Friday, September 03, 2010

Before I Forget

A question to all the economists out there.

I was thinking, as I typically do, about the dire situation of America and exactly what measures could be taken to fix it.

To me it's very simple;

Eliminate corporate taxes
Streamline regulation
Have a constitutional amendment that would limit fed, state and local spending and tax collection to a cumulative 15% GDP

and a bunch of other things, but in short unleashing the private sector, the animal spirits and the productive capacity of human nature to grow us out of this recession and dwarf our debt woes.

But then it dawned on me I have another theory - that the individual American, on average, is deteriorating to an entitlement slob and much like a cancer society is decaying as the cancer spreads and corrupts individual cells/people that makes up the whole.

I soon realized these two theories are in conflict with one another, and since I'm not a leftist, I admit I had conflicting theories and wanted to get your opinions on it.

Let us say we DO eliminate corporate taxes, replace income taxes with a sales tax, constitutionally ban governments from taking more than 15%, or whatever your wish list may be.

Has the basic unit of the economy, the individual, been so corrupted that there is no more animal spirits or entrepreneurial gung ho to actually avail themselves of that opportunity?

In other words say we get our wish list. Do you really expect Millineals and Gen X'ers to go and become the next Howard Hughes or TOny Stark?

It's an important question because one of the underlying premises is that there's always this gung ho entrepreneurial class of innovators and capitalists and dreamers and industrialists.

If you look around I see a bunch of Emo Kids and spoiled brats who couldn't run a lemonade stand if they got a Obama stimulus check.

Something to consider that even if we do the right things and implement the right policies, the society itself has become so degraded and decayed, it wouldn't matter.


Anonymous said...

I would have to vote yes, animal spirits would emerge. The proof for this would be the Regan and Thatcher revolutions. England was decaying into a third world country. The post war socialism had crushed the private sector. A business class did emerge after the Thatcher reforms.
Low flat taxes also attract business risk takers, and hard working employees, from all over the world.
This was a big part of the American success story, attracting the right kind of people. The entitlement types stay home, and complain. The get up go types, move
to a place where hard work and industry are encouraged.
Lets not forget a third world hell hole like China. Industry has exploded since the government introduced capitalistic reforms.
Ireland had been the back water of Western Europe. Low taxes resulted in a business boom. If you can get Ireland working, well just think how well America will do.

Anonymous said...

I'm afraid that while there are plenty of enterprising young people, the moochers comprise close enough to a majority that they and the useful idiots will simk this ship.

Chris said...

I'd say that the fact that the American people have allowed what has happened so far is a pretty bad indicator. The wishlist sounds like it would work, but currently it not only wouldn't be of any benefit to today's crop of losers, but it would never come to pass because of them.

Basically, it won't happen until/unless we see a cultural renaissance wherein the entrepreneurs and go-getters (and I don't mean go-get a welfare check) become a large enough portion of the populace that the political class has to pander to them for a change.

Hydrick said...

Not everyone in today's society is the next Howard Hughes or Tony Stark, but that's sort of the point. What makes them special is that they are so unique. Even if every single human being in America had that dream, most won't actually become the next Howard Hughes because some ideas aren't feasible, don't have the demand to drive production, etc.

Do we have some next Howard Hughes and Tony Starks out there? Yes. Look at what Steve Jobs has done with the iPod, iPhone, and iPad. Doing the right thing economically will better allow them to step up and start shaking things up in terms of society and what's being produced right now.

The question that we should probably ask is "Are there enough people who are willing to work the crazy hours it takes to come up with the next big thing that revolutionizes life as we know, build it, test it, perfect it, and get it to market?" How many people out there that are working are just putting in their 40 hours and expect a big fat paycheck, and balk at the idea of putting in more than that in a week unless told they have to by their boss? Howard Hughes and Tony Stark, contrary to popular perception, probably put in more than 8 hours a day 5 days a week, and it seems to me that a lot of people don't seem to realize that such a willingness to work is crucial to actually being as successful as they seem to think they're entitled to be.

Regardless, should the private sector indeed be turned loose, you can probably expect a societal shift in terms of innovation and willingness to do what needs to be done, because an unleashed private sector rewards such behavior. The people that don't adjust will either not do so because they've gotten to a point where going further requires them to sacrifice things more important than money (time away from work for family, video games, etc., moving away from what they love into a more managerial role, too much travel for their liking, and what have you) or that they just don't want to work to advance. In theory, under your changes, these people won't be able to screw things up for the rest of us though.

Ryan Fuller said...

The way I see it, if the pool of potential entrepreneurs is smaller there's less competition for those that take a chance and start a business.

Overall economic growth wouldn't be as high as it would be with more people starting businesses, but I think it could work. In any case there's a ton of extra cash in the economy, waiting for a combination of good investment opportunities and a non-hostile administration in Washington.

Anonymous said...

