The Washington Post via Greg Mankiw has the sentiments of several Commentators on the proposed Obama Tax increases. Jim Kramer expresses the personal desires of the Country with his Post, but is shackled to the old Keynesian concepts of pouring Money at any problem. Greg Mankiw, himself, still clings to the concepts of Marginal taxation, thinking percentage changes in minute change elements truly affect anything; he does give an accurate description of past and current tax rates. Robert Reischauer probably gives the best assessment, though the piece by Laura Tyson is good; though it contains some loose economic logic. The whole exercise indicates that Obama has did little to alter the general attitudes to Government and Taxes, and Community Spirit exists only in un-channeled venues no one has bothered to exploit.
I know that Everyone wants me to make a similar Commentary, so they can equally avoid any support of my final assessment. The economic retardant aspects of the Tax increases must be considered minuscule, basically because in the last 40 years, the Tax rates had been higher for 30 years than the proposed program. During the periods of higher Taxation, there occurred much of the high increases in economic activity which is so praised. One cannot be more precise about the Statement made, unless One wants to define the difference between real and nominal taxation, the tax assessment made, the tax avoidance utilized, and the real taxes eventually paid. It is sufficient to state that the George W. Bush administrations brought new forms of tax avoidance, of which the Tax Cuts were only a part, and this new tax avoidance was the basic structure in which the financial crisis was born. Housing became the preferred Savings and Investment vehicle, because Mortgages were given tax preference. Investment Banking became the major structure, because Regulators were told to ignore Accounting procedures concerning these institutions; Accounting principles established over a half-century of curtailing problems before they could magnify. The resulting collapse could have easily been foretold.
The prospects for the future are not as rosy as I would like, as I suggest We have reached the apogee of World economic productivity. The decline will come through a number of Demand and Supply Shocks, much like the current fiscal crisis. A great number of factors enter into this calculation, which range from increases in Resource pricing, to retirement of the Baby Boomers. The rest of the World will insist on maintaining the gains made in the recent Past, while Americans will not fail to drag their heels at any loss of Standard of Living. Most of the common Consumer Demands will be met, though at a reduced speed and higher Price. Business Profits may be the heaviest victim in the Scenario, where Prices will be reduced to capture a faltering Consumer Demand afflicted by chronic Household Income disturbance. It is beginning to sound like the Writings of John in the Bible, and it is too early for a Drink. I will simply finish with a Statement that total World GDP will likely decrease by 10% through the next decade. lgl