The Economy: Past, Present and Future

To many U.S. voters, one issue towers foremost -- the Fiscal Cliff of rising public debt. We appear to have come a long way since Vice President Dick Cheney famously said "deficits don't matter." Today, frightened by much-worse debt crises in Greece, Spain etc, Americans fret about floods of red ink that reached more than a trillion dollars a year under George W. Bush, and that have gone down only slightly under Barack Obama. First, we must (at last) list the reasons why the U.S. went from Clintonian surpluses to devastating hemorrhages in just a few years.

I know a simple way the sheer bulk of the tax code -- its complexity, in numbers of rules, words or exceptions -- could be trimmed by perhaps 70% or more, without much political pain or obstructionism! Because the method is designed to be mostly politically neutral. It does not aim at some utopian fantasy (like the Flat Taxers rave about.) It gores only a few sacred cows. It would be cheap and easy to implement. And almost guaranteed to work! (Only accountants should hate it for the effects on their lucrative business.) Yet, to the best of my knowledge, this method has never been tried, or even proposed. Alas.

How the American consumer came to propel the export-driven development of Japan, Korea, Malaysia, China and now India:  A complex, and even inspiring explanation for how the greatest wealth transfer of all time -- which has lifted several billion people out of poverty -- actually came about.  I reveal how George Marshall and the United States chose, in 1946, to behave differently from any other "pax" empire, and thereby changed the world.

The new radicalism that may be demanded in the 2020s -- especially by emerging middle classes in the developing world -- is to give all people a chance to compete fairly, free from parasitism by their homegrown kleptocrats and from the rising global variety. Free from the secret, conspiring control of a caste that Adam Smith himself called the oppressors of freedom and market economics across 6000 years.

Writing in the Daily Kos, Brin suggests a "no losers" revamp of the tax code, that eliminates tons of provisions but ensures that the net result will not change the tax situation for 100 representative classes of Americans. You could model the tax code on a computer, and program it to eliminate excess provisions without causing any major changes to tax liabilities.

Here’s a vital issue under discussion (at last) on both sides of the Atlantic. Governments, both rich and poor, urgently need two things: a way to calm speculation in the financial markets and also new ways to raise revenue. In late September 2011, the European Commission proposed a tax or fee on financial transactions. This appears to be part of the newly announced European Union plan, with Britain the sole dissenter.

Extremely modest in scale, the transaction fee would not even slightly inconvenience normal traders, like you and me. But it could prevent disastrous bubbles and other calamities. This zero-point-zero-three-percent (o.03%) fee  could raise a whopping deficit-curbing $352 BILLION dollars in ten years, while helping capital markets to settle down, avoid bubbles and computer runaway-meltdowns, while returning to both individuals and regular companies a fighting chance to participate in capital markets on an equal footing.

Today’s “modern large-scale capitalist representative democracy cum welfare state cum corporate oligopoly” works largely because the systems envisioned by John Locke and Adam Smith have burgeoned fantastically, producing synergies in highly nonlinear ways that another prominent social philosopher -- Karl Marx -- never imagined. Ways that neither Marx nor the ruling castes of prior cultures even could imagine.

Computerized flash programs dive in and pounce on any detected market trend, making millions of automatic trades, detecting or anticipating the decisions of human traders...some tout that these programs provide a service -- "efficiency." But which efficiency? For whom? A levy of just 0.1%, or even less, levied on each stock transaction might help bring these hyper-fast trading programs under control.

Federal taxes, in general, are at one of the lowest points since 1912... suggesting that our current national argument about taxes ought to at least feature commensurately lower rates of anger. Sure, let's negotiate how to simplify the system and make it more fair. But can we tone down the rage a little? Above all, effective tax rates on the very wealthy are at their lowest since Teddy Roosevelt was president.

The deliberately provocative title “Bottomless Well” forecasts a coming feast of both energy and human empowerment -- a predicted perfect storm of human problem-solving creativity -- arising from a combination of mass education, freedom and fecund market forces. It is, deep down, yet another expression of what’s recently been called the Copenhagen Doctrine or, more generally, the precept of Faith in Blind Markets (FIBM).

Now first let me put aside any notion that I’m an adherent of the opposite principle -- the general notion called Guided Allocation of Resources (GAR). As you will see below, I most definitely am not!

The notion that markets can benefit from a little ‘slowing friction’ goes back to the Tobin tax, suggested by Nobel Laureate economist James Tobin, originally defined as a tax on spot conversions of one currency into another. The tax is intended to put a penalty on short-term financial round-trip excursions into another currency. Slowing such transactions to a human pace prevents hysteresis and nonlinear runaway effects and allows all market participants to acquire the knowledge they need for Smithian/Hayekian decision making, instead of favoring a select few.