I love your premise. Your absolutely right. Too many people, even if the steps you suggest were to be taken and the economy does turn around, would demand their handout. Especially if the economy was booming, the economic parasites would say "hey, every one else is making money, so where is my share", not even acknowledging that they do nothing to deserve it except complain. So yes, society has created a "moocher" class that is here to stay. What now?

Ryan Fuller said...

One other thing; even if there aren't any Americans willing to take a chance on starting a business, there's plenty of foreigners with more initiative and plenty of resources ready to take advantage of good investment opportunities.

Fingers crossed for a good zaibatsu or two, eh? Nothing like a little price setting power over wages to grease wage stickiness. There's a reason Japan recovered so damn fast from the Great Depression, and the Keynesians are wrong to claim it was just deficit spending.

Yeah, I know there aren't really zaibatsu any more, but if we really eliminated corporate income taxes and deregulated everything, we might see them sooner or later.

Baron Metzengerstein said...

I can't speak for anyone else, but personally I was ready and willing to work overtime for _regular_ pay back when I could mark down something with a little more oomph than "college student." I doubt I'm the only one out there.

Also, I think we're on the cusp of another great awakening, and would argue that it will revitalize the American work ethic.

Anonymous said...

I say release the animal spirits. Sure, there are bums like me who hate working hard, don't care about money, think people who start their own businesses are suckers and are otherwise worthless people.

But a rising tide may even lift my crushed soul. Or, at least the pickins in the dumpsters will improve.

"Not" Orlando O.

Rosalys said...

You would have to dismantle the welfare class to a point where the rewards of working are greater than the rewards of not working. Not everyone has to be a Howard Hughs or Steve Jobs. There are the risk takers and if they succeed I say they earned and deserve every penny of their vast fortunes! They create the jobs out there for everyone else. Not everyone has to want to work 8o hours a week either. In a booming, entrepreneurial economy there would be jobs for the workaholics, the 40 hour a weekers as well as those who are content with a part time job. Isn't that what the pursuit of happiness is all about?

Anonymous said...

Wrong Question I think.

The "moocher class" exists because we allow it to exist. I.e. It is supported encouraged etc...

If you told 'em all to shut up, work hard, and cut of their support suddenly you'd discover that the "actual moochers" that is, the congenitally uninclined to actually pull their own load is quite small.

The problem inthe US is that given we have a demagogic voting system, that the extant moocher class may simply vote itself more bene's - i.e. a majority of people decide being a moocher is a nice life style. Then it's the end.

( see the end of the Roman empire, and how most people outside the professional moochers - bureaucrats, aparatchniks, etc... were actually quite happy to have "so called" barbarians move in, if they promised some order and relief from awful taxes.)

( and for teh record "moochers" includes both low class and high class people. and there's the danger. Those "high class moochers" are the leadership of the moocher class.)

I don't think we are QUITE there yet.

BashTheMsm said...

it would definitely work. once the government intake is limited to a mere 15%, there would simply be not enough money to allow 50% of population to squat at the expenses of the others.
however that would take a major miracle, or revolution. even the current republicans are just a milligram less socialist than the dems. not even reagan managed to reverse the constant growth of govenment, only stalled it a little. as i said before, i think there will be a civil war, sometimes in the future, where the producing part of the population will go against the parasites, sick of having to break their backs in order to others to sit on their asses. but it will have to get a lot worse than now.

Eagle said...

Cappy, cheer up! Consider where humanity used to be in the last 500-1000 years. The Dark Ages, mass illiteracy, rule of kings, ignorance. If a little freedom let us get beyond all that, we can sure get beyond this.

Anonymous said...

I hope reforms are made. However, if you look back on other societies, once in decline they never recover. There are all sorts of proposals to get back on track, but it never happens.
Take a look at Rome, they diluted the silver content in their money by 99.98%. Taxes kept increasing both in the rates and more and more things to tax. The Roman bureaucracy exploded. Almost the entire population of Rome relied on the dole, for their bread supply. These sort of problems were never solved.
A strong work ethic, law and order,
these things build a strong society. Some how as prosperity booms, these values are lost.

Anonymous said...

To solve the 'society crisis'you describe, America needs 2 things: more immigrants and a cultural change. The latter can be supplied through dissemination of Objectivist principles.

Also, you'd be very interested in this:

P Walker said...

The problem with your approach is that it hasn't been paying attention to what's really been going on in the economy.

Technology. Technology has done two major things. For one, it has made people incredibly stupid. My friend is a high school principal and was asked by a grade 10 girl what three times four was. Technology has been so embraced that the market wants teachers to do little more than train kids to enter numbers in a machine. The failure of the education system directly intertwines with the next item.

Technology has greatly removed the need for actual labour. People are unemployed, not because of "big government" but because technology has made workers rather irrelevant (and that's even before discussing places like China). GM, for example, makes just as many cars today as it did ten or fifteen years ago but with *half* the number of workers. Worker productivity essentially doubled both through threats by management but also by huge advances in manufacturing and automation techniques. There's just no work for people anymore but management and society still clings to the idea of the forty-hour work week.

