RE: Will The Economy Collapse?
December 23, 2012 at 8:40 am
(This post was last modified: December 23, 2012 at 8:41 am by jonb.)
You seem to be presuming the main way of taxation has to be through income, so high earners pay more than low earners and to make things more equitable would be to tax high earners more.
I would suggest there are alternatives, You could for instance tax property and decrease income taxes. To be honest I do not know enough about the American situation to talk usefully about your situation, but for the British situation this could be worth thinking about and you may find synergies.
From the industrial revolution onwards earning from industry has been used to bolster the price of land. In many ways the British industrial decline has been encouraged by successive governments because investment in property has been subsidised, while investment in commerce has been taxed.
This has moved British society so far that the average brit will invest all that they can in their housing, but will think to invest in business is dangerous and will avoid it if they can find other outlets for their wealth.
This has over heated the housing market, so much that it has become the mainstay of the British economy, and housing prices are so heated that the average working British family are subsidised by the government because they cannot afford the cost of their own home. Now with the general economic slow down the government cannot balance the books, but to withdraw the subsidy from the housing market would cause a property crash, but industry and finance are proving incapable of producing enough wealth to finance the property market as it is currently structured in Britain. A property crash would on its own destroy the british economy.
Secondly to keep the housing market as it is constituted prices must rise, however this means the chance of younger workers buying into the market becomes harder, this is partly due to the ways the government subsidises the market. This results in the market being driven by landlords buying available property and renting it out. However this strategy only works if the landlord can get more from rent than it costs to borrow the money to buy the property
This means if the government with draws the subsidies from the property market the landlords will default, that will destroy the british banks, because they would not have the finance to be tenable and the british banks are the main earner of money coming into the british economy.
This is the situation and to unpick it will cause distress, but politicians are not assessed on long term objectives of what the economy will be like in ten or twenty years, but how it stands at the next election, so what happens is rather than restructuring a system which is failing, politicians plug up small holes and hope for the best, and ignore the inevitable long term collapse that will happen during somebody else's administration.
I think most analysts know this, but to put it forward now will take away any faith in the system and the markets will collapse directly, so there is a blind eye being turned to the situation, by many to give time that a possible solution maybe thought up, but as the structure moves on it means the market default when it comes will be worse.
Personally I would take the hit now and restructure, but governments are not constituted to explain and lead. This is because voters like to believe in strong men in government who are wise an know more than we do and will sort all those complicated things out for us so we don't have to think about it. For a government to turn around and say most of you that have spent your lives working to own a house, are going to loose everything and be no better off than those who have done nothing, is not going to be in power for long. And because we are in a world economy we can't put up trade barriers without that causing just as big problems, you all have to accept a drop in living standards that will make you cry in pain.
So this is the song for our age
https://www.youtube.com/watch?v=6SeZe1CKRv8
I would suggest there are alternatives, You could for instance tax property and decrease income taxes. To be honest I do not know enough about the American situation to talk usefully about your situation, but for the British situation this could be worth thinking about and you may find synergies.
From the industrial revolution onwards earning from industry has been used to bolster the price of land. In many ways the British industrial decline has been encouraged by successive governments because investment in property has been subsidised, while investment in commerce has been taxed.
This has moved British society so far that the average brit will invest all that they can in their housing, but will think to invest in business is dangerous and will avoid it if they can find other outlets for their wealth.
This has over heated the housing market, so much that it has become the mainstay of the British economy, and housing prices are so heated that the average working British family are subsidised by the government because they cannot afford the cost of their own home. Now with the general economic slow down the government cannot balance the books, but to withdraw the subsidy from the housing market would cause a property crash, but industry and finance are proving incapable of producing enough wealth to finance the property market as it is currently structured in Britain. A property crash would on its own destroy the british economy.
Secondly to keep the housing market as it is constituted prices must rise, however this means the chance of younger workers buying into the market becomes harder, this is partly due to the ways the government subsidises the market. This results in the market being driven by landlords buying available property and renting it out. However this strategy only works if the landlord can get more from rent than it costs to borrow the money to buy the property
This means if the government with draws the subsidies from the property market the landlords will default, that will destroy the british banks, because they would not have the finance to be tenable and the british banks are the main earner of money coming into the british economy.
This is the situation and to unpick it will cause distress, but politicians are not assessed on long term objectives of what the economy will be like in ten or twenty years, but how it stands at the next election, so what happens is rather than restructuring a system which is failing, politicians plug up small holes and hope for the best, and ignore the inevitable long term collapse that will happen during somebody else's administration.
I think most analysts know this, but to put it forward now will take away any faith in the system and the markets will collapse directly, so there is a blind eye being turned to the situation, by many to give time that a possible solution maybe thought up, but as the structure moves on it means the market default when it comes will be worse.
Personally I would take the hit now and restructure, but governments are not constituted to explain and lead. This is because voters like to believe in strong men in government who are wise an know more than we do and will sort all those complicated things out for us so we don't have to think about it. For a government to turn around and say most of you that have spent your lives working to own a house, are going to loose everything and be no better off than those who have done nothing, is not going to be in power for long. And because we are in a world economy we can't put up trade barriers without that causing just as big problems, you all have to accept a drop in living standards that will make you cry in pain.
So this is the song for our age
https://www.youtube.com/watch?v=6SeZe1CKRv8
