Sunday, November 07, 2010

Now for something completely different...

The thought struck me as I was listening to the President tonight that maybe the answer isn't to extend the Bush Tax Cuts, or to extend them for the Middle class while raising taxes on the "Rich", or raising it for everyone, or eliminating the IRS... maybe the answer isn't something that the Democrats, Republicans, Libertarians, or even the Tea Party have been pitching...

The Bush tax cuts were created in a different time, the economy was burning through the value it had created during the Dotcom expansion using the home equity bubble as a lever. We needed people to return the money they had extracted from their homes and businesses into the goods and services to keep the economy running at red line for a while longer. The Bush tax policies were perfect for keeping people spending.

Today is a different time, like a teenager with a trust fund, we've spent most of the value we have created over the past 20 years and have a terrible hangover (our's is from Debt this time). So do we need the same tax policy as the one designed to keep a red hot economy red hot? Maybe not...

I'm thinking what we need is to restructure the tax cuts for the wealthy, giving them bigger incentives for each person they hire. Hire more people, get more tax breaks, we bribe them to get off the fence and back into the economy. To offset the bill, we need to boost taxes slightly on the middle class. The combination of these two approaches would result in more middle class people paying slightly more taxes (and less unemployed suckling from the public tit). The increased number of middle class working people would pay much of the cost of Government. If you want a balanced budget, you need to address entitlements, but that's a different discussion.

The punch line is that as more people produce value into the economy (work), the economy would start to grow, businesses would start to grow, the rich would get richer (sorry, I know it's popular to dislike the rich folk these days), the middle class would get bigger, and the unemployed would have the opportunities for work.

If anyone is still reading this please shoot me your comments...