http://www.nytimes.com/2009/06/12/opinion/12brooks.html

Quote:

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The American economy will have to transition from an economy based on consumption and imports to an economy with a greater balance of business investment and production...

Meanwhile, capital and labor will have to flow from sectors that depend on discretionary consumption to sectors based on research and investment...


The members of the political class face a set of monumental tasks. First, they have to [/B]persuade a country to postpone gratification for the sake of rebuilding the country.[/B]This country hasn’t accepted sacrifice in 50 years.

Second, political leaders will have to raise taxes and cut spending to get the federal fiscal house in order, and they will have to do it at a time when voters are already scaling back their lifestyles.

Third, they will have to refrain from doing anything that might further damage America’s fiscal position, which is extremely fragile. That means not passing a health care reform package unless it is really and truly paid for. That means forming a Social Security commission next year to tackle that entitlement problem.


Fourth, the political class is going to attempt the politically unthinkable. The U.S. is going to have to move toward a consumption tax, to discourage spending and encourage savings. There’s also a crying need for tax reform. As economist Douglas Holtz-Eakin points out, the tax code is rife with provisions that encourage leverage and discourage investment. The government will have to spend less on transfer payments and more on investments in science and infrastructure.


The members of the Obama administration fully understand this and are brimming with good ideas about how to move from a bubble economy to an investment economy.

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Increase credit ------increase consumption -------- increase debt --------bubble ---------POP !

Man this is hard.


I would be more willing to pay more taxes IF THE POLITICIANS WOULD NOT SPEND IT, primarily by getting more and staying in power.

I thought it was a very insightful piece but I really don't think Obama, or the vast majority of the American public gets it for that matter.


Thoughts? Comments?









G&P

I don't agree that the Paulson-Geithner-Bernanke reaction stabilized the economy . It is way too early to make that conclusion let alone to assess the long term damage their priming the pump will bring.

I agree with him that debt accured needs to be paid off .That is why I am objecting to the continued effort in futility called "stimulus " ;as well as the creation of new entitlements in areas of health care and education. He says they need to be delayed until means of funding them are found. I question the need to create them in the 1st place.

Brooks is good at pointing out the flaws in the American consumer but does not address the excess "consumption" of the national wealth by the government. Nor does he address the fact that many of the bubbles were the result of direct government intervention in the economy.
To his specific points:
First, they have to persuade a country to postpone gratification for the sake of rebuilding the country. This country hasn't accepted sacrifice in 50 years.

This is a complete distortion. I argue that the American has been sacrificing a huge chunk of their income in taxes for many years now on failed social experiments . This is why a family cannot make it ,or struggles on a single income .It has completely distorted Americas social foundation and has in fact exasperated the problems it was intended to fix.

Second, political leaders will have to raise taxes and cut spending to get the federal fiscal house in order, and they will have to do it at a time when voters are already scaling back their lifestyles.
Even JFK understood that you can't tax your way to prosperity . The only way to get out of the mess we are in is to slash spending and to grow our way out of it.That will not happen with more and more punative taxation. We need to reverse the share of the GDP the government has seized to manage and return it to the private sector where real innovation and creativity exists.

Third, they will have to refrain from doing anything that might further damage America's fiscal position, which is extremely fragile. That means not passing a health care reform package unless it is really and truly paid for. That means forming a Social Security commission next year to tackle that entitlement problem.

I agree ,and for many of the entitlements, the solution lies in privatization. Brooks was once a conservative that believed that . He knows damn well the current leadership is moving at a rapid pace away from this recommendation and towards larger government entitlements . The current administration thinks creating more of these is the solution to the current crisis .

Fourth, the political class is going to attempt the politically unthinkable. The U.S. is going to have to move toward a consumption tax, to discourage spending and encourage savings. There's also a crying need for tax reform. As economist Douglas Holtz-Eakin points out, the tax code is rife with provisions that encourage leverage and discourage investment. The government will have to spend less on transfer payments and more on investments in science and infrastructure.

I have no problem with this in theory if that would replace the taxation of income. But the the political class is not considering replacing the income tax ;they propose the consumption tax as additional burdens on the taxpayers .

Thanks Tom,

With earmarks, political corruption, the rising cost for virtually everything, it is very difficult to accept tax increases from a government that can't seem to cut spending.


I wish there were more Ron Paul[s] and Tom Coburn[s] in congress.




G&P

Please educate me.

How has the tax on income changed in the last 50 years?

I always saw it as, women started working, then getting paid a better wage, then the price of real estate went up. Our parentless kids are a result of women wanting to work... Our country falling apart is the fault of women...

I sound suckered. If it isn't the fault of half the adults in the USA, if it's "no one's" fault then why are things so bad?

Top US Marginal Income Tax Rates, 1913--2003 (TruthAndPolitics.org)


U.S. Treasury - Fact Sheet on the History of the U.S. Tax System

Simon, I don't know how serious you are about what you state.

It is consumers, as a whole, spending too much and not saving enough. Banks, credit card companies, marketing and government policies encouraging consumption.

It has nothing to do with gender in my opinion.





G&P

No, you didn't refer to gender at all. That's my stuff. Thank You for the links.