Re: Krugman on the Deflation quagmire; reply to Warren's post

[Warren Mosler <mosler@xxxxxxxxxxxxxx>]

UNDERSTOOD, BUT CONSIDER THE PROVERBIAL OLD WOMAN IN A
ONE ROOM SHACK WITH 50 CATS WHO DIES WITH $50,000,000
IN THE BANK.  APART FROM A BUNCH OF CAT FOOD, SHE
WASN'T CONSUMING AN INORDINATE AMOUNT, AND
SO HER NOMINAL WEALTH WASN'T A 'PROBLEM' FOR SOCIETY.
IT'S NOT LIKE 'THOSE FUNDS COULD HAVE GONE ELSEWHERE'
ETC. WITH TODAY'S FLOATING EXCHANGE RATE REGIME.

NOW CONSIDER THE GUY WITH NOTHING, WHO'S AN 'OPERATOR'
THAT MANAGES TO OBTAIN FINANCE TO BUILD A 400 FT SUPER
YACHT.  HE HAS NO WEALTH, NO INCOME, ETC., BUT HAS
ARRANGED TO HAVE HALF THE RAIN FOREST CUT DOWN, BIDS
UP PRICES OF LABOR AS WELL AS THOSE RESOURCES ARE ALSO
DIVERTED FROM OTHER USE, ETC.  SOCIETY PAYS A LARGE
REAL COST FOR THAT GUY.

POINT IS, I TEND TO 'CARE' MORE ON DISTRIBUTION OF
CONSUMPTION RATHER THAN DISTRIBUTION OF NOMINAL
WEALTH.  AND THE TAX STRUCTURE CAN BE EASILY DIRECTED
ALONG THOSE LINES.  CONSUMPTION TAXES CAN BE LEVIED ON
THINGS WE DON'T WANT CONSUMED, AND THE SUCCESS OF THE
TAX MEASURED BY HOW LITTLE IT COLLECTS, ETC.

SEE 'SOFT CURRENCY ECONOMICS' AT MOSLER.ORG

WARREN


--- "Niggle, Christopher"
<Christopher_Niggle@xxxxxxxxxxxx> wrote:
>  Warren: I agree with the Lerner-Keynes-chartalist
> views on fiscal policy to
> a certain extent: one very important consideration
> in designing a tax system
> should be its effect on aggregate demand.  But tax
> systems also influence
> the post-tax income distribution, and there is much
> historical evidence (and
> common sense argument and ethical considerations as
> well) in support of the
> proposition that too much income inequality is bad
> for society.  Hence,
> reducing the progressivity of our tax structure with
> the kind of tax changes
> implemented under the Bush regime is probably a bad
> thing in spite of the
> mild stimulus it might effect with respect to
> aggregated demand.  And
> reductions in tax revenue support the desire of
> right wing small government
> nuts to reduce social services and investment in
> public capital.
>
> I think Keynes made the same argument many times;
> the "arbitrary and
> excessive inequality" he disapproved of was bad
> because it reduced aggregate
> demand but also for ethical and political reasons.
> At a certain point, more
> inequality encourages more inequality...which is
> inconsistent with a humane
> and civil society.
>
> Chris
>
> -----Original Message-----
> From: Warren Mosler
> To: pkt@xxxxxxxxxxxxxxxx
> Sent: 5/30/03 10:34 AM
> Subject: Re: Krugman on the Deflation quagmire
> Importance: Low
>
> AGREE, AND WHILE THEY ARE AT IT, OFFER A NATIONAL
> SERVICE JOB TO ANYONE WILLING AND ABLE TO WORK.
> AND DON'T 'PAY FOR IT' WITH A TAX INCREASE OR
> SPENDING
> CUT!!!  IF THE POPULATION DOESN'T WANT MORE
> PRIVATE GOODS, BUT WANTS TO WORK, LET THEM AT LEAST
> PRODUCE PUBLIC GOODS...
>
> ALSO NOTE:
>
> > 	The Bush Administration has also recommended two
> > solutions. First, tax cuts
> > to the rich, which, as Krugman suggests, is likely
> > to be insufficient since it
> > provides additional funds to those"least likely to
> > spend".
>
> THIS IS ABSOLUTELY TRUE, BUT BEGS THE QUESTION, WHY
> TAX SOMEONE IF IT WON'T REDUCE HIS SPENDING?  THE
> VERY POINT OF TAXATION IS TO CREATE SELLERS OF REAL
> GOODS AND SERVICES, ETC. SO THE AXE SWINGS BOTH
> WAYS.
> TAXING SOMEONE WHO WASN'T GOING TO SPEND THE FUNDS
> DOES NOTHING FOR GOVERNMENT OR THE ECONOMY THE SAME
> AS
> CUTTING TAXES FOR SOMEONE WHO WON'T INCREASE
> SPENDING
> DOES THE SAME NOTHING.
>
> WARREN
>
>
> =====
> Warren Mosler, www.mosler.org
> c/o James River Capital Corp
> 5007 Chandler's Wharf, Suite 201/202
> Christiansted, USVI  00820
> 340-719-8813 office phone
> 340-719-8804 Fax
> Primary email contact:  mosler@xxxxxxxxxxxxxx
>
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=====
Warren Mosler, www.mosler.org
c/o James River Capital Corp
5007 Chandler's Wharf, Suite 201/202
Christiansted, USVI  00820
340-719-8813 office phone
340-719-8804 Fax
Primary email contact:  mosler@xxxxxxxxxxxxxx

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