The link between deficits and taxes

June 18, 2009

This chart from ClusterStock confirms what I have been saying: big deficits lead to higher taxes (1982, 1990, 1993, 2009) … at least I think it does

debt-and-taxes

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Weather we like it or not …

The economy is a complex and chaotic system. Dynamic and constantly changing conditions are just as impossible to control as the weather. Hurricanes, tornados, dark clouds, sunny days, beautiful weather are beyond the control of man and change from day to day, hour to hour.

Perhaps the mission of the key watchdog should be like NOAA: to monitor and predict and forewarn of disasters looming. Another body would be (capitalized) to come in and rescue and clean up after storms and disasters. Like flood insurance, investors would by “disaster recovery insurance” that would capitalize these disasters for quick recovery.

Although Hurricane Katrina showed us that government agencies charged with responsibilities to respond and rescue the public can (and do) fail miserably, overall, there is no way to stop hurricanes. A better case can be made for forewarning and rescue. If there is sufficient forewarning, investors can use better judgment and “seek shelter” and save themselves, thus saving much carnage and avoidable destruction.

The NOAA model, or in this case MOAN (Monetary Observation And Nominalization,) would be charged with responsibility of alerting and forewarning the public and policy makers of critical conditions occurring in the economy. GROAN would be the public insurance agency that would provide disaster recovery insurance.

A type of value added (value lost) tax could be tacked on to every stock transaction (like a broker’s fee) that would go into a “recovery fund.” This would have many benefits, including a “volatility governor” effect by creating a slighly higher cost to trade stocks, thereby slowing the system and reducing volitility, without impacting economic activity.

I would think this would be policitally acceptable as this would be a type of “greed tax” somewhat like a “sin tax” on tobacco and alcohol.

David Matthews

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