posted on Jul, 6 2010 @ 10:13 PM
Thank you posting this article. It is an interesting proposal to solve one of today's big problems, the so-called economic downturn. Also, your
perspective on the need for an act of cooperation to be rational (or at least characteristic) of all entities involved is wise indeed.
Although I found the proposed solution interesting, I think it falls short in its workability. I think it would be fantastic is an income tax holiday
could stimulate the economy in a meaningful way, however, given the current circumstances this simply isn't so.
As you may know, the government is one of the largest buyers of goods and services in the United States. Consequently, if government chooses not to
reduce its purchases and the money to buy those goods and services is not received via taxation it must come from one of two sources, borrowing or
The former comes with an interest fee that means taxes will have to be raised to levels even higher than they are currently to pay back the money
borrowed as a result of the deficit induced by the tax holiday. Clearly, this is a bad thing in the long-term.
The latter is essentially "increasing the money supply" and results in inflation and higher prices and, thus, a reduction in the value of savings.
Additionally, it results in higher interest rates which stifle economic recoveries.
I could literally write a book on this subject, but I'll leave you with some food for thought.
All the economic success or failure that we have will be the result of our collective doing. What we have in the future will be what we create today.
There are no magic buttons to push or mysterious forces to coerce; economics is about producing things of value. If we can't produce goods and
services of value for others then we will have nothing. If we don't invest in the technology to produce valuable goods and services and we don't
educate our children in how to use such technologies, then we will not produce goods and services of value.
However, currently, the U.S. has a savings rate below zero. We are consuming more than the value of goods and services that we produce ourselves.
That leaves no money for investment and a mounting financial obligation to other nations.
In the absence of a change of course, what do you think the outcome will be?