleague at the Center for Economic and Social Justice (www.cesj.org) that I think is pertinent to this thread discussion:
Letters
The Washington Post.
1150 15th Street NW.
Washington, DC 20071.
Letters@washpost.com
Dear Sirs:
George Will raises important issues in “Bewitched by Obama” (The Washington Post, 12/06/12, A19), but misses the point, compromising fatally on principle. The goal is not deficit reduction, but elimination. Obama is not responsible for the deficit, nor the size of it. The system encourages deficits and penalizes growth. Republicans offer a stopgap. Democrats offer more debt.
A way to balance the budget and pay down the debt is to implement “Capital Homesteading.” According to the Coalition for Capital Homesteading (http://capitalhomestead.org/), the Federal Reserve should stop monetizing government debt, and start funding private sector growth — but only if everyone shares in that growth as owners of the new capital.
To encourage financing in ways that create new owners, dividends should be tax-deductible at the corporate level, but treated as ordinary income at the individual level, along with all other forms of income, including inflation-indexed capital gains. All personal taxes (including FICA) should be merged into a single rate levied on all income above a meaningful exemption large enough to cover ordinary living expenses, including education and healthcare, possibly $100,000 for a family of four.
Most important of all, everyone should have a “Capital Homestead Account,” a “Super IRA,” in which dividend-paying shares can be acquired on credit on a tax-deferred basis, repaid using the dividends on the shares, which can thereafter be used for consumption.
Yours,
Michael D. Greaney, CPA, MBA.
Director of Research.
Center for Economic and Social Justice.
http://www.cesj.org/
http://just3rdway.blogspot.com/
http://www.newyorker.com/online/blogs/comment/2012/12/austerity-economics-doesnt-work.html
