Flat Tax - A Cure for a Non-Problem?

Candidates Perry and Cain have proposed competing flat tax proposals that are appealing for their apparent simplicity. A better test of their value might would be whether these proposals treat Americans equitably and whether they address the problems our economy faces.

The argument that a flat tax would help the economy is based on the premise that it would lead to increased investment in US businesses, plant and equipment resulting in job creation. This approach presumes that our economic woes are rooted in insufficient capital investment and productive capacity.

Reality intrudes at this point. The problems we face stem not from a lack of productive capacity or the capital needed to invest in new plant and equipment. China and the US already have too much productive capacity. The banks have too much cash. Our public companies have low debt equity ratios. The problem lies in the market place where stagnating wages, low home values, and exported jobs have sapped the ability of the consumer to buy new goods and services.

The Flat Tax approach will exacerbate this problem by increasing taxes on most consumers thereby limiting their ability to purchase new goods and services. Without growing markets, new investments will fail to generate the kinds of returns needed to justify them.

It's no wonder that it's the wealthiest voices that are fervently backing the Flat Tax approach; they will be its biggest beneficiaries, at least in the short term. In the long run, continuing to increase taxes on the middle class and poor will only shrink our markets and further damage our economy.

Let the Markets Work....the way they are supposed to

Candidates for the Republican presidential nomination prescribe allowing free market forces to work as critical to curing our economic woes. I agree 100%.

Most of these same candidates ignore the conditions that free markets require to work their magic. Effective free markets need free and open competition among participants. Unfortunately if left to themselves, markets tend toward monopolies undermining the competition that makes free markets effective. Government's critical role is to act as an unbiased referee to minimize anti-competitive practices such as price fixing, collusion, and other barriers to efficient markets and their benefits.

Teddy Roosevelt understood the referee's role when he busted the trusts (monopolies) and called for a "Fair Deal" to allow new and smaller companies to compete on a fairer basis.

Teddy would likely be appalled to see what passes for 'free markets' these days. A handful of "too big to fail" national banks dominate the marketplace and take huge risks with tax payer guaranteed money. A few, very large health care insurers and pharmaceutical companies have been handed huge markets to divide up among themselves. Their customers are either not allowed to bargain for prices or are so disadvantaged by knowledge and regulations that they cannot bargain effectively. Creativity has been stifled by new copyright extensions which limit the size of and access to our public domain for the benefit a few large media companies. Big Oil, Big Defense, Big Airlines....the list goes on, but the thread is the same: competition has become so stifled that our "free markets" are no longer free.

How did this happen? The referee has been bought and paid for. The rules that used to provide for a level playing field have been corrupted to create an unfair advantage to those with the deepest pockets and most access to the national legislative process.

A recent Bloomberg article proclaimed that "the area surrounding the nation's capital is now the richest in the nation". At the same time Federal employment is down, but the number of lobbyist representing the private sector has steadily increased. This well heeled population surrounding the nation's capital earns makes it's living from corporations, industry groups and labor unions who employ them to tailor government policy to their liking. It's a big expense, but also sound investments which provide excellent returns to their investors.

We need to restore our free markets to health by making them level again and reopening them to the competitive forces essential to their proper functioning. How? By restoring the level playing field to our electoral process. The necessity to raise huge campaign contributions requires that both candidates and incumbents be bought and sold by the highest bidder before they take office or if they have a chance at reelection. Even a member of the House has to raise about $20,000 each working day if he or she realistically wishes to stay in office.

If we want more competition in our commercial market places, we need to restore competition to our political market places by instituting government funded election campaigns and reducing campaign periods to several months, not several years. With our legislators and elected officials no longer being elected by a handful of deep pockets, they can act as honest referees to restore competitiveness to our markets.

If our commercial markets are free and open, they can be as effective as these Republican and many Democratic candidates claim.

Why Doesn't the Tea Party Embrace Occupy Wall Street?

Our economic woes have resulted in dissatisfaction and protest across the nation. The first group to organize to highlight the abuses of corporate cronyism was the Tea Party which excoriated the current administration for bailing out the banks, allowing public money to be used to pay huge executive bonuses, and the stimulus package. Tea Party-ers clearly distinguished between Main Street and Wall Street. The Republicans, Fox News and other conservative groups have supported the Tea Party's growth and efforts to become a substantial political voice.

Occupy Wall Street and its many branches across the nation have focused on many of the same ills, such as corporate cronyism in government, exorbitant bonuses, and the economic inequality that resulted. Yet they have been reviled and ridiculed by the Far Right, Fox News, and candidates for Republican office.

Why? Don't the Tea Party and the Occupy Wall Street share more in common than differences? Couldn't they achieve more by working together than by reviling another group that shares their dissatisfaction?

Hopefully the Tea Party will wake up at some point an realize that they and the Occupy Wall Street are mirror images of each other who need to find some way to work together to achieve the change they both seek.

Unequal Income Distribution Hinders Growth?

Nicholas Kristof's recent OpEd piece notes that

"In his important new book, “The Darwin Economy,” Robert H. Frank of Cornell University cites a study showing that among 65 industrial nations, the more unequal ones experience slower growth on average. Likewise, individual countries grow more rapidly in periods when incomes are more equal, and slow down when incomes are skewed.

That’s certainly true of the United States. We enjoyed considerable equality from the 1940s through the 1970s, and growth was strong. Since then inequality has surged, and growth has slowed."

Too Much Government? Yes!

Competition and free market forces are key to a healthy economy as long as there are safeguards to offset the pressures for the formation of monopolies. Monopolies earn above market profits by limiting the competitiveness of other firms in the market. How? Unfair competition, price fixing, patent trolling, and a host of other edges which business schools now call "barriers to competition". It is up to government is to be the fair referee. Americans understood that back when they busted up the trusts under Teddy, set up the FTC and SEC. Unfortunately those safeguards have seen their power eroded.

I too distrust big government and government regulation when deep pockets use the Federal Government to abet unfair competition and tap the tax payer pocket book to transfer wealth from the taxpayer to the campaign financeer. That's socialism too. Mostly corporate socialism.

Lobbying for industrial subsidies, undermining bargaining, allowing unfair licensing practices, making back room deals for access to resources, and the like have become the quid pro quo for campaign contributions which officials need to get elected.

Ike warned back in the 50's about the increasing control of the military-industrial complex. Since then we have seen each large industry copy that model to their enormous benefit. Large banks are the worst; they made the S&L crisis look like a hiccup. Big oil, big pharma, and health care insurers have all done it.

That horse is long, long out of the barn. The referee has been bought and paid for by the booster clubs. The results are clear: the top 1% has the field tilted in their favor, and the rest of society is slowing slipping downhill. If the CEO of public company blows it, he walks away with millions. If a group of banks lose trillions playing with government guaranteed money, they get bailed out because they are 'too big to fail." If industries improve their productivity, the benefits go entirely to the execs and are not shared with the wage earners. It goes on.

It's been a great short term ride for those at the top, but for the country as whole, our economy has become less and less healthy which has underminined our international competitiveness, destroyed our middle class, increased the ranks of the poor, and polarized our politics.

Is Herman Cain Really an "Out Sider"?

"Cain's campaign manager and a number of aides have worked for Americans for Prosperity, or AFP, the advocacy group founded with support from billionaire brothers Charles and David Koch, which lobbies for lower taxes and less government regulation and spending. .....his years of speaking at AFP events have given the businessman and radio host a network of loyal grassroots fans.