I think America has a cultural fascination with debt which derives from the delusion that debt somehow doesn't have real consequences, As Dick Cheney said recently, "Debt doesn't matter". Two examples are:
the corporate movement, whose figurehead was Michael Millikin, to make companies "more efficient" by increasing their debt load;
the government movement, whose figurehead was Ronald Reagan, to reduce taxes by replacing tax revenues with debt.
I think this is symptomatic of a society which does not want to face reality in an honest way. Indeed, there have been periods of time during the last four years in which the Bush administration has spent more than 100% of the national income. The U.S. is running an empire which it cannot afford -- but Americans don't want to know about that. For whatever reason, all empires seem to start piling up debt in an exponential manner.
Could a different tax scheme sober America up and wean us off our fascination with debt and other fantasy solutions? I find that hard to imagine.
John Crean, who founded Fleetwood Enterprises (NYSE:FLE) motor homes, has said the most difficult problem he had as CEO was to talk his executives out of going into debt. He said, "Everyone wants to leverage everything all the time. They say it's the only way to grow, but when I retired our sales were $1.25 billion and we got there without ever using any debt."
When I worked for Chevron, the company had only enough debt to maintain a credit rating. Debt-heavy companies cannot provide the stability needed by their customers, employees, and communities. Any shareholder who thinks their company needs more debt is a short term speculator no company needs.
Our economic fashion of the day, Monetarism, asserts the "money supply" should always be growing. "That's what provides growth, jobs, profit and prosperity", or so they claim. But what is the "money supply"? In large part it is nothing more than debt. Each new loan adds to the "money supply" and keeps it growing.
But Economies have grown and prospered in the past with a fixed money supply. Debt has become such a central tenant in the American belief system that it has even corrupted economics into a debt-centric world view where growth and prosperity are believed to be impossible without increasing levels of debt.
America eventually faces a difficult adjustment back to reality. In the meantime I find it doubtful that using a new tax scheme to rearrange the deck chairs on a sinking ship will accomplish anything useful. _______ Why not just move directly to America's preferred fantasy system and eliminate all taxes, paying for government services with newly printed money which "is free and adds to our prosperity by increasing the money supply".
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