Friday, February 06, 2009

Options going forward

I applaud Greg Mankiw for giving a clear statement of his preference for his type of stimulus package. My trouble with it comes in his dedication to tax revenue-neutrality. I see no real grounds for a reduction in payroll taxes, but I personally wish a Gasoline tax substitute for a Consumption-Demand Price increase. Any matriculated diversion of Taxes to the States based upon methodology will never be rescinded, and States will never cure their own fiscal woes by proper Tax allocation. My position holds that Taxes are not onerous, Government spending is excessive, and Taxpayers need no higher revenues simply to feed Business desires for higher Pricing. I am definitely in the minority when I advocate no Stimulus package, believing that Congress and President should work on containing the ballooning Deficit.

One has to ask what is the current Crisis? Unemployment stands only marginally higher than what is traditional in most Capitalist economies dependent on Private sector creation of Jobs. Some claim that Unemployment continues to accelerate, and Retail Sales suffer because of it. One would find it hard to find Job eliminations rising faster than the Glory Days of the two recent Booms; the real loss coming in the slowing of re-Hires for new projects. Nothing that the Government can do will multiply the numbers of these project Orders; Government Spending only affecting limited sectors of the economy at too great an Expense, while project Orders are dependent upon the expenditure patterns of Consumers; who are little altered by the greater Demand of a marginally-raised Government employment. Consumer Demand stimulus will not occur by Government infrastructure programs at the rate necessary to replace the lost project Orders.

The real support for the Stimulus comes from business leadership, whose sole goal consists of the replacement of losses stemming from their poor management in the previous Boom. Most Sectors have steady and consistent Orders for approximately 80% of their Production. They really want the American Taxpayers to fund the repayment of their overcapitalization during the Boom period; said overcapitalization caused by justifying Tax deductions, neither the capitalization or the Tax Cut formulation valid under the Boom conditions. The real need is for business to write down their losses, and go on. It is a simple case of over-extension by a business leadership whose management should have been replaced far earlier. What I have written is not popular, but regrettably too true! lgl

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