Wednesday, April 14, 2010

More Stupid

I swear, it seems like stupid just came out in swarms while I was out on my spring migration. It's as if stupid saw that, "hey, the penguin's not around! Let's pour out in mass quantities!"

As you may have noticed, we're currently in a period of elevated unemployment caused by a collapse in consumption. The current rate of unemployment is such that demand has in turn collapsed, meaning that, since there's no demand for company's products, they're in turn laying off even more people. This has stabilized somewhat this past month, but only because of massive government hiring for the Census. That isn't going to persist, the Census will be mostly over by July.

So, demand is down, and without demand, people stay unemployed. And we can't leave them unemployed forever because they'll start starving to death -- and people do not voluntarily starve to death, there will be massive civil disorder long before that happens. FDR created his own jobs programs so that people wouldn't starve during the Great Depression not because he was a anti-capitalist socialist -- he was by and large a moderate liberal Democrat -- but, rather, because the alternative was a Communist revolution that overturned his government and installed one that would have been truly anti-capitalist.

So, with demand down due to a collapse in consumption... the answer that Presidential advisor Paul Volker has is... to tax consumption with a Value Added Tax (VAT), basically a sales tax?! Say WHA?! So let me get this straight. Consumption is down, so in order to increase consumption you want to, err, *tax* it? Does anybody else agree that this sounds like the most idiotic idea since the captain of the Titanic put watchmen up in the crow’s nest without binoculars to watch for icebergs then called for full speed ahead?!

I thought Volker was smarter than this. Sadly, it appears I was wrong.

-- Badtux the Economics Penguin


  1. Seems like a bad time for a VAX. In general, a VAX is a bad idea because it hits hardest at people who can least afford it. If the government needs more money, they should tax those with more disposable income, not less disposable income.

  2. I'm just saying...perhaps theirs another way to generate huge money other than taxes...
    Just saying...

  3. Well, you can print money, for a time. And we do need to print money in order to print the money destroyed by the banks basically abandoning fractional reserve lending (they're hoarding instead, which increases the reserve ratio and thus destroys money thanks to the fractional reserve multiplier effect running in reverse). But in the long run, you can't print your way to providing necessary government services such as food safety, mine safety, etc., you have to tax it. Thing is, we are the least-taxed major OECD economy, so taxes are not a cause of our economic problems, our competitors have higher taxes with no major issues caused by that. Yet it isn't happening. Astounding.

    So what kind of taxes should be created? Well: We have a surplus of investment capital sloshing around in the economy that has been used to create one bubble after another. We have a shortage of consumption cash in the economy causing a collapse in employment. Clearly we should have a tax policy that focuses on soaking up some of that surplus investment capital -- such as, say, higher tax rates on the top 1% of Americans who make 1/5th of America's income. Yet someone actually proposes a tax on the consumer class, actually reducing the amount of consumption cash available? Astounding in its stupidity, yowza!

    - Badtux the Baffled Penguin

  4. How about taxing dividends the same as income? Right now the top 400 earners in the US paid 16-17% tax primarily because the dividend rate is 15%. People who actually work for their income pay about 30%.
    Hell, I would tax dividends higher than wages, not lower.

  5. In Canada they call this the GST. The Mnemonic I prefer for this is Grief and Suffering Tax. Vat for Value Added Tax sorta works as in "all a youse step into this snake pit and we's see which one is whicher than the rest."
    But the question I stumble over is why does a consumption based economy think that punishing consumption will result in profit? Yet 'K' street wants this. Meh.

  6. America deserves to starve for being so stupid. I won't though, I know how to get along just fine without anyone's help.

  7. Ever notice that a lot of these starving people can afford computers and high speed internet?

  8. Aha.

    The perfect time for a VAT.

    His true colors have finally emerged to the masses.

    A loverly VAT - a Rethuglican touchstone.

    Hope those ignorant, raving tea party voters go for this lie too.

    Like how they have been paying "higher taxes" under Obama, and it's all his fault.

    The plot thickens at the highest levels. After all, if no one has a job and can't pay FICA taxes, the VAT is the way to go.

    Thanks for the insights.



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