Doing What’s Right For America- Not So Hard
We keep hearing about the fiscal cliff and how hard it will to 
attack the deficits and national debt, yet keep the economy growing. This is because of the painful choices that lie ahead for our political leaders that they are reluctant to consider. We also hear how our political parties are controlled by their fringes and won’t compromise on ideologically based positions. If these are true, it doesn’t bode well for our nation’s future, and thus far there certainly have been no suggestions of compromise. Whether this is merely posturing to gather votes from the parties’ bases, and whether it will change after the election remains to be seen.
However, an article by the economist Robert Frank in the business section of yesterday’s New York Times (http://goo.gl/dIAxO) shows how simple it would be to address economic growth together with our nation’s deficits without causing significant pain for our citizens. He believes that the “remedies rest on solid evidence and common sense.”
First of all he suggests that tackling our broken infrastructure now would bolster the economy and reduce unemployment. These infrastructure projects will have to be undertaken at some point no matter what happens. Though having the government stimulate the economy at this time may be controversial, logic dictates that this is the proper course to take. By doing it now, there are workers available to do the jobs without competition from the private sector, making labor costs cheaper than in the future. In addition, the prices for the necessary materials will only escalate if we wait and interest rates will rise. Though debt may increase in the short term if we repair our crumbling infrastructure now, the overall costs for these necessary projects will only go up down the line.
Of course, along with borrowing the money to fix our infrastructure, we have to put in place the ways we will raise revenue and cut spending in the future to lower our budget deficits and national debt. This would make certain the credit markets would not punish us for temporarily raising the debt.
The ways Frank advocates to raise revenue might also raise some eyebrows, but as he explains them they make sense. They include fees drivers would pay for using highways during times of congestion, collected by an Easy-Pass system, and taxing carbon emissions and vehicles by weight. But the biggest change he recommends is eliminating the income tax with a “steeply progressive consumption tax” which could be supported by both liberals and conservatives.
Frank would not change the tax structure now, when the economy is still stagnant, but would have the changes enacted by Congress and ready to be put in place when the economy improved. I’m not sure that completely replacing the income tax with a consumption tax is the proper way to go, but lowering our current income tax and adding a consumption tax might be something that would be applauded by both the right and the left.
Of course, getting the two parties to work together on anything is another story. Maybe after the election……?
Resurrecting Democracy
A VietNam vet and a Columbia history major who became a medical doctor, Bob Levine has watched the evolution of American politics over the past 40 years with increasing alarm. He knows he’s not alone. Partisan grid-lock, massive cash contributions and even more massive expenditures on lobbyists have undermined real democracy, and there is more than just a whiff of corruption emanating from Washington. If the nation is to overcome lockstep partisanship, restore growth to the economy and bring its debt under control, Levine argues that it will require a strong centrist third party to bring about the necessary reforms. Levine’s previous book, Shock Therapy For the American Health Care System took a realist approach to health care from a physician’s informed point of view; Resurrecting Democracy takes a similar pragmatic approach, putting aside ideology and taking a hard look at facts on the ground. In his latest book, Levine shines a light that cuts through the miasma of party propaganda and reactionary thinking, and reveals a new path for American politics. This post is cross posted from his blog.
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Obama said he “will be more flexible” after the election.
Oooops, that was directed at Russia’s Putin. Oh, well maybe he can find some Republicans in congress of Russian heritage.
For this to work, infrastructure projects must either avoid calamity or add value. It must either help cut costs, improve efficiency, reduce risk, or have a tangible benefit. Even increasing green spaces and such has tangible benefit if done right (remember: health care is a huge cost). Projects just “for the halibut” will not have the desired effect. No Bridges to Nowhere is the point, make something that adds real value or prevents future catastrophe.
I am a huge fan of the carbon tax for two big reasons:
1) encourages conservation or alternative energies with real $$ incentives. This alleviates climate change, health concerns like asthma, and reliance on foreign oil/susceptibility to Middle East & central African unrest.
2) would be a huge revenue boost that could either go to a) debt reduction or b) shifting the tax burdens from productive activities (I don’t believe in corporate income taxes because I feel it gives companies an incentive to go elsewhere).
Dduck If the President is re-elected perhaps Mitch McConnell will be more flexible? After all, he would have failed at his goal of making Obama a one term president.
lol
I’ve been preaching about adding a VAT for awhile now. Germany has a 19% VAT on most goods.
SL, excuse my ignorance, but doesn’t a VAT disproportionally hit people with lower incomes?
Depends on how it is done. The vat for food is really low, along with other things that people need to live. By itself, it probably does hit the poor a little harder, but germay taxes wealthy folks at a high rate, so it evens out. Also, Germany has a much stronger social system, so being poor over here is nothing like being poor in the US.
I do understand why liberals dont like the vat, but even a 2% vat would probably do wonders for knocking down the US debt and probably would not be too painful.
Conservative might argue that the tax will decrease demand, but it doesn’t. It could also be used as a temp boost to the economy. The increase in sales before the vat would go into place would be a great bump.
Thanks, what about a car, a TV and cable/Sat., iphone/pad/electronics and service, things beyond food?
19% for most of that. Services are 7%. Even with a 19% sales tax, you see a lot of bmws and benzs on the road. Btw gas is taxed at a little over 8 dollars a gallon.
Then to us in the U.S., it would appear to be regressive. Try and find a kid under 10 years old without an iphone/ipad. And to pay 19% to drive to work and that gas tax is horrendous.
You see we are exceptional and feel we are entitled to our stuff without too much in taxes to be paid.
BTW: I almost threw up when I had to pay a tax on top of the cost of a friggin stamp in Canada.
Yep, highly taxed, yet the country still has one of the most powerful economies in the world.
Well imagine that! Sounds like the boom years of America. But wait! Taxes = Bad!!!! The GOP says so!!!