As I look at the dismal economy that our government has caused us, it seems to me that the only way out is to make the pie bigger. Democrats, and some Republicans will scrap and want to make sure their constituents get a piece of a smaller pie, but they would do their bribers (what I call constituents) and all of us a favor if they would focus on productivity – also known as pie expanding.
How do you expand the economic pie? The best way is to not try and equalize it. An equal pie is a shrunk pie.
The right thing to do is to cut taxes on the productive, cut taxes on investment, cut government spending, cut government regulation, avoid nationalization of industry and stop the financing of private risk by government.
Today’s Wall Street Journal has more on this approach, which worked for Britain as they tried to emerge from a financial mess worse that what we have now.
I’d start with a 2 or 3 month tax holiday for the 2nd quarter of 2009. No FICA. No income tax. No nothing.
Unfortunately, we have exactly the wrong set of people arriving in power.
December 23rd, 2008 at 12:14 pm
Ah, yes, the all-purpose economic solution – cut my taxes. And do like Maggie Thatcher. Unfortunately, Andrew Wilson’s WSJ piece glosses over the hard questions in defense of the supply-side approach. Which does not surprise since Wilson is not an economist, but basically a speech writer “My primary focus is on writing clearly and persuasively (and, where appropriate, with eloquence, passion and humor) for top executives of major companies.” Neither is it surprising that his writing supply-side stuff would show up on the WSJ Op-Ed page which is devoted to rightist economics. If he had cited Maggie’s Chancellor Nigel Lawson’s “The View from Number 11″ he would have reported that Maggie went wobbly all too many times for Lawson’s taste. And Britain’s situation in the early 1980s was not like the present US situation. We don’t have a crowding out problem, we have a credit paralysis situation from fear of borrowers’ bankruptcy. “Post hoc, ergo propter hoc” doesn’t make a case for repeating what someone else did before unless the facts and the mechanism are clearly analogous. Although we certainly need a smart tax structure for our economic good, we also need to raise financing for a working government in a way that best encourages wealth creation and a decent distribution of the good life among the citizenry. In the short run, though, we have to do something to create raw economic activity that encourages flowing credit to feed our dependence on a sea of credit. Cutting some taxes may be good for the long run, but won’t do much to loosen credit markets in the short run. And as Keynes observed, “In the long run, we are all dead.” .
December 23rd, 2008 at 12:17 pm
Cutting taxes lets wiser people decide what activities to pursue, keeps political decisions from propping up unproductive enterprises, and also, as a side benefit, cuts the influence of governmental power – increasing liberty.
All worth pursuing in my book.