September 26, 2011

Fair Taxation is Part of the Foundation, Not a Growth Storey by Itself

It is nobody’s argument that more one’s income, the lower contribution one must make towards maintenance of societal institutions, be they the police, external defense, education, natural disaster preparedness, or roads. Fair, progressive contribution for shared services is the bedrock of a lastingly viable Capitalist order.

When this foundation erodes, it needs to be restored. Plugging gaping loopholes and special treatment of certain incomes, combined with leaned up bureaucracy in Gov and removed dole support for the fat ones in the private sector, will open the door for a combination of:

1. Reducing tax rates for all

2. Reducing accumulated deficit/GDP

3. Adding or Amplifying, while restructuring as might be needed, such societal institutions as are squarely needed and are currently underactive, and in direct delivery of the services they render, not file and procedure pushing

All of the above are in the nature of systemic longevity foundation restoration, and will unlikely have an immediate economic BO!OM effect by itself, though activities 1 & 3 will indeed seed some employment and incremental demand in the economy, which will provide the reason for private sector investments.

Significant, 100% organic, Exciting! Rate of private sector growth is possible only if a new boom occurs. Robotics, Biotechnology, Virtual Reality, Green Energy are possible contenders as the boom leaders, but it’s difficult for a Gov to will a boom in any sector into existence at any given point in time, as we have seen with the Solyndra disappointment.

In recent times, we have seen booms/bubbles in ERP, Telecom, Dot Com, Web 2.0, Housing, and Government Bonds. They occur when they occur. Low interest rates and abundant credit, or Government buying of what people do not need -- for the purpose of providing Topline nany-support to private sector -- or tax doles for bottomline support, can help them form, but the more artificial the boom is, shorter it lasts, and rather than deflating or correcting along a smooth curve and making way for the next industry, they often pop quickly and menacingly.

Meanwhile, being prepared for natural disasters, to be able to save life before and after it strikes, is a REAL thing that a Government can put public money into. Besides, of course, the delivery of Education and Bridges and Roads.

It might be a good time to stop perpetually seeking economic titilation - to rather focus on solidifying the eroded foundation for some time.

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