How to fix the economy

[JBMcB]

Outstanding reporting from NPR's planet money. They got five respected economists from the range of the mainstream, and somewhat fringe, political spectrum, and pulled ideas that they all agreed to, on what government can do to fix the economy. Most are tax related:

http://www.npr.org/blogs/money/2012/...nomic-platform

In brief:

1. End all tax subsidies and loopholes [[mainly the mortgage deduction) and greatly simplify the tax code.
2. End corporate taxes, replace with capital gains increases
3. End payroll taxes, replace with consumption taxes [[especially for energy/pollution generating activities)
4. Legalize most drugs
5. End the tax break for employer-funded healthcare

[firstandten]

The article also say pure poison to any politican who supports it.

Great plan.. would probably work....

Don't like to use the word impossible but thats pretty much what you are looking at.

[rb336]

How will ending the tax break for employer funded healthcare help the economy?

[JBMcB]

How will ending the tax break for employer funded healthcare help the economy?

It encourages employers to offer more health care coverage than you might need. The argument is that you should get health care yourself - if individuals had to shop for it then that would put downward pressure on prices.

The mortgage deduction is a similar issue. Mortgage companies know that interest is tax deductible, which means they can demand higher interest rates. It paradoxically makes homes *more* expensive in the long run.

[Papasito]

Legalizing most drugs sounds great to hippies and baby boomers, thugs and addicts, but they are harmful to the body, influence driving and use of machinery and are very addictive.

If we limit the use of it, like we do with blood-alcohol levels on drinking, there will be enforcement/policing costs involved.

Simply making drugs legal is not a quick and easy decision with no repercussions.

[JBMcB]

If we limit the use of it, like we do with blood-alcohol levels on drinking, there will be enforcement/policing costs involved.

The point the economists make is that the cost of policing, prosecuting, and incarcerating regular drug users, drug smugglers and dealers, along with all the ancillary crime that goes with it, is a fraction of running a legalized drug system, including free treatment for addiction.

Portugal legalized the use of most banned drugs a few years ago. The result was lowered teen drug use, more people seeking rehabilitation, lowered policing costs and crime rates.

[antongast]

These seem like good ideas on their own merits, but I don't really see where they're targeted toward what's specifically wrong with the economy right now. These are long-term structural reforms that make equal amounts of sense regardless of what the economy's doing, not short-term strategies to help the economy pull out of a slump.

[firstandten]

Short-term you need to stimulate demand, which gets us into these partisan arguments of Gov't spending vs Tax cuts. Politically thats why its so hard to fix the economy. The executive and legislative branch become gridlocked and very little gets done.

Now the economy will fix itself but it will take a few years, the intersection of politics and the economy will make short term fixes painful.

[antongast]

Short-term you need to stimulate demand, which gets us into these partisan arguments of Gov't spending vs Tax cuts. Politically thats why its so hard to fix the economy. The executive and legislative branch become gridlocked and very little gets done.

Yeah, I suspect that's why this ideologically-diverse panel of experts decided not to tackle that question.

[Hermod]

Legalize pot and make it a government monopoly. You have to buy it in government run stores. Figure out how much money you need to run the government and set the price accordingly. Abolish all other taxes. Let the IRS goons work at stopping the sale of non-government pot using IRS rules of evidence [[guilty until proven innocent). Problem solved.

[TKshreve]

Legalize pot and make it a government monopoly. You have to buy it in government run stores. Figure out how much money you need to run the government and set the price accordingly. Abolish all other taxes. Let the IRS goons work at stopping the sale of non-government pot using IRS rules of evidence [[guilty until proven innocent). Problem solved.

So let the government say what you can and cannot grow [[naturally mind you) in your own private garden.

See anything wrong with that? Please tell me you do.

What else would you recommend we privatize? Clean air? Water? How about rain? Or the sun? SMH

[firstandten]

I think we focus too much on the quick fixes. I look at pot like I look at casino's , a piece of the puzzle but not the total answer. We will only get to the total answer once manufacturing comes back in a big way.

I think we have finally lost the thrill of buying cheaper goods produced overseas. I believe we have finally seen the devastation that off-shoring and outsourcing has bought to our economy. Of course it took 30 years before we finally saw the end game to the Repubs economic policy. Thats why I say a true economic recovery may take around 10 years before we really start to see results.

I know we are a country that looks for quick fixes, of course there are some quick fixes you can use but our political process won't allow that to happen.

