‘You Can’t Get Fooled Again’: Is America Ready For Real Economic Solutions Or Not?
"Yes, US policy is one step improved from the post-2009 bank-centric errors, but it is still a long way from being a framework that one could say with confidence will lead to a real, sustainable recovery", Rabobank's Michael Every writes, in a new note which strikes at the heart of something I've struggled to communicate over the course of the current crisis.
The investing public seems to realize that, acting on its own, extraordinarily accommodative monetary policy invariably leads to asset pr
I can believe there are incremental policies developed that chip away at the inequality whilst not letting it all burn. The combination of below may dampen the worst effects:
Universal Income
Lower cost education
Small wealth tax
Larger inheritance tax
Taxes need to be more progressive both at the corporate and individual level. And we need to rebuild and adjust the safety net for our citizens so that when economic tornadoes blow through the economy the answer is not a nationalistic antiglobal wave that kills innovation, trade and growth. In real terms that means universal health care, increased aid to education, and a much higher minimum wage. The economy also badly needs investment in public goods capital stock, like roads, bridges, hospitals, schools etc. What a wonderful opportunity with low interest rates to finance it! It also makes sense to institute a slightly progressive version of a VAT to finance many of these efforts and to backstop medicare, medicaid and social security. In that way, everybody pays.
Is VAT and equalizer? I thought VAT was paid in greater proportion by forced consumers such as the poor.
Thank you! I know you keep hammering on this and it’s largely preaching to the choir here, but I want to scream this article from the rooftops. Unfortunately, understanding this analysis requires nuance and most people can’t or won’t engage with the facts you’ve laid out.
My father-in-law has a masters degree in economics, works for a small bank, and follows the markets closely, but even he can’t seem to wrap his head around this and thinks he has gotten the short end of the stick on government stimulus even though he is likely among, or nearly so, the 1%.
Given that, how do we turn this into a short slogan for the masses?
Wealth of the Nation not the greedy individual.
Getting rich off the fat of the land is fine, picking our bones clean, not fair.
Stimulus for All
Or maybe ‘Stimulus for Main Street’
“Workers of the world, unite!” didn’t work out.
Thank you for this on-point essay. Also I’ve been meaning to read Skidelsky, who seems better at economics than the hard-core economists. Even if these ideas become accepted intellectually in private, it’s hard to envision a future in which the current political-economic dogmas give way to their full embrace. What is the probability that the same old same old septuagenarian Democrats, and their key advisors like Larry Summers, will repudiate their life’s work of neoliberal, monetarist mistakes? What is the probability that the so-called fiscal conservatives in the GOP will acquiesce to MMT Trump or go full gaslight and underwrite a new New Deal that is essentially the opposite of their hard-money views? Looking around Europe, it’s also hard to find an obvious leader or anything close to an EU-wide consensus for any of this. The cynical view is that the monetarists have been so effective at “state capture”, that their corruption will never allow it to happen so long as their asset prices keep rising.
Really great read H, thank you!
This article hits on many hot points for me
Even a fiduciary cannot handle my money as well as I may. Buybacks create a hazard. Uninvested earnings should pass through a shareholder’s hands. Change the tax code!
UBI seems predestined. A poorly designed tax code may cause people to stay unemployed. A properly graduated tax may appear to penalize the middle class but only because the 1% are hiding behind them
Finally, i may need to take on more interest rate risk and reduce credit risk
Income producing real estate is taxed on at least three levels and sometimes on four levels:
1. annual valuation tax (i.e. property taxes)
2. income tax (after deduction of debt interest and appreciation – although some ownership entities, such as pension funds, are income tax exempt)
3. transfer tax when sold
4. sometimes: tax on gross revenue (eg. in the City of San Francisco)
Other assets (non-real estate) should also be taxed on valuation and on sale (albeit at the federal level vs the local level). A valuation tax would create pressure to pay dividends (generally also taxable) vs. fund share buybacks. A transfer tax would encourage long-term investing vs. short-term investing. All this would take a little bite out of the financial asset inflation that is “concentrated disproportionately in the hands of the wealthy” and immediately narrow the (paper) wealth gap.
I am not a proponent of transfer taxes for financial assets, nor real estate. Transfer taxes on real estate are relatively rare, thank goodness. However the remainder are points well received. Why do counties not tax financial asset holdings (valuation) for residents? At least on the surface it would seem an asset is an asset no matter how it is held. It would seem if the asset has real property component such as a refinery then a tax exclusion for the holder would be required as they already paid property taxes on the hard assets.
I imagine that taxation of financial assets would need to happen at the federal level, as financial assets are mobile (while real estate obviously is not). Of course, financial assets can be moved offshore but the federal gov’t is better able (than local gov’t) to deal with this form of potential evasion.
Thank you
Presumably we are all believers in the awesome power of policymakers to deliver outcomes that eliminate the hard reset that the “libertarian” or Austrian types are calling for. The problem might be whether there ever comes a time when the system is so unbalanced, so fragile that policymakers cannot stabilize it. We are in genuflect mode to the Fed in 2020. Is it possible that market forces one day will force a reset in which policymakers are unable to moderate? I imagine an inflationary bust would be one possibility of that.