Some much of what our government does as public policy tries
to create short term fixes for problems or panders to special interests. Using
policy to affect positive behavior to benefit the country really is what our
government should do.
Our two major parties also play a hand in policy that is not
forward thinking because they are stuck in ideological ruts.
Democrats (mainly) try to solve problems by creating
programs and agencies to address the issue. This is partly why our government
is so large. Many of these agencies become institutionalized and instead of
solving the original problem they look to expand their scope for their own
survival. And on top of that new agencies and departments come along that
tackle something similar since the original problem was never resolved. Now we
have redundancy.
Republicans ideologically say we need to let the markets be
the driver of success in our country. If we let the people who are business
leaders lead our country then everything else will fall into place, hence the now
infamous trickle-down theory. First the markets, read business leaders, will
never do what is in the best interest of the country. This goes against their
own survival. Second this really isn’t public policy since public policy is to
manage competing interests to find the best overall solution for the country
going forward.
And these are just some of the reasons I continue to blog
that the two major parties are failing our country so much so that in 2012 I
wrote a platform for my fictitious revival of a previous party in our past. I
am going to touch on some of my previous ideas with a bit of an update on one
aspect of how we can make a positive move forward economically with some
temporary changes in tax policy.
Basically our economy needs major overhaul. I do not think
trickle down or whatever version of that the Establishment Republicans are
espousing nowadays will work. I haven’t seen anything from Ms. Clinton except
campaign slogans and Mr. Sanders is going to try and use the government to
solve problems that any government can never solve. At least he is actually trying to create
something. I feel they are highly ineffective, but he is trying so he is
gaining popularity with some youth.
What I propose though is changes that can be instituted, but
as things progress can evolve. The issue I want to move forward is reestablishing
a stronger middle class and re investment back into our country. These changes
by themselves are not enough, but they can show you, the reader, it is possible
to put together policy that if properly acted upon will have a positive effect.
First we need to lower capital gains taxes on long term
investments and raise them significantly on short term trading profits and
activity. And when I mean raise I am talking about 90% for certain types of
short term trading.
And there is some detail to this such as individual
investors would get the greatest benefit for long term capital gains almost to
the point if held for a certain time like years the tax rate would be nominally
zero or close. The next group that would see benefits from long term trading or
sometimes known as buy and hold trading would be mutual funds. For many years
mutual funds when managed well are a great way for people in the middle class
to save long term. Not too many people can spend the time researching companies
to make long term stock decisions except for professional money managers. They
would not receive the same benefits as the individual investor, but see
significant reductions to encourage their long term planning.
The first goal here is to get people to reinvest in
companies that reinvest back in our country. Long term investing strategy means
investing in companies that have long term growth prospects. If companies know
their stock price is not going to be based on one quarter’s profit/loss then
they can invest more in their future to adapt to changing markets and new
products. Well managed companies can grow. This type of investing leads to job
and wage growth for workers.
The second half of the equation is to significantly raise
taxes on short term trading. The philosophy behind this is to get Wall Street
to go back to being investment bankers and planning for the long term. There is a culture of billionaires making
more money for themselves that has no benefit to anyone or anything else. Money
is invested with the sole purpose of enlarging balances, not earning money. The Sanders philosophy is we need to go after
Wall Street. We do not need to attack Wall Street, we need to move them into
activity that benefits the whole of our country and economy. The last thirty
years of ever increasing trade activity for the sheer goal of extravagance for
a few set individuals is exponentially more dangerous to our economy than
people want to admit. Well people not in the Sanders camp.
We cannot as a society force wealth redistribution; that
does not create jobs or grow our economy. We can reward positive and punish negative
behavior as part of public policy. Our criminal justice system is one example
of punishing negative behavior. The government has no right to tell people what
to do, but it can set policy that benefits the greater good. Basically the same
billionaires have to change their investment behavior, no one is saying they
still can’t make billions. To grow economically, someone needs to grow it. They
change is they won’t be pulling money out of real capital investments to
manipulate markets for their own good. If they want to continue to make money,
they have to make money for everyone.
And this is a temporary tax law. Tax law is one of the few
policy opportunities a government has in changing large scale behavior. And of
course it needs to benefit the country as a whole or it can be very
destructive. And it is easier to change tax law than to rid our government of
oversized bureaucracies. For example changing behavior means the SEC is reduced
or at least focuses on the basics of investing and regulation from its original
intent. It can spend more time on investment fraud, insider trading, and making
sure new issues are introduced to the markets correctly. We do not need to add
a whole new set of responsibilities or whatever Mr. Sanders may add to it or
have another department added to reform Wall Street.
This is just one idea to a much larger puzzle of improving
the economy for all of us. Some other aspects of this potential tax change are
giving tax breaks to corporations for improving exports and new technology
development. Ford and GM selling more electric cars to us and places like South
America and India is a boast to our economy so their tax rates on the income
from these changes reflect this benefit. This is companies moving forward in
the world economy, yet making their growth come from inside the country. This
is different from the Republicans saying give breaks now expect results later. You
hold the reductions till the growth is realized. They may argue they have no
incentive to invest, but if they say that they shouldn’t be in business in the
first place. The goal of a successful business is to make a product, sell it,
and evolve. Tax breaks create extra rewards for the hard work. And if it generates an improved economy for
the whole, then the need for large scale welfare and other social programs is
reduced, plus there are more people paying taxes so a reduction, credit etc is
an acceptable way for public policy to evolve and this reduces the overall size
of government which reduces the need for taxes from everyone.
This is not a stop gap measure, it has to be calculated and
flexible. At some point we could lower short term rates once overall changes
are made. And nothing is ever perfect, there will be events forcing short term
adjustments in the policy, but if you make long term planning the first step, it
is easier to react to short term issues.
Some food for thought as we head into this wild and crazy
political season that is now upon us.
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