[TKshreve]

I think we focus too much on the quick fixes. I look at pot like I look at casino's , a piece of the puzzle but not the total answer. We will only get to the total answer once manufacturing comes back in a big way.

I think we have finally lost the thrill of buying cheaper goods produced overseas. I believe we have finally seen the devastation that off-shoring and outsourcing has bought to our economy. Of course it took 30 years before we finally saw the end game to the Repubs economic policy. Thats why I say a true economic recovery may take around 10 years before we really start to see results.

I know we are a country that looks for quick fixes, of course there are some quick fixes you can use but our political process won't allow that to happen.

Do you think this might have something to do with a stalled recovery?

http://bottomline.msnbc.msn.com/_new...shows#comments

A money 'black hole': rich hide at least $21 trillion in tax havens, study shows


Seems to me that this article authenticates everything I've been telling myself for years. It's pretty easy for a country to stagnate when all the "job creators" are busy stashing away the "job creating" utensils. Not to mention they are draining revenue. Wait, don't they already pay 96% of the taxes? Sure they do........ sure they do.

Seems like every day we hear about another backroom deal that fatten the few and punish the majority. Credit Default Swaps, hedging, Citizens United [[i.e. campaign finance), LIBOR, offshore tax havens, manipulative tax codes, outsourcing....... which always lead to bailouts and austerity measures.

Talk about class warfare. How long will we be able to continue with this type of society?

[firstandten]

Talk about class warfare. How long will we be able to continue with this type of society?

My guess is not much longer. The article you linked mentioned at some point if this keeps up there could be civil unrest. I believe that is a real possiblity.

I believe that while we are getting to that point the 1% will get very security conscious with private security forces, camera's the whole works, much like some third world countries where there is a high disparity between the have's and the have's not.

As a society I like to think that we try to find equilibrium in our social and economic policy. Whereas I think many people felt we went to far to the left in the 60's and 70's it led to a series of Repubs in the executive branch[[with Carter and Clinton being the exceptions). I believe the Dems will control the executive branch [[even beyond Obama) for the next few elections because people feel we have gone too far to the right. I feel that will happen until folks have a better comfort level in where we are going as a society.

[Jimaz]

... I believe that while we are getting to that point the 1% will get very security conscious with private security forces, camera's the whole works, much like some third world countries where there is a high disparity between the have's and the have's not....

This has already started albeit discreetly. The market for panic rooms has been reported to be booming for years. Another more overt indicator is the [[re)emergence of gated communities. It's kind of hard to be discreet about security fences.

[TKshreve]

My guess is not much longer. The article you linked mentioned at some point if this keeps up there could be civil unrest. I believe that is a real possiblity.

I believe that while we are getting to that point the 1% will get very security conscious with private security forces, camera's the whole works, much like some third world countries where there is a high disparity between the have's and the have's not.

As a society I like to think that we try to find equilibrium in our social and economic policy. Whereas I think many people felt we went to far to the left in the 60's and 70's it led to a series of Repubs in the executive branch[[with Carter and Clinton being the exceptions). I believe the Dems will control the executive branch [[even beyond Obama) for the next few elections because people feel we have gone too far to the right. I feel that will happen until folks have a better comfort level in where we are going as a society.

I certainly hope that this is a larger cyclical swing i am not privy to, due to my age.

However, I cannot help but think that the wealthy hold all the cards. They choose whether to play ball or not. And I think they have every ability [[and intention) to hold the economy hostage whether things go their way or not.

For instance, if the U.S. succeeds in closing Corporate tax loopholes, what's to stop those industries from colluding and passing on all losses to the consumer? Or if personal income tax is raised on top earners, what's to stop them from altogether refusing to invest in their companies and selling out on American Industry?

In reality, companies have only been able to continually improve their businesses on the backs of the American Worker. Look no further than the restaurant industry that rewards managers who run the operation on a skeleton crew. Workers literally clock three hour shifts of minimum wage, against their preferences.

Or on a grander scale, the types of businesses who maximize profits by selling junk imported from China - Walmart anyone? Or the business that sends job overseas [[basically the same thing) but enjoys a lush tax write off by doing so. Or the countless industries/public sector workers that are constantly being asked for entitlement concessions? It continually falls on the back of the American Worker.

Companies cannot continue to "cut" their way to favorable yearly comparables. They are going to have to reinvest in America at one point.