Fiddling with the tax system, while needed for other reasons, will have ZERO effect on jobs or unemployment.

We have to figure out what we want. Do we want to restore an eighteenth century system in the twentifirst century? If so, it may mean giving up a lot on all the advances that have been made. Personally, I think this whole restructuring of our society towards a "knowledge economy" is a load of horse manure, coming from the same people who told us before that corporate tax cuts and cuts to the rich would usher in waves of broad prosperity. Or that free trade with Mexico and elsewhere would bring jobs to the United States.

The question our society has to answer is how we define work. And I mean real work, not the faux work you see middle and upper management do for a living. Flooding offices with paperwork to create the illusion of work while gutting the production floor.

Anonymous said...

In my opinion, there would be three "classes" of people:

1) There will be those who have the guts and temperment to incubate new technologies and new businesses. Throughout history, we've always have them and I believe we always will have them. But yes, we must encourage these people and make capital available. Let's call them the "Outlier-Incubator class" in deference to Gladwell's book.

2) There will be a "moocher class", people which do nothing but cash those welfare checks and breed non-funcrional children. We need to make sure that governments set policies that gradually reduce the moocher class in size and in dependency on government.

3) The third class is the "employee class", who are those who work for the the "Outlier Class". We need to ensure that this class has the skills and abilities and knowledge to do the high value work that the "Outlier-Incubator Class" creates.

4) The last class is the political class, which I think needs to be eliminated or at least declawed. We should not have professional politicians. These should be considered short term gigs. I'm thinking one 6 year Senate term, a maximum of 3 - 2 year house terms and possibly 1 - 4 year term for President, with a total of no more than ten years.

It is very important to sustain and grow the two productive classes, to minimize the moocher class and to greatly reduce the power of the political class. Our economy cannot drag along 10-15% of unproductive working age people doing nothing living off the welfare state, nor can we tolerate corrupted professional politicians.

Note that with globalization, we need jobs that are highly skilled which that cannot be offshored due to the level of skill.

Also note that because the speed of innovation and technology changes have become much faster than in the past, there must be some sort of system for retraining since the necessarily skills will also change.

Last, it is very important to protect the intellectual property of the productive classes on a worldwide basis. We don't do this well at all - the amount of stolen technology and use of IP without licensing it is rampant, particularly in China, the former Soviet Union and India.

Hello Birdy said...

I agree with the person who said it would work if we just cut off the losers and watch them suddenly grow a pair and support themselves.

But the crux of the biscuit is in what, this person who said ...

"however that would take a major miracle, or revolution. even the current republicans are just a milligram less socialist than the dems. "

Anonymous said...

Read Alfred Nock for a pessimist's take on the future of the mass of men:

Tony said...

The simple answer, nope, policy wont matter. The main issue is not legislative, but it is indeed cultural. I saw a youtube video about 3 years ago of "man on the street" interviews with kids (appearing to be between 15-21) in LA, I think. They were talking up the greatness of socialism and communism. It is truly appalling what the schools have taught to the childrennnnnn.

I don't think its just a matter of a missing desire to work or create, but more importantly, actual ability to do so. We X'ers were made fun of becuase we didn't know how to make change when we worked at McDs in the 90s. Guess what, been to McD's lately? They have all ages working there and they still can't make change. Technology has made things to easy and most of the population can't appreciate that, so they dont know how good they have it.

There needs to be a culling of the heard.

Philanthropist said...

The New American Dream is to eat until you're disabled and then have the government buy you an electric scooter so you can get more food.

Rick Caird said...

To get government to 15% of GDP, we will need a revolution of some type. "The Fourth Turning" by Strauss and Howe posits we are entering that period.

My guess is it will take a radical change in our politicians and what we expect from government. The more government we have, the more socialism and "spread the wealth around" we have. The more socialism, the less innovation and entrepreneurship we have.

You do note a major problem with change. Our educational system is dismal. Our culture emphasizes entitlement over opportunity. There is a huge class of people who simply unprepared to make it on their own. You may have noted the "not so much" stimulus package undid all the welfare reform put together by Gingrich and Clinton. That reform was gone in a footnote. There is a whole class of politician who derive their power from creating serfs in the guise of "helping people".

Any change like you propose will be gut wrenching. It will have to sweep away much of our current culture and mores. That will not be easy. But, I believe lour current government and our current Keynesian thinking is hitting the wall. What cannot continue, will not continue.

Anonymous said...

A 'revolution'is not needed. America's bankruptcy will do all the work.

jgriffin said...

Push the reforms. The people are a self correcting problem. Don't want to work, don't have to eat. Get the government out of the welfare business and give it back to the churches, etc. that actually care about getting people back on their feet and providing for those who truly can't work.

Anonymous said...

It isn't the spoiled GenXer's and Millenials you need to be worried about. It's the entitled Baby Boomers and Silent generation that should worry you. The bigger task facing us is limiting entitlements, and they're the ones consuming the entitlements.

Before we can unleash the private sector we need to get rid of the economic barnacles covering the hull.