Economics of the Debt Crisis

I'm going to deviate just a bit from my normal technical material today, and comment on the debt crisis issue we're currently facing, not only in the US, but in Europe as well.

While the politicians worldwide dither about, we all are being placed a great risk of financial difficulty. I'm not sure that complete collapse is going to occur, but there will be just enough damage to make us all shudder a great deal. This is already happening, as we get closer to various "deadlines" for solving the problem.

From my perspective, it's time for us all to eat a little of the bullet that's being aimed at us. If we don't share the pain, we'll all get more of it than is really necessary. That means - hold your collective breaths - TAX INCREASES for some of us. This is true not only in the US, but elsewhere as well.

While some people preach tax reduction as though it were some sort of panacea, the truth of the matter is that we've "been there, done that", and all that money is simply building up in corporate coffers and individual bank accounts without a single job being created as a result. Hundreds of major corporations (General Electric is a prime example) haven't paid a dime in federal income tax in years, and that's just not right.

So called "small family farmers" are getting millions of dollars in subsidies to support higher food prices than are necessary. A number of these are the loudest complainers about the current tax system, in that they want to pay nothing, and get the rest of us to support them.

I propose that we (at least in the US) levy a 50% tax on all of the excess profits or income earned by anyone whose total compensation from all sources is over $500,000. The only way out would be to invest the money in anything that creates a job. Hire someone. Open a factory in the US. Invest in infrastructure bank bonds. Buy stuff made in the USA, and by "made", I mean everything. The parts, the assembly process, the distribution scheme, the services needed to operate or use whatever it is. Let's spend our money, and spend it here. It's the only way to get Americans back to work, and thereby contributing to our economic growth.

The reasoning is as follows: If we sit on our cash, like grandma did during the depression, then eventually, no one will have a job, and our economic collapse will continue. Also, consider that the biggest long term fear for all of us should be the slow, steady march of inflation, which robs us of purchasing power unless we act to grow our way out of the current situation.

Keep in mind that this has happened before. I was here during the 1970's when we went through a similar, but somewhat less damaging time. There were also the twin recessions of the early 1980's, and we did live through that as well.

There was also a time in the 1990's when we thought that such situations could never occur again. "This time it's different" was the refrain. Well, guess what folks; it's not different, it will never be different, and anyone who tries to tell you otherwise has been smoking or drinking too much.

What the country needs is enough people working to support the retirees and the overall lifestyles that all of us have come to expect. Anything else won't work, regardless of the tax rates.