My resolutions this year are a bit different than in the past. I guess I should restate that. In the past, I have resisted New Year’s Resolutions. If I am really serious about doing something, I can resolve to do it at any time. Typical New Year’s Resolutions only last until about mid-February anyway. The five items below make up a list of things I want to pay more attention to in the coming year. It is anything but a complete list, but it strikes me as a list of five very significant issues. I hope to refer to it often and continue to blog about these things more than many of the more superficial issues with which I have dealt in the past. Here it is:
1. The Value Added Tax, VAT. I actually think that VAT is a reasonably good idea. I think it is simpler than our combination of Income, Property, Sales, and Death taxes. It has a fatal flaw, though. There is not a chance in the world that it would be enacted to REPLACE those taxes. Its passage would only mean another layer of tax and more revenue for Congress to abuse. Tax reform will be a hot topic for the next 22 months and I plan to watch and pay attention more than I would normally. I predict we will see proposals of a very moderate VAT, like 1% (just like the start of Social Security), and that it will be only a foot in the door. I will work to oppose any new tax that does not replace a tax that is removed from the current long list. I predict a VAT will not pass in 2011 but will become a HUGE issue in the 2012 Presidential Election Campaign.
2. The Fed continuing to create money out of thin air. I continue to be very concerned that the mother of all bubbles (greater by a factor of 10 than the housing bubble) is being created right now by a Central Bank that the American People neither understand nor control. I predict that the Fed will continue to print money to allow our government to operate with few fiscal restraints. A Trillion dollars of new deficit each of the past two years has been possible only because of your friendly local Fed. The Fed will also engage in Central Planning of the Banking Industry that will further remove our economy from any stable base (like existed under the gold standard) and will greatly increase the severity of the crash that will be the inevitable outcome of the bubble they are creating. I predict that these short term measures will continue to prop up politicians and will eventually bring an end to the position of the U.S. Dollar as the standard world trade currency. I predict that the Fed has the political backing to carry out the sherade for 2011 and possibly even 2012 (until the election), but am convinced that hyper inflation (Jimmy Carter style, at least) will occur within the next 3 years unless we throttle the Fed or return to a gold standard.
3. Virtual Civil War. I don’t see a war like in the 1860s, but I do predict a battle that is every bit as influential in setting the path for the future of our country. I see wage earners vs. dole takers. I see Investors vs. politicians/regulators who would tax and spend rather than invest. I see Private Sector Employees vs. Public Sector Employees. I see entrenched Keynesians vs. Libertarians and Free Bankers. What will happen when private sector unions finally discover that public sector unions are driving taxation and deficit spending to the point where they (private sector unions) lose wage parity and the power to control our political direction? What will happen when Investors come to the realization that the government has in the recent past and will continue in the near future to nationalize businesses and industries? Unless a concerted effort is made to stop pitting one part of our society against the other for political gain, I fear we will have a virtual Civil War. It will be between unelected regulators and the people regulated. It will result in massive non-compliance with taxes, regulations, and law in general. We can’t build enough prisons to handle a lawless society. We can’t hire enough enforcement personnel to track down all scofflaws. I hope for unifying, straight talking leadership but fear we will get more of what we have now, a prescription for the fracture of America.
4. Global Warming. This is a multi-facited problem that is as much about Globalism as about Climate. Currently, we fight over whether the climate is changing and if so if the change is man-caused. This is a microcosm of the debate on Globalism. Is everything so entwined that every action taken by political leaders in Sri Lanka has an effect on politics in Andorra? Is there a need to have world governing bodies? Must all societies agree to conform to the same standards? These are questions about which we will hear exponentially more in the coming year. I hope to stay aware of the drive to “One World Order” and to understand the consequences of such a system. Just the total ineptitude of the U.N. leads me to be very skeptical of any world governance proposals. I am also concerned that the “global climate change” fear-mongering is just an attempt at a foot in the door advancing Global Government.
5. Innovation. It is my opinion that here is where the real hope lies. As mentioned before, I loved The Watchman’s Rattle by Rebecca Costa. I think she is really onto something and it is an important concept for us to watch. The evolution of our brains has not kept pace with the evolution of our societies and the growth of our populations. We are losing control of our destiny because we are overwhelmed by complexity beyond our capabilities. Truly, what in life has not become more complex than it needs to be or than we want it to be? I plan to learn more about the human brain and hopefully train mine to be more open and innovative. I think we will develop many of the cures/solutions/fixes that will keep us from collapse as a society. But, I don’t think it will come easy. I think that key innovation will occur in societal/political organization (see Theory of Power by my son, Jeff Vail, for one take on this). I think solutions will come in understanding and using human emotion and belief systems. I hope solutions come from more reliance on facts than from retreating to the comfort of beliefs.
The good news is that change for the better is occurring, if not at the national political level. I already notice when talking with Liberal friends that they are disgusted with many of the Orwellian measures that are being forced upon us. They are upset at the level of taxation and regulation. They are concerned about how many people are out of work and can see that at least part of it is due to government policy that encourages sloth/discourages work. I notice when talking with Conservative friends that they are worried about backlash and the growth of right wing anarchist groups. They are concerned that too many people are talking about guns and taking things into their own hands. They worry about loss of respect for the law. I actually think there are a growing number of folks on both sides who are leaning more toward a Libertarian/Get-Government-Off-My Back attitude. I think there is a great opportunity for us to build on these feelings and start to work together to right the wrongs of the past 80+ years of movement to the deficit-financed welfare state.