I just don't see them doing this. I don't see them "taking one for the team" in order to reinstate the middle class. And especially if any leftist/progressive policies are enacted. The top 1% will take their ball and go home. It's a scary, realistic thought.

[Jimaz]

I just don't see them doing this. I don't see them "taking one for the team" in order to reinstate the middle class. And especially if any leftist/progressive policies are enacted. The top 1% will take their ball and go home. It's a scary, realistic thought.

They've already done that.

[firstandten]

Thats why civil unrest is a real possibility. Right now we are passing this violence off as street crime. However its not a great leap for this violence to become more organized, if that should happen our society is in for some real problems.

[Wheels]

Thats why civil unrest is a real possibility. Right now were are passing this violence off as street crime. However its not a great leap for this violence to become more organized, if that should happen our society is in for some real problems.

OUCH!!! That rite there is a really scary thought!

[JBMcB]

The underlying cause of a lot of these corporate problems is the tax code. It incentivizes bad behavior. Moving the tax burden from corporate profits [[which you want to encourage) to capital gains [[which you want to limit - people *should* be investing for income) goes a long way towards fixing this problem.

[Jimaz]

This is a transcript of a 52-minute video which is also included at the end of the page: Bill Moyers and Chris Hedges: How Whole Regions of America Have Been Destroyed in the Name of Quarterly Profits.

Detroit is never mentioned explicitly but certainly would have fit the theme. There are a lot of important controversial ideas discussed here that are rarely touched in more conformist media. A sample follows:

Sheldon Wolin writes about this in “Democracy Incorporated” into what I would call, what he calls inverted totalitarianism, whereby it's not classical totalitarianism, it doesn't find its expression through a demagogue or a charismatic leader, but through the anonymity of the corporate state that purports to pay fealty to electoral politics, the Constitution, the iconography and language of American patriotism, and yet internally have seized all of the levers of power. This is what it means when lobbyists write all of our legislation, or when they stack the Supreme Court with people who serve the interests of corporations. And it's to render the citizen impotent.

52 minutes well spent, IMHO.

[Hermod]

The underlying cause of a lot of these corporate problems is the tax code. It incentivizes bad behavior. Moving the tax burden from corporate profits [[which you want to encourage) to capital gains [[which you want to limit - people *should* be investing for income) goes a long way towards fixing this problem.

I don't think you should eliminate capital gains. I think that short term capital gains [[traders) should be taxed at a very high rate on the gains, but if you hold on to a stock for say ten years, there should be no tax on the capital gains. Same with a house. If you "flip it" you pay a big tax. If you own it long time whether as a residence or rental, there should be no tax.

Capital gains come in two forms. The first is the gain caused by inflation which really, really should not be taxed. The second is the gain from the growth and expansion of the business which should be encouraged as a "good thing".

[Hermod]

For instance, if the U.S. succeeds in closing Corporate tax loopholes, what's to stop those industries from colluding and passing on all losses to the consumer? Or if personal income tax is raised on top earners, what's to stop them from altogether refusing to invest in their companies and selling out on American Industry?

Both of which will happen.

Businesses consider taxes as part of the cost of doing business and figure that into calculating their prices. If you own a building and the locality increases your property taxes, you pass the increase on to your tenant who passes it on to his customers.

If you have an extremely high marginal personal income tax rate, people in that bracket will do things which are economically unsound but make sense tax-wise.

[ghettopalmetto]

I don't think you should eliminate capital gains. I think that short term capital gains [[traders) should be taxed at a very high rate on the gains, but if you hold on to a stock for say ten years, there should be no tax on the capital gains. Same with a house. If you "flip it" you pay a big tax. If you own it long time whether as a residence or rental, there should be no tax.

Capital gains come in two forms. The first is the gain caused by inflation which really, really should not be taxed. The second is the gain from the growth and expansion of the business which should be encouraged as a "good thing".

So you want to give further encouragement for people to make money by sitting on their asses. How, pray tell, does that help the economy???

Who needs to make stuff when you can just manipulate numbers, sit on your butt, and collect a fat paycheck for doing nothing? Yet we wonder why everything seems to be made in China.

Smack my damned head.

[antongast]

Legalize pot and make it a government monopoly. You have to buy it in government run stores. Figure out how much money you need to run the government and set the price accordingly. Abolish all other taxes. Let the IRS goons work at stopping the sale of non-government pot using IRS rules of evidence [[guilty until proven innocent). Problem solved.

Why not do this with gasoline instead?