Monday, August 29, 2011

Taxes and the economy

It seems that most people, when faced with the question of taxes, looks at it from a personal standpoint, and not really in the usual, rational, "what's in it for/against me?" way, either. What I mean is that people tend to forget some of the bigger picture items that have to do with the whole concept of taxation. Republican/conservative ideologues want less taxation because they want smaller government, but rather than actually arguing for smaller government (an argument they will lose every time--even with their own constituents, who really don't want smaller government. Depending on their sub-group identities, they want government redirected in various ways, either getting into people's bedrooms/sex lives/reproductive systems, getting into other countries militarily to overthrow hated enemies, getting into the school systems to program (or allowing/funding parents to program) children according to their beliefs, getting into the business world to bail out fiscal losers in the Wall Street casinos, etc.) they instead bloviate about how the rich pay more than their share of the tax revenue, or about how the government is stealing the money out of the pockets of hard-working men and women of blue collar America, or about what a tremendous burden taxes are on the poor, put-upon capitalist entrepreneurs. (Occasionally, the real argument sneaks out; the teabaggers are convinced, or are trying to convince others, that a smaller government is better because, well, because it, well, just because. They have had to sidestep the realities that taxes and the government depending on them do a whole lot of good things for everyone in the country, like provide roads and bridges and clean air/water. [Or they did before that kind of regulation and investment began to erode thanks to their very efforts over the last 3 decades.])
The end result, however, of concentrating everyone's attention on the individual's relationship to taxes, has been more than just the complete capitulation by politicians to even talk about raising taxes to stave off national bankruptcy or pay our debts, let alone spend that money on useful things that everyone wants, like healthcare or reliable transportation and infrastructure. The result is that our whole economy has suffered. By making the whole discussion about income taxes and their effects on everyone's wallets, people have let slide other arguments that have virtually eliminated the chances for American businesses to succeed or remain competitive while using American workers.
Before the income tax was created on a permanent basis in 1913, the main provider of government revenue were taxes on goods and services (really, just "goods" at that point in our history), called tariffs. Tariffs were used throughout our history before then for one of two reasons, mostly: 1) as mentioned, to raise revenue for the federal government; but more importantly, 2) to stimulate national businesses by providing an indirect price support for American goods. By having a tariff on imported goods, the prices for our own goods could compete, and usually beat, those of foreign countries' products in our markets, creating a beneficial demand for our own manufacturing concerns. Keeping demand for American products high, even at the expense of having prices higher than they could have been otherwise, helped all Americans, because high demand necessitated high production requiring high employment, which put more money into more pockets, etc. As long as these inflationary measures were outpacing the rise in prices for goods, everyone won.
The potential problem is obvious: inflation with a capital "I." And for most years since the end of WW2, inflation has been a concern. Since the 1980s, however, inflation of this sort has not been a problem, income stagnation and joblessness have been, in alternating doses. Alternating, that is, until now, when we have both declining salaries and high unemployment. And you know what solves those issues? Inflation! That's right, deflation (recession) and depression are cured by inflation, according to the only economic theory that has ever been proven to work in a capitalist economy, that of Keynesianism. It's so obvious it almost qualifies for a "duh." Yet because we have been so conditioned by decades of worry about inflation, we can't see that forest for that tree. Granted, we do have to worry about prices rising faster than incomes, but we've always had to worry about that. (And of course, the US hasn't been doing anything about that, either, so what's the real difference now anyway, right?)
We have to abandon the concept of free trade, because it has already killed US manufacturing and is currently finishing off what's left of the middle class's ability to earn a living. Raise that tax to stimulate the market for homegrown biz, raise taxes on the rich because they have yet to help create anything for anybody except themselves with the extra cash bonanza they've been getting since the 1980s, and maybe we can rejoin the industrialized nations once more.

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