Governments are again paying out excess Cash, while citizens are not paying any Taxes. Mish has a good Post on a jobless Recovery. Government Economists fail to understand that recoveryless Recoveries are the result of painless Depressions. Alteration of Consumer Preferences do not occur when those Preferences are protected by Government program. Cash for Clunkers is a good Case in Point: You too can continue to buy new Cars; all you have to do is continue the Debt overhang you have engaged in for years–even if your Income has dropped. Your Credit is Good, because though you will default, the Government will not–hopefully! I am reminded of those Gamblers who double down, and go for Broke. Economists would disclaim such an indecent expression of their behavior, though they might be given the email address for Gamblers Anonymous.
I am an old-time Traditionalist, and think it might be Time for the introduction of labor corvee in replacement of Taxes. Here We could leave Tax rates at the levels where it is practical: this means where Taxes will actually pay for the Government. All Taxpayers will be told that if you do not forward the Cash, then you must forward the labor; as the average Wage level at which Government employs Civil Servants. Taxpayers can actually pay their Taxes, perform the corvee, or hire Unemployed at Minimum Wage to replace their indenture. This system could remain in place forever, working fantastically well under recessionary conditions as huge Unemployment means a sticky Minimum Wage level of employment; especially if basic Welfare Benefits were not affected by such Employment. Payment of Taxes would still be the greater venue, as labor corvee is a rude method of self-employment, and Boom times generate higher-paid Employment. Actual Government employment could be minimized, while the quality of Government effort would increase; the Private Sector providing better employment performance than Government bureaucracy. Sound bizarre?–it is me people!
It is known that American Government cannot continue to Spend enormous amounts without a source of revenue. The Bond markets are already showing Signs of Cracking, overburdened by a overworked Tracking system, with Everyone being blitzed by a confusion of different issuances of various Interest return performance. Several Treasury issuances are on the verge of being ostracized because of the lack of real Returns from the instruments. It is a fact that the Bond markets will dry up immediately as boom conditions are reinstated, and Taxes will have a replacement lag of at least one year, and probably three years or more, if ever. Americans should be preparing for a Government financial crisis, which may be more savage than any crises seen before. lgl