The Crossroads of Collectivism: Trump Tax Plan, Laffer Curve and Reagan & Thatcher Prosperity in the US & UK
Collectivist States seek Total State Power by Force, Political Action & Economic Means. Once a State controls the Means of Production & Distribution it quickly controls the Wealth of the People. Under Compulsion, Liberty evaporates & horrid enormities occur as the State purges Citizens refusing surrender. These ill effects are the same regardless of which sector in the political spectrum Collectivism arises from.
The United States has reached a Tipping Point beyond which the Aggregation of Total State Power into the hands of a Cabal of Rulers of vetted Legislators & private Central Bankers will be fully consummated – unless a political course change for the Ship of State is made in the present election cycle.
With the reasonable premise we do not need to be taxed more – here are some thoughts about taxation policy & economic circumstances underlying the present, or any, political circumstance.
To start, it is always far more serious if taxes are too high for effective compliance – than if an increment of revenue is lost by tax reduction. Lowering tax rates actually increases revenue – as careful consideration of the following information shall illuminate.
Consider President Ronald Reagan’s experience.
Reagan made tax cuts with a cooperative Legislative Branch. Presidential Candidate Donald Trump can do the same – should Republicans hold control in the House & Senate in the general election of November, 2016.
Taxation advisor Arthur Laffer was a member of Reagan’s Economic Policy Advisory Board from (1981-1989).
Laffer also advised Prime Minister Margaret Thatcher on fiscal policy in the UK during this period.
As you may be aware, simply stated, Laffer’s taxation premise is:
If taxes are low, compliance is high & if taxes are high, compliance is low.
Dubbed the Laffer Curve (LC), it is a quantification of human nature known for centuries.
The chart below expresses the LC axially.
It also happens to demonstrate the realization European monarchs arrived at several centuries ago, assisted by the Rothschild family banking franchises. When you tax people around 50% of their earnings, they begin to lose incentive to participate. For a monarch this could mean losing everything – including one’s head in a revolt.
Enter the concept of Fiat Currency – printing money to bridge the gap between a monarch’s cultural limitation in tax receipts & the additional cost of Imperial Designs. This is the camel whose nose is presently under the US fiscal tent.
A Monarch (or Government) has only to print more currency to reach further into the purses of Subjects (or Citizens) because each unit of currency in their pockets is devalued by the addition of newly created units arriving in circulation, printed out of thin air, in the act of Monarchical (or Legislative) Fiat.
After all, a nation’s currency in its entirety, reflects the sum total of a nation’s Debt – which can be divided into an infinite number of parts or units.
This is the same Central Banking trick known today as ‘Inflation’ – so named because prices of goods & services become necessarily inflated to reflect the intentional devaluation of each unit of the currency.
In this way, Legislators escape culpability for grossly over-spending the People’s Treasure – inflating away its value in an unending game of self-interested appropriation – under cover of Central Bank ‘monetary policy’, over which politicians purposefully have no statutory control.
In return for this political cover, Central Banks accrue interest on Debt Notes they issue from thin air – paid by a government with the power to coerce its people through taxation enforcement up to & including penalty of imprisonment or corruption of blood.
Thus Inflation is onerous, unseen, unbridled & unlegislated Taxation.
By the way, the Monarch (or Government) does not suffer the effect of Inflation, because as much fiat currency as necessary can be printed without limitation – to pay for the original purchase supporting imperial (or state) designs.
The totality of this scheme is quite divisive in governments of popular form.
A few examples illustrate the point.
If government employees receive ‘inflation-adjusted’ compensation, they have a compelling personal stake in perpetrating the unlegislated tax of inflation upon their fellow citizens. This self-interest becomes manifest in several unhealthy expressions for a Republic.
For example, citizens who take government pensions or benefits become wholly compromised in any consideration of the merits of government monetary or other policy & should honorably absent themselves from political advocacy – unless willing to demonstrate complete renunciation of those benefits.
Similarly, the until recently, unheard of practice of active duty US Military Officers engaging in political advocacy – previously forbidden by Service traditions & the Uniform Code of Military Justice (UCMJ) – is now commonplace.
Witness recent Obama campaign signs in the front yards of active duty Military Officers in Washington, DC area communities. Something compelled these officers to do this. This is dangerous precedent for the preservation of Liberty, under a latent threat of military coercion in US politics.
Thus governments become entrenched in folly & inequity that ultimately leads to their dissolution in revolution.
To conclude the point on taxation policy, the following from the Laffer Center’s website is succinct:
“Importantly, the Laffer Curve does not say whether a tax cut will raise or lower revenues, nor does it predict that any and all tax rate reductions would necessarily bring in more total revenues. Instead it says that tax rate reductions will always result in a smaller loss in revenues than one would have expected when relying only on the static estimates of the previous tax base. This also means the higher the starting tax rate, the more dramatic the supply-side stimulus will be from cutting the tax rate. It is possible this economic effect will swamp the arithmetic effect, causing an actual increase in tax revenue.”
Reagan tax cuts combined with cuts in Federal spending produced the real, positive economic effects Laffer described.
