The Broken Society of Consumption

From a forum debate on tax policy, savings rates, and why the economy depends on stupid spending.

The goal of a taxation system is to fund the federal government into larger and better services for its people (hopefully) and help manage the economy to minimize negative production cycles and maximize positive runs (at least that is what the central bankers tell themselves).

Hehehe, here I was being extremely dry in my humor by acknowledging that the goal of the federal government worker class will be to enlarge the government. It has to be; these guys want 3 bedroom houses with swimming pools and trips to Las Vegas as much as the rest of us. Because it is a government program there is no avenue for profit and bonus through greater gains of efficiency as there exists in the private sector, the only way these guys are going to get that house and trip to LV is to hire more workers below them so they can make director. This is just plain common sense. We the people should realize it and privatize as much of the government as possible, or at least place incentive programs that mimic those found in the private sector. And before anyone jumps on me for potential for abuse; please, the governmental powers are abused just fine without these incentives. We just have to be very careful about what we incent and how we measure excellence.

But, um, yeah, my goal is NOT a larger government.

The Flat Tax Problem

Now this is what would happen if we had a flat tax rate:

The poor and middle class being financially smart-challenged when compared to the rich would just keep SPENDING ALL THEIR DAMN MONEY like idiots. (Myself included.)

The rich would spend a trifling of their income on consumption, for there really is only so much Godiva Chocolate you can eat in your Ferrari. So the rich would just keep stockpiling their money.

The Savings Rate Collapse

Actually, indeed I AM saying that Joe Average is stupid enough to spend ALL of his money. This is just plain true. Our savings rate in the '50s and '60s used to be between 10 and 20%. By the early '90s it fell to just 1.5% and now it has gone past 0 to -0.5%. Now this doesn't mean that ALL Americans are not saving. What it means is that an astonishing amount of people are spending at -5 to -50% to make up for all the guys who are saving at 5% to 50% of their income.

So what you say? Screw them if they are that careless and selfish not to plan for the future. Their mom should have told them the story about the three little pigs. I am actually there with you in a very hardcore, conservative kind of way. I have sympathy for people who have family tragedies and I would like a social net to save them; but people who don't save I would LIKE to say SCREW them. BUT here is the rotten kicker: The economy is WAY too dependent on the Stupid Joe Averages. Think about it, how many Tobacco companies would say "hey, man, you really can't afford this, why don't you keep your money and quit?" Or casinos? Or fast food companies? Or car companies who look at your credit report and say "I could sell you this car, but it wouldn't be good for you — why don't you drive your current car for 3 more years and then get a used car." They don't do this for it is just not rational to turn the business away. Even if they did, what would be the point? Another merchant would just go ahead and relieve the guy of his money.

We have broken our society by driving consumerism (NOT CAPITALISM) to the point where the world's great economies are dependent on the majority of its population to practice Stupid Spending.

Now think about that for a moment. It is true, you gotta give me that.

What I Actually Want

Here is what I want: A small government that does what it is supposed to do (Libertarian), with protection for the environment and the seeking of renewable consumption practices (Green), with a government that stays out of making morality laws (Democratic), who recognizes that individual and society is most respected when businesses are encouraged from small to large to be productive (Republican). What I don't understand is why there isn't a major party for this.

How Do Rich People Get Rich?

How does a rich person get rich? Through tax breaks or business activity?

It is through business activity. So there is a tax level that is too high and the rich people move their capital to a more tax-friendly state to do their business. That is why so many American companies are now off-shore based. BUT here is the thing that is the kicker — they want the effect of a progressive tax system in promoting an active poor and middle class in the consumption of their products.

What our government should be doing is fueling consumption by slashing taxes for the middle and poor classes so as to keep the economy kicking. Or perhaps it should level punishing taxes against the poor and middle so that they learn how to save? No that never works, for when that happens some jerk takes power and gets all the common guys behind a stupid fascist or communist plan and we lose whole societies and have wars and other nonsense.

Make It Cool to Pay Taxes

I say we have cool special ways of marketing taxes like:

Agree to a 40% tax bracket and pay over $10M in taxes and you get to be a Hero of America complete with a 15 minute TV special, a Presidential Handshake and a rocket ride in an F14 or something cool like that. Maybe even a nifty belt-buckle that stupid TSA agents will confiscate.

See, we have this whole cool, consumer marketing thing going on, let's make it cool and image enhancing for the rich to pay their taxes instead of avoiding them like they are right now.

-Erik