Friday, August 28, 2009

Government Fiscal Policy

The Students of the financial crisis should read this short Paper, which undoubtedly puts the crisis in its proper prospective. The real point to be made remains that the economy policy of Government and Fed were as responsible for the crisis, as the immediate participants. It was the Congress and President which destroyed the budget surplus, not the economy. There is always the Suggestion that the economy would be a lot smaller than it’s current size, except for the Tax Cuts. It is my belief that Tax Relief did not retrieve the economy from Recession the last time around; the growth was too slow and insignificant for that claim to be made. The unwarranted Tax Relief, on the other hand, did incite the vast draft of Debt; both here and from foreign sources. Study the Paper carefully, and reread until Understanding is reached. It is probably the best instrument outlining the current crisis, and perhaps calls for harsh measures to correct present defects.

Our only Salvation, though, may come in the form of much higher Import pricing; a process where the Operation is successful, even though the Patient died. Outsized Energy Costs will hurt every aspect of the domestic economy, and introduce a real curtailment to production here. One of the most serious problems faced by the American economy is Distribution, due to the sheer size of the territory; the element most dependent upon cheap Energy. Energy Costs can easily introduce a new personage to the American Household, as it can become as expensive as another child. The American Household already has an entire second family in the Household, simply paying for the Mortgage. It will serve no one to place another million Households in bankruptcy. There must be Change, but no one can exactly define what that Change should be.

There used to be an old American adage that Business must fund the Government, when American Households run out of Cash. Business and Economists rant that higher Business taxes eventually devolve upon the individual Taxpayer anyway, and that they should be dismissed or reduced drastically for economic performance. I disagree! These groups ignore the distributive aspects of Business taxes. Individual Taxpayers are often short of Cash, especially in Recessionary times, where We find Ourselves. Business Taxes are spread across the spectrum of American Consumption, affecting all Goods equally. American Households can alter their purchase patterns in the face of rising Consumption pricing. Individual Taxes impact American Household too uniformly, and increase the distortion of financial stability because of unavoidable Costs to different Households. The Government fiscal policy must be adapted so that Taxes pay for all Government Expenditures, whether paid by Household or Business; while in tough times Businesses are much more capable of paying Taxes, especially as Taxes are placed upon Net Profits, which Households may not possess. lgl

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