Mohamed A. El-Erian writes in The Atlantic:
This is similar to the current argument between Democrats and Republicans over the tax rates for top earners. It has emerged as the dominating issue in a much larger debate on how to deal with America’s debt and deficit challenges. But by obsessing on this one single issue, important insights are being crowded out. Indeed, if current trends continue, whoever wins the argument could feel they won a battle at the expense of losing the war. In this eventuality the victims would be average Americans who are yet to recover properly from the Great Recession.
When placed into the larger context of America’s challenges, the Democratic view prevails. But before they celebrate what is likely to end up going their way, they should realize that this would prove a shallow victory if it is not followed up by a more holistic approach to re-invigorating the U.S. economy.
Republicans’ dis-incentive arguments about taxing the rich would apply if the country was starting from much higher tax rates. It is not. Similarly for the rate on dividend income and for how carried interest is treated. Moreover, most in the party have already yielded on the need to raise additional tax revenue from the richest Americans by signaling that they would agree to limits on deductions (that, currently, disproportionately benefit this fortunate group).
Our challenge as a society is to re-orient government activities rather than shrink them – away from supporting the few to acting as a proper enabler for the many, and as an efficient provider of better safety nets for the most vulnerable segments of society. And this medium-term priority needs to be implemented in the context of measured and sustained deficit reduction.
I would like to see the Democrats address tax reform structured to provide lower tax incentives to companies who advance financing mechanisms that result in new economic growth whereby broadened private, individual ownership is the result. While tax and investment stimulus incentives are excellent tools to strengthen economic growth, without the requirement that productive capital ownership is broadened simultaneously, the result will continue to further concentrate productive capital ownership among those who already own, and further create dependency on redistribution policies and programs to sustain purchasing power on the part of the 99 percent of the population who are dependent on their labor worker earnings or welfare to sustain their livelihood. By stimulating economic growth tied to broadened productive capital ownership the benefits are two-fold: one is that over time the 99 percenters will be enabled to acquire productive capital assets that are paid for out of the future earnings of the investments and gain greater access to job opportunities that a growth economy generates. Simply reducing tax rates in the name of JOB CREATION or increasing tax rates in the name of REVENUE GENERATION is not enough. We need to create a conscious OWNERSHIP CULTURE whereby we finance FUTURE economic growth with EVERY American an owner-participant in the companies producing our products and services. That is how we will be able to sustain an affluent growth economy that benefits all Americans.
Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm
