How America Can Rise Again

by James Fallows

 

...When I was growing up, these bridges and roads and dams were a source of real national pride and achievement,” Stephen Flynn, the president of the Center for National Policy in Washington, who was born in 1960, told me. “My daughter was 6 when the World Trade Center towers went down, 8 when lights went off on the East Coast, 10 when a major U.S. city drowned—I saw things built, and she’s seen them fall apart.” America is supposed to be the permanent country of the New, but a lot of it just looks old.

 

Since everyone knows that America’s passenger-rail system is a world laggard, there is no surprise value in saying so. But it’s still true. Stephen Flynn points out that the physical infrastructure of big East Coast cities was mainly built by the 1880s; of the industrial Midwest by World War I; and of the West Coast by 1960. “It was advertised to last 50 years, and overengineered so it might last 100,” he said. “Now it’s running down. When a pothole swallows an SUV, it’s treated as freak news, but it shows a water system that’s literally collapsing beneath us....

 

Full article:

http://www.theatlantic.com/doc/201001/american-decline

I guess that Stephen Flynn was too young to remember the Northeast Blackout of 1965 while he was seeing things built.  Stuff happens, we rise above it, we always do.

 

    Infrastructure has a certain useful lifespan. American built a lot of infrastructure in the last century that is wearing out. Quite frankly, we do not have the resources to maintain all of it.   

This is related: http://thenewmetropolis.com/

People have been forecasting the demise of America since 1776.  I imagine they'll still be saying it in 17,776.

With the continually rising costs of material and labor, I am very concerned about the future of our infrastructure.  America wants the best services but doesn't want to pay for them with corresponding increases in taxes.  It creates quite the dilemna for any level of government (local, state, national).

With the continually rising costs of material and labor, I am very concerned about the future of our infrastructure. America wants the best services but doesn't want to pay for them with corresponding increases in taxes. It creates quite the dilemna for any level of government (local, state, national).

 

Our government budget problems are not caused by infrastructure spending.  The short-term and long-term budget problems are caused by entitlement spending, pure and simple.  America is sometimes jokingly referred to as an insurance company with nuclear weapons, or a pension fund with nuclear weapons.  The tax burden for most people was substantially less when we were first building the interstate highway system under Eisenhower, not because infrastructure spending was less (in real terms), but because entitlement spending hadn't become the combination of elephant in the room and third rail that it's become today.

 

The main reason China has so much more to spend on its infrastructure *and* to lend to us is that it has nothing resembling our own welfare state.

^ Umm, the top marginal tax rate under Eisenhower was around 90%. Today it's less than 40%.

 

 

Source

I'm aware of that.  It's a popular statistic for conservatives to cite, because it's the rate paid by the richest of the rich, but the top marginal rate is of less significance to the vast bulk of society (unless you're a trickle-down promoter).

 

Federal government spending was about 17.7% of GDP in 1957 (just picking a random Eisenhower year).  Total government spending (fed/state/local) was 27.2%.  In 2008, those numbers were 20.7% and 37.1%, respectively.  In other words, the federal government's share of the economy has increased dramatically notwithstanding the decrease in the top marginal tax rates.  I don't care about the top marginal tax rates.  I don't anticipate making $380,000+ anytime soon.

^^^ Tell that to the local governments who participate in very little entitlement spending yet cannot afford to pay for basic road repairs because the price of concrete, steel, etc has went through the roof and the labor costs have exponentially increased since, for example, the Chinese immigrants were installing our railroad tracks.  That said, I'm not espousing that "entitlement" spending (or whatever conservatives call it now) is not an issue with our budget that will have to be addressed.

Here's historical tax rates by income group since 1960:

 

 

Source

 

Do you really think there's an extra trillion-plus dollars in taxable income out there just from the few people in those brackets?  Do you really think we could patch the budget up by simply jacking the top tax brackets back to Eisenhower levels?  If not, what is your purpose in citing all of these top-bracket statistics that are completely irrelevant to most of us?

Do you really think there's an extra trillion-plus dollars in taxable income out there just from the few people in those brackets?

 

It may not be a trillion-plus, but it would be something substantial.

 

Do you really think we could patch the budget up by simply jacking the top tax brackets back to Eisenhower levels?

 

It would be a welcome start in the right direction.

Meh.  I support a more progressive tax structure, too, but even putting the top bracket back at 90% would barely dent the budget deficit the last few Congresses have condemned us to (and that's assuming that rates that high would have no impact on economic activity, which is a questionable assumption).  The bulk of the money comes from the middle class brackets now: the 25 and 28% brackets.  That would still be the case even if you took the top bracket back to 90% and all the wealthy mysteriously stayed put and took it on the chin.  There is no feasible way to balance the budget and maintain the levels of entitlement spending that we have now, let alone free up enough room for major physical infrastructure investments on the level of the Eisenhower administration's.

I had no idea that just before WWII, nobody even paid income tax until they hit inflation-adjusted 80,000 a year.

I think the income tax is the root of all evil:

http://mises.org/etexts/rootofevil.asp

I think the income tax is the root of all evil:

http://mises.org/etexts/rootofevil.asp

 

And yet I'm pretty sure the Townshend Acts and the other major acts that presaged the American Revolution were exactly the kind of taxes (regressive, consumption-oriented ones) that most opponents of the income tax want to impose on the country in the income tax' place.

 

The income tax, capital gains taxes, and estate taxes are the fairest systems of taxation because they place the tax burden on those for whom the marginal utility of any given dollar is the least.

I think the income tax is the root of all evil:

http://mises.org/etexts/rootofevil.asp

 

And yet I'm pretty sure the Townshend Acts and the other major acts that presaged the American Revolution were exactly the kind of taxes (regressive, consumption-oriented ones) that most opponents of the income tax want to impose on the country in the income tax' place.

And yet I'm pretty sure the American founders weren't the ones who added the 16th amendment in 1913.

 

The income tax, capital gains taxes, and estate taxes are the fairest systems of taxation because they place the tax burden on those for whom the marginal utility of any given dollar is the least.

Ha!  There's a particular beauty in this quotation from William F. Buckley Jr.:

I would like to electrocute everyone who uses the word "fair" in connection with income tax policies. 

 

Read this: http://mises.org/etexts/rootofevil.asp

And we all know Buckley was such an unbiased source of information about tax policy.

The founding fathers were not upset about taxes... they were upset about the lack of government spending to match their taxes.  Britain wasn't spending enough of the colonies' tax revenues on the colonies.  The colonists were left to carry the cost of several campaigns against the Indians, protection they felt they were owed from Britain.  After the revolution the former colonies had no problem with taxing themselves and each other.  The difference was that they now had the spending to go with it.

 

Their rallying cry wasn't "no taxation," it was "no taxation without representation" because they believed that if they had seats at the legislative table, parliament could no longer treat them as donor states.  Today, the blue states are donor states and the red states generally aren't.  Ironic. 

I think the income tax is the root of all evil:

http://mises.org/etexts/rootofevil.asp

 

And yet I'm pretty sure the Townshend Acts and the other major acts that presaged the American Revolution were exactly the kind of taxes (regressive, consumption-oriented ones) that most opponents of the income tax want to impose on the country in the income tax' place.

And yet I'm pretty sure the American founders weren't the ones who added the 16th amendment in 1913.

 

The income tax, capital gains taxes, and estate taxes are the fairest systems of taxation because they place the tax burden on those for whom the marginal utility of any given dollar is the least.

Ha! There's a particular beauty in this quotation from William F. Buckley Jr.:

I would like to electrocute everyone who uses the word "fair" in connection with income tax policies.

 

Read this: http://mises.org/etexts/rootofevil.asp

 

First, I've read more than enough Mises to know all I need to know about him.

 

Second, I'd like to electrocute everyone who uses the word "evil" in connection with income tax policies.  Sadly, electrocuting one's political opponents is as illegal for me as it was for Buckley.  (And keep in mind I was the one also not exactly on board with LiG's proposal to jack the income tax rates back up to 90% on the glitterati.)

 

Personally, I don't think America needs to "rise again," as the last time I checked, we're still officially "risen."  I do think that a balanced budget amendment to the constitution, however, would be the only thing to keep us from falling into debt slavery to foreign (and even domestic) creditors.  That might well mean that income taxes would have to rise and a VAT would have to be levied, and it would also mean that Medicare, Medicaid, and defense spending would have to be cut and Social Security would have to be privatized.  I could live with all of those if it came with the knowledge that, from 30 years (the longest-term federal debt obligation) onward until eternity, the U.S. would not live on the financial sufferance of any other entities of uncertain motivations and character.

I would be suprised if we didn't go to a VAT at some point in the future.

I would be suprised if we didn't go to a VAT at some point in the future.

I assume that at some point we'll get a small VAT in addition to some cuts in income tax and corporate taxes. Sort of a middle of the road compromise that will actually make taxes more complicated than they already are. I really think that the IRS, H&R Block and the makers of TurboTax employ too many people for our tax system to ever get simplified.

 

I personally would be strongly in favor of a constitutional amendment requiring a balanced budget on the condition that it allowed clearly defined exceptions for times of war and severe economic recessions. With income taxes down because so many people have no income and sales taxes down because no one has any money to spend buying unnecessary items, it isn't realistic to expect the budget to stay balanced during a severe recession like the one we're in the tail end of now.

I would be suprised if we didn't go to a VAT at some point in the future.

I assume that at some point we'll get a small VAT in addition to some cuts in income tax and corporate taxes. Sort of a middle of the road compromise that will actually make taxes more complicated than they already are. I really think that the IRS, H&R Block and the makers of TurboTax employ too many people for our tax system to ever get simplified.

 

I personally would be strongly in favor of a constitutional amendment requiring a balanced budget on the condition that it allowed clearly defined exceptions for times of war and severe economic recessions. With income taxes down because so many people have no income and sales taxes down because no one has any money to spend buying unnecessary items, it isn't realistic to expect the budget to stay balanced during a severe recession like the one we're in the tail end of now.

Good points but I sincerely hope the VAT would replace the income tax.  It's probably impossible to implement a new tax like VAT without rolling something else back (in addition to balancing the budget).

 

 

And we all know Buckley was such an unbiased source of information about tax policy.

He was a masterful conversationalist.  The hyperbole in that quote was perfect.

 

As reported by the NYT: http://www.nytimes.com/2004/06/29/politics/29buckley.html?pagewanted=1

"By ironic periphrasis, arch understatement and surprising deployment of familiar and of course unfamiliar words, Buckley convinced his opponents that he knew something they did not, and what's more, that he intended to keep the secret from them," Mr. Bramwell said as he presented the award. "Thus did he waken their minds to the possibility that liberalism is not the philosophia ultima but just another item in the baleful catalogue of modern ideologies."

I wish I had something intelligent to add to this since I was the one who started the thread, but I tend to generate more questions for myself than answers every time I opine. Some of them include:

 

What is the real deal with the Federal Reserve?

Why can't we have our own social security and medicare accounts and then progressive special assessments for everything else, like wars?

Why are there still counties instead of metropolitan taxing and infrastructure bodies?

Why isn't there a VAT?

Why do we always appoint Goldman Sachs executives to head the treasury?

If World of Warcraft can make an economy easily accessible and update in real-time to 11 million people, why is the IRS so archaic?

 

Spending is what makes the economy go, so it's curious to me why everyone wants to tax it more.  Personal income is the act of taking money out of the economy.  Tax the heck out of that.  If I were going to get rid of one existing tax it would be the payroll tax, because once again why would we want to tax employment?  Employment is a good thing.  Fund social security instead with a more steeply graduated personal income tax.  And no, that would not be an attack on small businesses... business income put back into the business would not be taxed as personal income.

I would be suprised if we didn't go to a VAT at some point in the future.

I personally would be strongly in favor of a constitutional amendment requiring a balanced budget on the condition that it allowed clearly defined exceptions for times of war and severe economic recessions. With income taxes down because so many people have no income and sales taxes down because no one has any money to spend buying unnecessary items, it isn't realistic to expect the budget to stay balanced during a severe recession like the one we're in the tail end of now.

 

I would allow an exception for time of war, too.  A "severe economic recessions" exception would be dross in the forge, though.  It would become like "blight" in eminent domain law: a label that politicians immediately begin to look to tack onto everything in order to advance their agenda, whether it has any sensible basis or not.  Someone would probably have found a way to classify the boom times of 2006 and 2007 as "severe economic recessions."  The federal government should do what many state and local governments do and establish rainy-day funds.  If those funds are exhausted, the government should cut spending.

What is the real deal with the Federal Reserve?

The world may never know...

Why can't we have our own social security and medicare accounts and then progressive special assessments for everything else, like wars?

Because Social Security and Medicare are insurance plans, not retirement plans.

Why are there still counties instead of metropolitan taxing and infrastructure bodies?

Counties made sense back when commuting involved a horse, but now not so much. Unfortunately, now there are significant advantages to living in an exurban county, and those people in the exurban counties don't want to risk giving those up.

Why isn't there a VAT?

Because the proponents of a VAT keep pushing for an all at once change, rather than an incremental adjustment. A VAT is a good idea, but it makes more sense to start with a small VAT and then slowly increase that while decreasing the income tax till that's all we're left with.

Why do we always appoint Goldman Sachs executives to head the treasury?

Because the executives from Silverboy Scrotums don't want the job.

If World of Warcraft can make an economy easily accessible and update in real-time to 11 million people, why is the IRS so archaic?

World of Warcraft wasn't made up by congress.

I would be suprised if we didn't go to a VAT at some point in the future.

I personally would be strongly in favor of a constitutional amendment requiring a balanced budget on the condition that it allowed [glow=red,2,300]clearly defined [/glow] exceptions for times of war and severe economic recessions. With income taxes down because so many people have no income and sales taxes down because no one has any money to spend buying unnecessary items, it isn't realistic to expect the budget to stay balanced during a severe recession like the one we're in the tail end of now.

 

I would allow an exception for time of war, too.  A "severe economic recessions" exception would be dross in the forge, though.  It would become like "blight" in eminent domain law: a label that politicians immediately begin to look to tack onto everything in order to advance their agenda, whether it has any sensible basis or not.  Someone would probably have found a way to classify the boom times of 2006 and 2007 as "severe economic recessions."  The federal government should do what many state and local governments do and establish rainy-day funds.  If those funds are exhausted, the government should cut spending.

Hence the need for a clear definition of severe economic recession.

Spending is what makes the economy go, so it's curious to me why everyone wants to tax it more. Personal income is the act of taking money out of the economy. Tax the heck out of that. If I were going to get rid of one existing tax it would be the payroll tax, because once again why would we want to tax employment? Employment is a good thing. Fund social security instead with a more steeply graduated personal income tax. And no, that would not be an attack on small businesses... business income put back into the business would not be taxed as personal income.

 

It is production, not spending, that makes the economy go.  As to why taxes are generally levied on productive activity, it's because the purpose of taxation is not to engineer social ends, and sin taxes can only go so far.  The purpose of taxation is to fund the legitimate and necessary operations of government.  To accomplish this, it is best to tax activity in which people will engage anyway because it benefits them, notwithstanding the deterrent effect that taxation will have on that activity after a certain point.  Sales taxes discourage spending and reduce spending power, lowering living standards.  Payroll taxes discourage employment (or, more accurately, reduce the take-home pay of any given employee).  Excise taxes discourage production.  Income taxes discourage effort to rise up the income ladder.  Property taxes discourage property ownership.

 

Notwithstanding all of the above, people will still go shopping, work, employ, produce, etc. because, at least if the taxes on each particular activity are not excessive, it is in the individual's rational self-interest to do so and pay the tax.

Income taxes discourage effort to rise up the income ladder.

 

Still waiting to meet a person to whom this timeless adage actually applies. 

 

"I don't want to share another marginal 10% of my proceeds, so I'll just stop working.  If I have an idea that will make me money, I'll choose not to go ahead with it, because my ROI would be reduced by taxes.  Never mind that this would result in zero ROI.  I'd rather have no return at all than pay a higher marginal tax rate on it.  That'll show em."

Hence the need for a clear definition of severe economic recession.

 

Don't forget the need for a clear definition of a "time of war"

 

If the overall costs of Iraq were accurately forecasted to the people the way healthcare reform is being propagandized now.... I'm not so sure how loud that war cry from the right would have been.

Hence the need for a clear definition of severe economic recession.

 

Don't forget the need for a clear definition of a "time of war"

 

If the overall costs of Iraq were accurately forecasted to the people the way healthcare reform is being propagandized now.... I'm not so sure how loud that war cry from the right would have been.

 

For drafting purposes, this would be simple enough: refer back to the power of Congress to declare war.  That carries sufficient gravitas that I think we can trust (and yes, I know how hard that commodity is to come by in Washington) that we will not simply declare war on North Korea just to justify more unsustainable domestic spending.  I could be wrong, of course, but even my cynicism has limits.

Income taxes discourage effort to rise up the income ladder.

 

Still waiting to meet a person to whom this timeless adage actually applies.

 

"I don't want to share another marginal 10% of my proceeds, so I'll just stop working. If I have an idea that will make me money, I'll choose not to go ahead with it, because my ROI would be reduced by taxes. Never mind that this would result in zero ROI. I'd rather have no return at all than pay a higher marginal tax rate on it. That'll show em."

 

If the marginal tax rates are low, which they currently are, then you are correct.  People will push their way up the income ladder notwithstanding the fact that they have to share a larger percentage of each marginal dollar with the government.  However, increasing paychecks do not come for free (usually).  There does come a point at which the extra effort isn't worth the extra take-home pay.  For example, I make substantially more than my secretary.  She goes home at 4:30.  I seldom go home before 7:00 and work past 9:00 several times per month.  I also took out a consequential sum in student loans in order to pay for a professional school degree.  The hours, debt, and other obligations would not be worthwhile if the government were taking 60% of my paycheck.

 

That is one example of how the concept of a disincentive towards higher earnings can manifest in practice.  It's not that there is a disincentive to earn more money.  It's that taxes make the return on investment from pursuing those higher earnings lower.  If the pursuit of those higher earnings involves taking on exogenous obligations (e.g., debt), it can even turn the ROI negative: there would be no sense in shouldering a $1000/mo. student loan obligation for an increase in net (i.e., after-tax) take-home pay of only $600/mo.

Income taxes discourage effort to rise up the income ladder. 

 

Still waiting to meet a person to whom this timeless adage actually applies. 

 

"I don't want to share another marginal 10% of my proceeds, so I'll just stop working.  If I have an idea that will make me money, I'll choose not to go ahead with it, because my ROI would be reduced by taxes.  Never mind that this would result in zero ROI.  I'd rather have no return at all than pay a higher marginal tax rate on it.  That'll show em."

 

Bingo. I have never understood this argument beyond a conceptual level.  This might make sense if humans were purely rational beings but we are not. If I am a motivated person, I am going to achieve as much as my god given skills and situation will permit.

Income taxes discourage effort to rise up the income ladder.

 

Still waiting to meet a person to whom this timeless adage actually applies.

 

"I don't want to share another marginal 10% of my proceeds, so I'll just stop working. If I have an idea that will make me money, I'll choose not to go ahead with it, because my ROI would be reduced by taxes. Never mind that this would result in zero ROI. I'd rather have no return at all than pay a higher marginal tax rate on it. That'll show em."

 

Bingo. I have never understood this argument beyond a conceptual level. This might make sense if humans were purely rational beings but we are not. If I am a motivated person, I am going to achieve as much as my god given skills and situation will permit.

 

See my above example.

 

At the moment, rates could still go up a little without substantially discouraging work.  However, some posters like Living in Gin here have suggested going back to the Eisenhower rates (90% at the top vs. 35% today).  That's very different than proposing, for example, a return to the Clinton rates, which wouldn't be all that much for the middle tax brackets.

Simple: Get rid of the party system and elect people with innovative, original non binding ideas.

I agree that returning to 90% would throw things out of wack, but I still think that a motivated individual would still put their energy into an Option B which would have a higher ROI than getting a professional degree and paying back student loans at a loss. I am sure when you made your decision to get your professional degree you looked at several options (private schools vs public, etc) and made your decision on assumptions based on the current rules. If the rules change, the scenarios change and then you weigh your options.

Gramarye, your scenario is a strong argument for reducing educational costs.  That is the variable screwing up our incentive system.  Your example also throws into stark relief what a privilege it is to get your higher education for free.  If a steep income curve is the expected payback for student loans, then people in these positions without student loans are living like medieval nobility... to an extent previously unheard of in this country.

Simple: Get rid of the party system and elect people with innovative, original non binding ideas.

 

Meaning what, exactly?

 

Parties form organically because people united by a common vision are more powerful when organized than disorganized.  In fact, the benefits of organization are so strong that parties form even among people who are not completely united by common visions, making intra-party tensions a reality and party discipline a powerful weapon.  I seriously don't see a way in which you could organize a government free of political parties.  At the very least, you can't point to a single industrialized nation that has done so.

I agree that returning to 90% would throw things out of wack, but I still think that a motivated individual would still put their energy into an Option B which would have a higher ROI than getting a professional degree and paying back student loans at a loss. I am sure when you made your decision to get your professional degree you looked at several options (private schools vs public, etc) and made your decision on assumptions based on the current rules. If the rules change, the scenarios change and then you weigh your options.

 

This is true, people would definitely start looking for Option B (though people like myself who chose Option A when Option A was the right choice would be understandably irritated at the ground shifting under our feet).  However, this illustrates my eternal frustration with discussing questions in the abstract without ever eventually descending to the concrete: What could an Option B be?  Well, you could found your own business, but you'd quickly find that you were working more for the bank than yourself if you had to take out a reasonable amount of debt to get started: you'd be making roughly the same loan payments, but whatever you paid yourself would be taxed at the high rates you're advocating.  That is, of course, assuming that your business was successful.  Aside from that, what other paths of upward social mobility have traditionally been open to all in America?  (Obviously, "marrying well" or "being born in the right crib" work, but sadly, those paths aren't exactly universally available.)

Relax it's just a hypothetical discussion on an anonymous internet forum :)

 

All that I am trying to say is that a person isn't going to say,"Crap it will cost me more to do option A than I can make so I am going to go home and sit on the couch and eat Frito's instead."

 

That's my whole point, it really isn't an either/or proposition, more of a scope and scale of the work.

 

So, apparently nobody had any incentive to take a high-paying job or start a business from 1953 to 1961 (which happened to be one of the economically prosperous periods in American history)? Who knew Ike was such a pinko Commie, despite being a Republican!

Gramarye, your scenario is a strong argument for reducing educational costs. That is the variable screwing up our incentive system. Your example also throws into stark relief what a privilege it is to get your higher education for free. If a steep income curve is the expected payback for student loans, then people in these positions without student loans are living like medieval nobility... to an extent previously unheard of in this country.

 

Hah!  I had more than $130,000 in scholarships and I still don't live like medieval nobility, except when I go to Renaissance faires.  As for reducing educational costs: I'm all for it, if you can find a way to do it, but how do you propose to do that?  Almost 100% of educational costs are related to (a) the costs of personnel (by far the largest portion) and (b) the costs of building construction & maintenance.  Good luck trying to persuade tenured faculty to work for substantially less in order to hold down costs, particularly faculty at professional schools like business and medical schools.  Those professors are not women's studies professors; they have serious and lucrative career opportunities available if they choose to abandon academia.

 

Also, you seem to be talking in two different directions here: On one hand, you're suggesting that some people need to pay more for their education (those who get it for free--presumably as I did through undergrad), while others need to pay less.  That's not a coherent basis for policy, because even if it were true, the consequence would be a legal needle-threading exercise where some group of people (generally including the advocate of such a policy ...) tries to push everyone into an extremely narrow range of what that group considers "acceptable."

 

Also, while it didn't sound like I was going to be agreeing with you much anyway, I might also suggest that you're really going to have trouble pushing an agenda that would try to keep anyone from getting their college tuition completely paid for.  You may harbor idealistic notions about education just being for the sake spiritual betterment, but speaking from the perspective of someone who did extremely well on standardized tests and in the scholarship hunt: the prospect of a full ride to college was definitely one of my primary academic drivers through middle and high school--and the actual offer of one was why I went to a public Big Ten university instead of heading off to Kenyon or Princeton or somewhere similarly expensive.

Who knew Ike was such a pinko Commie, despite being a Republican!

Well he certainly wasn't a conservative.  In fact the modern conservative movement was born during the 1950s mostly due to the big government Republicanism of Ike's administration.  It's not often talked about but John F. Kennedy was a tax cutter.  Too bad he didn't live long enough to finish his vision.  Much of the same could be said for Lincoln who kept all the states in the Union but didn't have a chance to affect Reconstruction (which was an awful time in American history methinks).

 

I wish I had something intelligent to add to this since I was the one who started the thread, but I tend to generate more questions for myself than answers every time I opine. Some of them include:

 

What is the real deal with the Federal Reserve?

Why can't we have our own social security and medicare accounts and then progressive special assessments for everything else, like wars?

Why are there still counties instead of metropolitan taxing and infrastructure bodies?

Why isn't there a VAT?

Why do we always appoint Goldman Sachs executives to head the treasury?

If World of Warcraft can make an economy easily accessible and update in real-time to 11 million people, why is the IRS so archaic?

Great, great questions.  Keep asking them and digging for the truth.

Ike was for whatever party got him to the white house the fastest.

"The main reason China has so much more to spend on its infrastructure *and* to lend to us is that it has nothing resembling our own welfare state."

 

China's powers that be are far more interested in maintaining control of the population than they are in prosperity.  This is cultural more than it is the normal behavior of the top of the heap trying to stay there.

 

There's a sort of symbiotic relationship going on right now.  They produce a lot and sell it to us.  They absorb what their "upper crust" (actually 50 to 60 million people) can absorb, and "loan" us back the rest.  This keeps their general public occupied but not prosperous, and under control.

 

How long this relationship can last is anyone's guess.

It's true that that's anyone's guess ... but my larger concern is what happens when that relationship has gone past that point of how long it can last, whether that's 2011 or 2020 or 2040.

1) I think one reason education costs keep inflating is because we are post-industrial. The rhetoric "college is the key to income" shot up because there's nowhere else to make a living wage, so the demand shot up, so the costs shot up. It's something I don't see much in this national conversation.

 

PS: I think this goes deeper, to the possibility that a stable middle class is *not* intrinsic to capitalism, it was just a fluke of industrialization, and that the only long-term, post-industrial stability might reside with socialism. I'm not saying that's right, I'm just throwing it out there.

 

2) I'm a living, breathing example of tax policy incentive. I'm pretty close to pulling the trigger on ditching my planning career for a masters' in mid-level healthcare, and if the progressive tax curve was, say, 50% higher, I would abandon that plan. It literally just wouldn't be worth it.

 

3) I think we generally know where that tax sweet spot is that allows for wealth building and investment, but it's just never low enough for Republicans to stop bitching. Because if they woke up one day and said "ok, it looks like taxes are in the sweet spot," a piece of their political platform would just disappear. Their political survival depends on complaining about taxes.

 

Spending is what makes the economy go, so it's curious to me why everyone wants to tax it more. 

Private spending makes the economy go, not government spending.  When governments spend money, that money comes from the sweat of the citizenry's collective brow.

 

Taxing income takes money out of the free market.

 

Personal income is the act of taking money out of the economy.  Tax the heck out of that.  If I were going to get rid of one existing tax it would be the payroll tax, because once again why would we want to tax employment?  Employment is a good thing. 

So people getting paychecks is act of taking money out of the economy?  You have it all reversed my friend!

 

business income put back into the business would not be taxed as personal income.

Too bad that's not true.

 

2) I'm a living, breathing example of tax policy incentive. I'm pretty close to pulling the trigger on ditching my planning career for a masters' in mid-level healthcare, and if the progressive tax curve was, say, 50% higher, I would abandon that plan. It literally just wouldn't be worth it.

^a progressive income tax does stifle incentive to move up the ladder. Good example Civvik