Mrs. Thatcher achieved similar results in the UK.
Prosperity resulted.
How much?
For a cogent discussion of the remarkable results achieved with tax reductions by Reagan see: Revisiting Reagan Tax Cuts.
Then politics crept in and the advances were incrementally squandered by forces of what President George Washington called ‘Interest’ – meaning political Self-Interest. In our discussion, we can call this effect ‘Entitlements’.
Mrs. Thatcher codified it another way, calling it socialism: “The problem with socialism is that you eventually run out of other people’s money.”
How did this happen? For an excellent summation see these two links:
Some further observations about how this happened are worth emphasizing. They highlight structural flaws which must be corrected by the People using further Constitutional Amendments.
First, in the smoke & mirrors world of Congressional appropriation of funds & extra-governmental management of monetary policy by the Central Bank Cartel known as the Federal Reserve (Fed), there exists a Deliberate Disconnect in Accountability to the People – because federally elected Legislators cannot be held accountable for monetary policy actions of the private entity Fed. This crippling slight of hand supports vast transfers of the People’s Wealth to the Fed over time – the very root of income disparity in our society today.
All this results from the Federal Reserve Act of 1913 – which established US Central Banking for the fourth time – and from the purported ratification of the 16th Amendment to the US Constitution in 1913, which created Income Tax.
It’s no accident they occurred simultaneously – a one-two punch for the Rothschild Model in a popular government.
“AMENDMENT XVI — The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”
We’ll deal further with rectifying the problem of the Fed below, but there’s an obvious solution to the inequities & inefficiency arising from Income Tax.
Income Tax must be abolished by a 27th Constitutional Amendment repealing the 16th Amendment. Income Tax can then be replaced by a Consumption Tax in a 28th Amendment. The Consumption Tax (CT) is a very, very low automated percentage of each transaction (no more than 1%). CT obviates the need for an Internal Revenue Service
(IRS), which can be largely retired & eliminated. The aggregate volume of transactions occurring in the US economy ensures more than enough revenue to conduct the nation’s business. Happily, the Laffer Effect of tax reduction boosting an economy, will ensure the US economy reaches the most robust dimensions ever enjoyed.
Understanding the elegant simplicity & unimpeachable fairness of the Consumption Tax is subject for another discussion. Suffice to say here, CT is real, effective & has been successfully used before in the United States.
Additionally in 1971, the Nixon Administration repudiation of the ‘Gold Standard’ backing US currency opened ‘Pandora’s Box’ to the ills of fiat currency because Legislators, in collusion with Central Bankers, could print untethered currency to their heart’s content – and have! It took Federal Legislators & Presidents a few years to fully realize they were no longer accountable to the People for ‘Sound Money’, but they caught on quickly enough – in an era of Legislative Bill ‘Riders’ – to do serious damage to the national Treasury. Federal Debt has spiraled uncontrollably upward ever since. A return to backing US currency with Gold & other precious metals will help quickly dispatch this Inflation Racket. President Richard Nixon’s Executive Order of 15 August 1971 – the policy instrument authorizing fiat money – can be cancelled to commence the process of returning to Sound Money.
The following chart will water the eyes of any thinking American – the more so because it’s already out of date – the US Federal Debt now stands at nearly $20,000,000,000,000 (trillions):
The American Public is paying a staggering $440 Billion in annual interest – just to service the US National Debt.
Who receives this interest? The few members of the Federal Reserve – a private entity. See chart below.
$440 Billion Annual Interest Paid On US $20 Trillion Debt (Aggregated Monthly Over Fiscal Year)
US Entitlements & Debt Interest in the next 15 years, completely crowd out the primary function of the Federal government – Defense of the Nation. Repeat, there will be no money for Defense.
Why would a nation do that to itself?
On the chart below – at the intersection of Revenue & Debt – lay the next American Revolution.
US Entitlements & Interest On Debt Consumes Entire Federal Budget
See also:
Question, you ask:
“With the majority of accumulation of $20 trillion in US Federal Debt since after 1971, why haven’t the prices of goods & services inflated through the roof – most particularly given acute Federal Budget excesses committed by Congress & the Executive Branch over the last 8 years from 2008-2016?”
Answer:
The post Word War II Baby Boom Generation of Americans is now in the stage of life during which shedding debt & downsizing is the norm. This effect is destroying private debt at a rate coincident with unrestrained creation of debt by government.
When this generational force has subsided, prices must inflate under aggregated & continuing unchecked currency devaluation by Federal government through Unbridled Spending & Debt Interest.
Our Nation & the world will experience the true Mother of All Depressions.
This is because each new added dollar represents a smaller & smaller slice of the Federal Debt Pie – as that Pie is sliced more & more thinly. Ultimately, US Debt paper (dollars) will be rendered worthless, each representing a slice so thin, it won’t be negotiable.
As the currency collapses, every sector of the economy must absorb the loss.
Home prices, government pensions, everything of value is lost. This is what happened in 1929, when markets & assets lost 90% of their value & remained devalued for the decade long Great Depression.