I wish everyone a Happy, Healthy, and Thoughtful New Year. And while you are having that Thoughtful New Year, take the time to comment here and help the conversation. Last year, this blog was viewed over 345,000 times, but there were fewer than 500 comments. That is too much of a one way street for my liking. My hope for the New Year? More comments.
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January 5, 2011 at 8:45 am
NGC
Isn’t a right wing anarchist an oxymoron? Or at least right wing in the traditional sense of the word. I accept there are anarchists who have moved beyond such definitions and are not social anarchists. But they still don’t neatly fall in with the political right.
January 5, 2011 at 9:59 am
ttoes
Thanks, NGC for taking the time to read the post and to comment. I appreciate the proper use of words and may be guilty of a use of “anarchist” and/or “right-wing” that is a bit too colloquial. I was too quick to use labels. My intent was to describe fear of the growth of groups who are anarchist (anti-government) and lumped with conservatives (the Right Wing) because of their belief in the 2nd amendment and religious freedoms. I should have called them Political/Religious sects that hole-up in compounds that are highly fortified and who do not abide by the laws of our government. I guess the fear I was trying to describe was the fear of something like a Vigilante mentality. Hope that makes more sense. I would be curious to know what you think of my prediction of a Virtual Civil War.
Thanks,
Tom
January 5, 2011 at 3:26 pm
pmv
All interesting issues. I’d be curious to know your thoughts on switching to a Gross Receipts tax model instead of a corporate income and payroll tax. Also, what do you think about the Deficit Commission’s proposed tax changes? I think it is quite interesting that it appeared to get pretty even support from republicans and democrats. I kind of like the idea of removing lots of specific tax breaks in exchange for a generally lower tax rate.
Also, where are you getting the figure that the central bank bubble is 10 times bigger than the mortgage bubble? It’s hard to find numbers on these sorts of things, since no one really wants to own up to how much they owe. That figure seems high, but I really don’t have any basis for that.
January 5, 2011 at 9:17 pm
ttoes
PMV,
Your comment is a good one. The “factor of 10″ was my best guess based on recent reading. If you go to http://www.ny.frb.org/markets/soma/soma.pdf, you will find that (if I read it right) the Fed has issued about $1.15 Trillion in currently outstanding debt in the open market account alone. If, instead, you estimate the Fed bubble as the total of the National Debt it is more like $14 Trillion. I have seen estimates of from $1 Trillion to $8 Trillion for the total value of the bad mortgage loans outstanding. That means if you estimate that the bad mortgages are 25% under collateralized, the housing bubble is between $250 Billion and $2 Trillion. Put all those together and the Central Banking Bubble is somewhere between half the size of the housing bubble and 56 times the housing bubble. I haven’t found anyone who can explain what happens if the entire national debt came due or the bad mortgage loans were all called at the same time. What all this says to me is that: 1. Both are HUGE problems; 2. It is almost impossible to account accurately for either problem; 3. I may be exaggerating; 4. This is a blog and the subtitle is “One Man’s Opinions and Lots of Questions.”
As to the taxation question, I guess I’m not over the top excited about the Deficit Commission recommendations. My broad brush comment is that it is like repainting the jalopy – looks nice for a while but still doesn’t run worth a darn. I think what is really needed is a slow transition to a completely different system. That brings up your question about a gross receipts model. Taxing gross receipts is not as good, in my view, as a sales/use tax which taxes consumption. I guess where both consumption and gross receipts taxes bother me is the same place income tax rubs me wrong – all the exceptions. Do you want to do like Hawaii and give huge exemptions for insurance agents and businesses owned by disabled people? Do you want to tax at every level of receipts (like the VAT) miner to smelter, smelter to refiner, refiner to mint, and mint to retail customer? Remind me later and maybe I will take the time to figure out what I like best in taxation (not much) and I will do a post.
Thanks for the comment.
January 6, 2011 at 10:37 pm
sandals911
What I like about the Gross Receipts tax is that it taxes general business activity and doesn’t deincentivize profit. Of course the devil is in the details. It was proposed in California with an exception for purchased goods, but people didn’t like that because it meant that high tech and finance jobs (big in CA) where most of a business’s expenses are in payroll would pay much higher taxes than manufacturers, retail, etc.
I also kind of like the idea of getting rid of the mortgage income tax exemption. This just seems like another way for the government to influence what we do and it also incentivizes carrying large mortgages and never paying down the interest.
January 7, 2011 at 9:09 am
ttoes
911,
I agree with attempting to choose a method of taxation that does not serve to demotivate innovation, thrift, work, etc. I also agree with your point on “detail”. Take income tax for example. Start with a simple system. You make “x” dollars income – you pay “y” percent tax. Then add tax brackets – not quite as simple. Now add deductions (personal, investment, business), about 150 separate types. Getting a bit complex. What about exemptions? You get the idea. We (our government) collects taxes to pay for government operations, or, at least part of them. If you watch Congress, the main reason for taxation seems to be as a tool for social engineering, and environmental engineering, and cultural engineering, etc. The original appeal of a VAT is similar to the appeal of a “flat tax.” It is simple – until we start using it for non-tax revenue purposes. I have little faith in any government body refraining from using taxation as a tool for other ends than funding government. So what is the simple system that raises revenue without rewarding sloth and consumption or without penalizing work and thrift?