Monday, December 4, 2017

A Tax Bill to Depress the Economy

A Tax Bill to Depress the Economy

The so-called tax bills just passed by the House and Senate will depress the economy, which is easy to understand.

Governments rapidly return all of their tax money to the economy for salaries, schools, health care, defense contractors, road building and plenty more. They tend to put tax money into the spending stream as it arrives generating spending for, and income to, millions of people widely dispersed in all the states. Federal tax money tends to be spent in the United States and therefore supports the domestic economy.

To cut taxes by billions and billions to enrich a small number of people and corporations with no need to return that buying power to the spending stream guarantees a slowdown. A look at annual Corporate 10K reports often finds billions sitting as cash in liquid accounts. Corporations are slow to return revenues and profits to the spending stream and they have no obligation to spend in the United States. Tax money that once supported our domestic economy will end up going abroad.

The rich speculate in stocks and real estate and trendy collectibles and bid up the price of things that already exist, all of which creates nothing much for employment or the economy. Recall the Credit Default Swaps and Collateralized Debt Obligations after the Bush era tax cuts, and the depression that followed.

Claims that tax breaks to the rich creates a bigger supply of capital to finance investments ignores the need for demand and the mass buying power that cannot exist in a country with the crude and extreme inequality of the United States and tax bills to make it worse.

The bloated and privileged rich can do nothing to benefit the country or the economy buying the Congress and helping themselves to the country’s buying power. Some of us think the wealthy and the Congress have a responsibility to support the welfare of the larger society. Instead they act like marauders and midnight looters, pillaging and laying to waste.