Friday, April 5, 2013

“E” is for Economy (my occasional rant)

global-economic-growthOn July 27, 2011 Paolo von Schirach stated that “America is running now the serious risk of being pitied or laughed at by friends and foes alike. The once mighty Superpower cannot extricate itself from an economic and fiscal crisis that, however serious, is hardly terminal.” This was on the occasion when the US Congress was unwilling or unable (depending on the point of view) to pass a simple bill that would enable the Country to pay past obligations. They fidgeted, they fussed, they delayed and in the end, passed the bill. But in the interim, the United States’ credit rating was down-graded by two different agencies. It was a deliberate political move, intended to undermine presidential policy.

What I’m wondering about is: did those politicians realize that they weren’t just ruining the American economy, but also the economy of the entire world? It doesn’t really require the brain of a genius to realize that the economy of any country is dependent on the economy of other countries. To paraphrase John Donne, “No nation is an island unto itself.” The economy of each country is so intertwined with that of other countries that the decline of one country’s economy will inevitably result in the decline of the economy of each country that has any type of financial exchange with it.

Let me explain. Country A owes country B a certain amount of money; it’s not worried, because Countries C, D and E owe it a much larger sum, so it should have no problem paying off its debt to Country B. Country B also owes money to Country F, which in its turn owes money to Country G, and so on. Clear as mud, right? In a nutshell, everyone owes everyone else money. If one country is suddenly unable to meet its obligations with another country, this causes difficulties for that country to meet its financial obligations; in the end we have something that resembles a dominoes effect from one country to another.

Most countries are also lined through commercial trade. What happens if Country A’s credit rating has been downgraded, as happened to the US in 2011? Other countries are going to be a little less eager to accept the request of said country to buy merchandise on credit. They will want cash up-front; without this, Country A will be unable to obtain the desired merchandise, and at the same time, the other countries will also be out of luck, because they really need the sale so that they can buy other products that they need but can’t produce on their own.

And what is really bad is the effect in Country A’s own backyard. Country A needs new roads, new bridges, new hospitals, etc. They contracted the year before to have this work done, providing jobs, which produces a better economy. Unfortunately, there isn’t enough money in the till to pay for the work that has already been done, so what do you do?

The way I see it, there are three choices: raise taxes on EVERYONE, take money out of other coffers (which calls for austerity measures) or raise the debt ceiling. Raising the debt ceiling should be a temporary measure at best; it alleviates the immediate pressure but in the end simply adds on to the internal debt. Taking money from the coffers of other programs is a little like stealing from Peter to pay Paul. It puts a terrible pressure on the recipients of the funds that were taken, and leads to an increase in austerity; the experiences of countries such as Greece and Italy should teach us that austerity measures don’t work – they simply create resentment and unrest.

I my opinion, the best way is to exact taxes on everyone. It should be a reasonable tax that allows all of the people to enjoy enough the fruit of their work, not just a lucky few who actually enjoy the fruits of other people’s work. If people have more money in their pocket, they will spend it, which will increase the economy. People who don’t have money to spend on extras, won’t. It’s as simple as that. It seems to me that in a country that is supposed to be built on equality, there should be equality in all things, including taxation. And if everyone pays their fair share – some paying a heavy share with little gain and others paying a lighter share with a lot of gain is not quite fair – then the country’s economy will necessarily be improved. 35% of 20,000 (7,000) +15% of 3 million (450,000) =457,000 is much less than 20% of 20,000 (4,000) + 20% of 3 million (6,000,000)=6,004,000.

Okay, rant over. Thank you for “listening”. But I do think it’s fair that everyone that everyone pay their fair share to help in the economy of their country, whatever country it may be.   

 

Sources:

13 comments:

  1. Don't even get me started with the Economy. That's why I chose Elvis - LOL.

    ReplyDelete
    Replies
    1. I fully understand. That's why I classified it as a rant. ;(

      Delete
  2. Our economy (in the UK) is a joke - except that no, it's actually seriously flawed!

    ReplyDelete
    Replies
    1. It's the same way around the world, although I did think that the UK was at least slightly better off than we are in the States. I guess all we can really do is just laugh--if for nothing else than to not start screaming and pulling out our hair!

      Delete
  3. Good rant, Mary! I'm very thankful that Canada is doing fairly well these days but at the same time worried that the proverbial "other shoe will drop" at any time. As the U.S. goes, so goes the rest of the world in general and your next door northern neighbour, in particular.

    ReplyDelete
  4. Some people make such a ridiculous amount of money that a higher tax would have no effect on their lush lifestyles, while others make choices about whether to pay for heat or groceries. I'd rather tax the person who owns as much wealth as 50% of the country than make a poverty stricken family give up necessities of life to pay Uncle Sam. Yes, there are individuals who don't pay taxes, but they pay a lot more in other respects. If we were to tax the rich as they were taxed in the 1950s, our economy would improve tremendously.

    http://joycelansky.blogspot.com

    ReplyDelete
  5. Your post makes a lot of sense. I'm okay with taxation. We all have to put forth to better our economy.

    ReplyDelete
  6. Sadly, I do not see our economy improving with a simple tax increase. There will have to be cuts, and there are SO MANY PROGRAMS that we can do without. Not every program out there that the government funds is necessary and vital to the average citizen. When our government issues money for scientists to study cow patties to see how much carbon dioxide the patties give off in excess of millions of dollars-- I have to say there ARE programs that can be cut at a time like this.

    There is a LOT Of waste in our government-- and it will take someone with a good business efficiency mind and one willing to stake their popularity, to get down to business and make the necessary cuts. It might not be enough to cure the debt problem, but it sure would help.

    The other part of the equation is that we have so many companies who have taken their businesses over seas, eliminating jobs here. There are no incentives for these businesses to stay here. This does NOT help our economy.

    Then we have to fight for the jobs that are left-- many times competing with illegal immigrants, who will work for much, much less. I'm all for LEGAL immigration...but not this illegal immigration stuff. If people only understood how much it costs us per YEAR to fund illegal immigrants--we would have long ago sealed off the borders.

    Oh and I could go on, but I won't...because I'm just rehashing a bunch of stuff that we all already know, but seemingly no politician is willing to do anything about because they want to get re-elected. UGH. If only these elected officials would buckle up and do the right thing for the long term, we might have a better outlook.

    We reap what we sow.

    Cheers, Jenn.

    ReplyDelete
    Replies
    1. Thank you, Jenn. I agree that there are too many unnecessary programs. The only problem is that the programs that are being defunded are the more important ones. Of course, what is necessary and what is not are at times in the eye of the decider. Perhaps our members of congress should receive an hourly wage instead of a lump sum. that would really cut down on waste!

      Delete
  7. Don't know how your tax system works but here in NZ we have 4 tax levels - as you weave your way up the levels you pay higher tax. We have a pretty good social welfare system too. Some people here think it's unfair that higher income earners are taxed so heavily to dish out to those who don't want to work. I can see both sides of the story, I therefore don't have an opinion.
    Thanks for visiting my blog.

    ReplyDelete
    Replies
    1. You're welcome. Italy also has the same tax system as NZ. Unfortunately, here in the US they feel that big companies don't have to pay high taxes, because they provide jobs. This is fallacious and stupid, because most of the jobs they provide are outsourced to other countries, and they are laying off here in America, because the economy is too low to buy anything here.

      Delete
  8. I can understand your frustrations, Mary.

    ReplyDelete
    Replies
    1. It IS truly frustrating. If we could only get our political "leaders" to listen to their constituents, things might get better, but I won't hold m breath.

      Delete

I would really love to read your thoughts, so leave a comment so we can all converse. Thanks.