Re: Wealth, Money and Taxes

["John Gelles" <indexed-savings@xxxxxxxxxxxxx>]

            FUNCTIONAL FINANCE,
            RATIONAL EXPECTATIONS.
            GAMING THE SYSTEM

On this thread (and in all other debate) Gelles has
NOT asked sovereign nations to forgo ALL taxes.

I have only asked that taxes be used to perform
their necessary and possible function   AND
that taxes NOT be used by mistake to
    (1) impair production of economic wants and
    (2) impede the spreading of wealth among ALL
          people (to eliminate poverty as we know it).

A possible function of taxes, where government
spent debt-free money into circulation (to avoid
all national debt and all nominal gov't spending
to service the national debt), would be:
        to prevent private spending ahead of
        supply at affordable prices.
Such a tax could be a form of compulsory
saving that deferred unfair greedy spending until
"other people were served".
        Yes this would be complicated.
        No, it would not be MORE complicated
        than today's Internal Revenue Code.


One of our scholars has agreed with me, for once:
in principle, the above claimed similarity between
"social-security-type saving" and "taxes" is fair ;
he said:

      "we can for sake of argument call  'taxes'
        'mandatory savings accounts' and pretend
        they will take care of  'savers'  in their old
        age. (this is essentially [functionally] what
        we do with the payroll tax)."

This is a giant step toward agreement between
many of us that functional reform of money and
taxes, to afford more wealth to nations and
individuals, in our quest to avoid fascism (and
the need to re-kill it) in the future, is desirable.

Let us recall the bumper sticker (with the
paradox) that illustrates why we to the left of
center, because we are attacked as "tax and
spend" egg-heads, have given power to our
opponents in politics--and stubbornly refuse
to change:

           Paying Taxes Will Make Me Poor
           But  Not Enrich  My  Nation That
           Creates  All The  Money  It Needs

Functionally, taxes make the poor poorer.

The system of assigning ownership to wealth
built by a whole economy is far from fair or
reasonable. Taxes to redistribute the money the
poor are entitled to, for the sake of equity and
economic prosperity, have not worked.

Better to scrap most of these taxes and start
over with a game plan to use voluntary and/
or compulsory saving and to produce public
needs, like schools and  hospitals, water and
land reclamation, etc., by initial government
spending.
            This spending will then drive a free
enterprise, for-profit, sector under regulations
necessary to (1) prevent spreading economic
failure  and  (2) avoid over-concentration of
power that political science strives to prevent
by its tested checks and balances.



Not so agreeable to these thoughts is another
scholar who said:

      "If the government spends without taxing
        and/or borrowing, the CB would lose
        control of the money market rate, and
        its currency would eventually become
        worthless."

Of course this is the potent argument that keeps
the Washington consensus in power. It is the
argument that doomed the welfare state as we
knew it.

That is to say, it is the argument that, together
with middle class disgust with taxes,  allowed
the left-leaning New Deal to die after it paid
for the GI Bill.

Later, using cold war Keynesian military
spending the principle of spending your way
to wealth and power was applied to keep
communism and depression at bay.

Now, with capital asset bubbles burst and
possible over-capacity in ex-communist
markets in place, deflation is feared and
depression conditions exist in too many
places.

So what are we to do?

Rational Expectations theory tells us that
economic engineering to re-spend our way
to current victory over fears of deflation
and inflation will be met by clever players
who will try to take advantage of new laws
to keep the wolf from the door.  That's OK.

Some of us, however, responding to RE
theory will actually "game the system" and
try to steal so much the system will fall on
its face.

Does that mean there is no way to get from
here to "there" ?

I don't think so.  These few days of discussion
of money and tax reform "outside the box"
have made some progress.

All on this forum know what we want.  Most
do not agree in any detail on what to do about
it.

We know economic modeling of price
coordinates will not reveal an AUTOMATIC
PILOT cure for the clash of greedy people that
inhabit Mother Earth.  But information techno-
logy (IT) may help an ad hoc effort to employ
every person and produce enough to improve
our lot year after year.

IT can help with the logistics currently in use
to make production and distribution vastly
more efficient that it was decades ago.

Our inefficiency at the moment is in failing
to implement today the secret of WW II
financing: "It was proved we could afford
anything we could produce".

At that time we needed up front price and
wage control, low interest, endless money,
rationing, a national production board, both
savings program and income taxes, and
determined political leadership.

Today we have unheard of IT power.
It can supply some of the effects we will
need without the direct controls of an
earlier time. But we may have to think
outside the box that blinds the Washington
Consensus yet keeps that consensus on
top.

        John Gelles