Sunday, June 17, 2007

Meaningful Change

Mike Shedlock has a good Post, which would be better if not wandering all over the place; I can’t say too much about that, though, considering my own proclivities. One might choose to pick Mish’s ideas apart, because they indeed have much merit. The elements I enjoy consist of his allegation that We cannot Inflate Ourselves out of increased Government liabilities, Consumers are finding greater difficulty in financing themselves out of Consumer Debt, and On-going Expenses are rising faster than Wages+asset appreciation for most Borrowers. His Challenge should be thoughtfully Read, but perhaps misses the main point: practically everything he cites could be corrected through the simple expedient of eliminating the Bush Tax Cuts.

The growth of M3 Today has the same inclination as in 1996, but has a different impetus. Investors back then had to invest or face taxation. M3 growth Today comes from the skew in Incomes coming from industries outside the Fed’s famous Core Inflation. One of the great mysteries of Core Inflation derives from Food and Energy being excused from Inflation Averaging, but not Health Care. Few would allege Health Care trails Energy and Food by much, and actually, if it too was excluded from the Averaging, then there would probably be a very flat Inflation rate. An adequate Tax rate system, something on the order of the 1996 Tax Schedule, could well get all Prices moving at the same Speed. How? By insuring that excess Profits are actually taxed, not higher but equally, rather than being excused as under the current Tax system.

We know innately that much of current Government Expenditures result from unnecessary Spending, but identification of Kind may be revealing. At least 10% of Government Spending could be eliminated if We separated political patronage from the Budgeting process. I still suggest a Program where Congressional members were granted only a limited amount of Discretionary funding by Vote, the amount set by the yearly Estimate of Tax revenues available; a No Vote being entered automatically for every member of Congress exceeding their limit, no matter the Issue. A second element worth working on is elimination of Contracting of outsource labor; passage of law which forbids issuance of outside labor Contracts at an Expense rate higher than composite Government Civil Service labor, circa 1996 Inflation-adjusted. The Government would have to go back to employing Lawyers, Engineers, etc., rather than provision of a Business profit on top of labor Wage. These two Enactments alone could truly incite percentage Cuts from the Budget. lgl

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