Good Readings

Greg Mankiw comes forward with an excellent Post on Tax Policy. He presents the exact matrix necessary for discussion of Tax impacts. He deals with Efficiency from the viewpoint of Incentives, while I would be more concerned with Tax Placement confusion, and the structural inability to match Spending and Revenues. This also is a question of Goal orientation, and is not to suggest that His position is not a very defensible position. I do not put much weight on Intergenerational equity, believing as I do that such inequities are canceled by Wage Restraints and Inflation. Greg and I possibly agree on the issue of Egalitarian measures, which I believe only interrupts normal Profit flows, though unlike him, I could accept something like a 20-40% Surtax of devolvable Tax revenues upon the appearance of success (Income some 20% higher than the Average Income of Taxpayers). I probably will find extreme disagreement with Economists on my doubts as to the viability of seeking Full Employment; predicating Business success upon issues of Volume become increasingly irrelevant under conditions of rising Material Costs, retirement of the truly heavy Consumers, and an eventual shrinking Labor Force. We need to produce Smarter, not Greater.

This Post may explain the State of the Union better than Bush’s Speech, but I must forewarn the Reader that it is not as bad as it seems. It certainly does not call for a Tax Rebate package, though no one could stop the Package, considering that it is an Election year. Readers should not expect an immediate reward, though, as Politicians will come to realize that the Rebate has to materialize in September or October to impact the Election. Downgrade of the Ratings for the monoline insurance firms could shake up the Market, but not really affect holdings; the Investment Tie-up is already existent, and unstructured Selling will only provide sharp losses immediately. The communications cable disruption is not actually so bad, as it drains a lot of the hyper activity in the Markets when We need a Breathing Space.

Those concerned with Inflation should read this Post. I could attempt a long-winded discussion how every Point of Inflation reduces a set Cost of future Debt Service, but would entangle within Numbers, whilst Economists could all claim that the Numbers are wrong. I will only say that Inflation is only the failure of Tax Policy (to get back to the first paragraph), which should insist all Expenditures (both Public and Private Sector) should be adequately funded. Think of the Concept of unsecured Debt which is never paid, but revolved down through the years, with draft of material Profits which were never earned by the Expenditure. lgl