In the customary Revaluation that follows, secured creditors deemed ‘Too Big To Fail’ are made whole on the backs of depositors & mortgage holders – in what has become the customary “Bail Out”. Only this time, since the currency will be worthless, it will be a “Bail In”. As we saw in Argentina & other revaluations, US citizens will be permitted to withdraw only that amount of their own money not imperiling a Bank’s Reserves, which at a maximum represents only 10% of Bank Obligations – due to a logic-defying practice known as ‘Fractional Reserve Lending’. And then payment will only be made at a rate consistent with a revalued currency at pennies on the dollar.
It gets pretty complicated when Central Banks tinker with money supply as a chief tool for managing monetary policy.
In fact, it is criminally complicated. Central Bankers the world over should be held accountable for malfeasance & for the untold heartache they have caused for hundreds of millions of people through the profiteering scheme of ‘Inflation’ which is at the root of nearly two centuries of boom & bust cycles and several armed conflicts among nations.
To start in the US, using our 27th Constitutional Amendment abolishing Income Tax, we must likewise abolish the Federal Reserve Act of 1913 to prevent further Central Banking & to end forever the two senseless practices of paying interest on our National Debt & paying the Unlegislated Tax called Inflation. A deeply onerous Racket the private ‘Federal Reserve’ Bank franchise must end permanently, if our Republic will survive & flourish. Happily on several past occasions Central Banking has been successfully repudiated by Congress & by Presidents Washington, Jefferson, Madison, Jackson & Wilson. Absent this critical step, the People’s wealth will be consumed.
In response to the assertion that a welfare constituency in the United States has no skin in the game if they pay no tax, there is a more direct & sustainable course than fretting about lack of taxation participation:
End entitlements all together. This is fiscally sound, Constitutionally sound & a certain inducement to innovation in income production among tax skates. The Framers never intended the nation would encumber itself in this way.
Entitlements are a problem worth worrying about.
In sum, there is merit to be found in the Trump Tax Plan & some cogency in its numbers. Certainly, it does not go far enough, but if extended growth of the economy can kick the can a little further up the road – to wean Americans off entitlements through employment – it may be of interim use. In totality Trump’s Tax Plan appears to resonant with the structure of Reagan era taxation policy, which proved beneficial & prosperous.
Taking the ‘Drag Brake of Taxation’ off the ‘Wheel of the US Economy’ will create unprecedented Prosperity in the United States. The only reason not to do so is if you don’t want the US Economy to prosper & soar! Why would someone want that?
As a related economic issue, Mexico is a failing State ripe for the next chapter of its history. Mr. Trump’s border wall, will prove important to our Nation’s Security & Economy Stability as the Mexican State trajectory unfolds. Trump’s plan contains sensible points of leverage available to the United States in dealing with this issue. Certainly, allowing
further abuses of US Sovereignty & Security associated with Mexico cannot serve US national interests – nor the long term interests of our southern neighbor.
Mexico’s trajectory is Mexico’s & not ours – violent La Raza Racists & other Provocateurs not withstanding.
See: Pay for the Wall
While the attention-deficit bombast passing for Mr. Trump’s style can be off-putting & perhaps counter-productive, there is no question it is occasioned by deep sincerity in promoting a Return to American Greatness. The deeper one looks into his platform, the stronger his arguments become.
Some would say his style is bona fide of something other than dysfunctional politics as usual. That may well be true.
That said, regarding the fallacious assertion the Trump Tax Plan is not viable, it may be more to the point to observe the challenge is to find any discernible tax plan at all from Candidate Clinton.
Please see: Hillary Clinton’s Plan to Raise American Incomes
Even a cursory look at this ‘offering’ reveals button-pushing, pandering & double-talking rhetoric largely offensive to Liberty loving Americans & belies a measured political calculation that is all too familiar. Of course, we are all fed up to here with that sort of self-serving Collectivist politic. The plain truth is Mrs. Clinton’s bromides do nothing to address serious, unsustainable structural defects in US Treasury, Taxation & Monetary Policy.
Given the overt & concentrated assaults on American Liberty, sovereignty, morality, normative culture, fiscal responsibility & official accountability that has come acutely – even brazenly – to the fore in the Obama full court press of the last 8 years, it appears we have arrived at a crossroads of historic import for the trajectory of the greatest nation to ever appear on Earth, the United States of America.
On such occasions, all hands must be mustered & the decks cleared for action.
We each must decide whether our personal trajectories are sufficient reason to countenance further politics as usual, or whether Liberty is more precious to the longer course of our Nation’s affairs for Ourselves & Our Posterity. The Tyranny of Collectivism stands before us & we are already well worn in its rub – a state no nation can hope to long endure.
An answer must soon be given if our Experiment is to last. Though we risk Tyranny of another stripe, it seems necessary to answer the present danger of Collectivism. As the Party dice appear to have been cast, this would mean support for Trump. The alternative must be deemed unrecoverable.
© Copyright 2016 Strategic Waters International, LLC. All Rights Reserved.
