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Economies are driven by imagination. We give it other names, such as consumer confidence, expectations, and forecasts. It all boils down to imagining the future. If you imagine you'll have plenty of money tomorrow, you'll spend more of your savings today. If you think tomorrow will be challenging, you hoard your cash to be safe.

Our current economic situation is often described as a lack of demand. The country has capital to invest, and savings to spend, but people aren't so sure this is the right time. You wouldn't, for example, buy a house unless you imagine property values to be heading up instead of down.

A recent study showed that you can influence how much people save for retirement by having subjects simply imagine themselves older. When you imagine an old version of yourself, it changes how you act today.

Presidential election years are especially good for imagined futures. At the moment, both the supporters of Mitt Romney and the supporters of President Obama see a brighter future ahead because both groups imagine victory, and with it the improved economy they crave. The problem is that the day after the votes are counted half of the country will turn deeply pessimistic and imagine tragedy. According to the imagination theory of economics, you'd expect stocks to zoom with optimism as we approach a close election (check!) and a deep pullback right after the election when half the country turns to instant pessimism.

The three presidents who did the best job of manipulating citizen imaginations were probably Kennedy, Reagan, and Clinton. The economy was strong under each of their administrations.

President Obama is a master at manipulating our imaginations with his hope and change message. But I think Republicans have done an effective job of blunting his imagined future with their large doses of obstructionist reality and imagined drift toward greater socialism. The President's plan of taxing the rich doesn't feel like optimism; it feels more like the stranded survivors of a plane crash voting to eat the fat people first.

If society descends into chaos after the elections, for whatever reason, and I am forced into my role as Emergency Backup Leader (EBL), I'll use the country's collective imagination as my user interface to steer civilization back on course. I'll literally tell people to imagine being generous to the people in need, and imagine the wheels of commerce rolling forward. I'll ask people to remember how constipated and bloated the government was before civilization imploded and to imagine how we can learn from past problems and design a better model.

Rationalists will scoff at my methods and deride the idea of an imagination interface as new-age magic. They will compare it to the bestselling book The Secret. They will demand data-driven executive decisions, not gazing at crystals and thinking happy thoughts. I'll make all of the rational decisions that are needed, especially in cases where it will improve confidence. But I think science supports the notion that the job of a leader is to control imagination. When you get the imagination right, capitalism has all the direction it needs.

When things get so tough that only the rich have resources to spare, I'll ask the wealthy to imagine a future conversation in which someone asks what they did to help the country through its tough patch. I'll ask them to imagine remembering with pride how they intelligently opened the spigots to their capital and let it flow into the economy, boosting demand and increasing optimism when it was needed most. Perhaps some of the rich will imagine hiring more people than they needed. Others might imagine they invested in more projects than they would have normally bitten off. Some might imagine feeding the poor. It will be a source of great imagined pride - sort of a Greatest Generation thing - and an opportunity for the rich to regain respect in society.

Let's hope the economy self-corrects before I need to test that approach.

 
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Sep 30, 2012
just from my pov, it seems extremely fail that so many of you are willing to meet around the table for defense spending (common cause), and divie up fair share of burden (even if weighting rich with more burden). You then turn around, in that same spirit, and pretend as though social spending is just as legitimate. Defense is an absolute necessity that all agree on and need. Social spending is not a necessity and we dont agree on it, and we dont all benefit from it.

My point is that ppl are using the defense frame for validity for something that is different. I consider the frames to be drastically different, and would challenge any rational adult to deny this.

This is my primary objection to the left, lumping everyone together for a collective fate. One size does not fit all. I dont want a govt who cares for poor. I want govt to stay out of ppls pockets and let them choose to be compassionate on their own (or not). The bulky bureaucratic systems deny me the freedom to opt out. If I try to I will end up in jail or shot by a cop. Being greedy is a personal choice. Social programs are an attempt to overpower the souls of greedy individuals. I think thats bad govt, except in microdoses. Personally I take pride in giving to the poor, and when big brother is forcing me it takes any benevolence out of me. Its no longer my choice, and its not even me giving. govt compelled compassion robs both the giver of being charitable, and the receiver of having a target to be thankful to (govt is only following the law). its full on fail and it robs choice.

I think being greedy is bad, but i dont want 1984 to force me to be good. only force me to not stomp on others rights. if im not harming my brother, govt needs to stay out of all my choices.

the primary thrust of mainstream democrat policy today is exactly that, making choices for the individual based on studies (or elites 'common sense') picking what is optimal for society and the individual. its not just not their job, its not even their perogative.
 
 
Sep 27, 2012
I've been turning over in my mind your idea that electing Romney is necessary to remove the gridlock we have in congress. This struck me as somewhat bass aackwards, but it has taken me a bit of time to think it through. Since the gridlock has been primarily caused by the Republicans unwillingness to negotiate and compromise, if you give them full power as a way of reducing the impediment to getting anything done you are only caving in to the phylosophy that doing nothing and hoping for a better election result is better than working with the opposition and trying to solve problems together. If the Democrats were smart (or unified, which they just may become if Romney is elected), than you encourage them to act as the republicans have. You end up encouraging the tyrany of the minority which has frozen our government for much of the last 3 years. I think MOST politicians see that the country is being backed into a corner, that with the new congress, SOMETHING must be done. Giving the Republicans control will not make action any more possible than keeping a democrat in the white house, and giving congress to the Republicans. Add to that, the absolute danger Romney presents in his promices to eliminate regulation of clean air, clean water, safe drugs, safe food, public health, and so on... I think that a split government could be effective (see the 1990's as an object lesson). I think the one thing "We the People" must insist on is Compromise... from both sides.
 
 
+1 Rank Up Rank Down
Sep 25, 2012
>>#2: The Enemy rarely reacts to your strategies the way you want them to. I don't think the Republicans will go along with this. And if its forced down their throats...well, try to imagine how they'd get around it.

Republicans aren't my enemy. I'm actively campaigning for one of them for state senate in my district. We are on the same side in education reform.

I oppose them on the national level - mostly because of the anti-tax pledge. I think it is grossly undemocratic to attempt to force an entire party to agree to support a single platform in order to get party support. Why bother having so many representatives in that case? Voters could just choose "R" - and have one person cast votes for every district that wins majority "R" support. Cheaper and less chaotic that way - with the same result. Democrats could continue to elect individuals - because they haven't all sold out to the pledge system yet.

I can think of one way children of wealthy conservatives might attempt to get around a pay-as-you-spend military tax: Join the military for a few years to reduce their future military tax burden. That would not necessarily be a bad outcome in my opinion. If you are going to advocate for sending US troops into conflict - I'd respect your POV more if you've actually served.

I'm not sure Republicans would necessarily fight it, actually. By separating out military spending, it might be easier for them to fight against other spending - knowing the military budget is not at risk. The military tax would automatically go up or down every year based on spending - not on votes to raise or lower taxes - so they don't have to worry about the whole pledge thing. Out of their hands.

We'd then have a lot more clarity on other spending priorities.
 
 
Sep 25, 2012
@Dingbat

[To clarify: Here is one way to implement what I'm talking about. Create a military tax to pay for the entire military budget in a given year. Active duty military and veterans would be exempt from paying - or pay at a reduced rate. The rate would be progressive with the wealthy paying a higher percentage - because they have more to defend. If we spend less on the military in a given year, the tax would decline, if we spend more, it would increase. Since conservatives tend to favor more military involvement - they can do so knowing their constituency will have more financial skin in the game - to make up for the lack of physical risk.]

I dunno, Dingbat, your idea has a certain appeal but I can see two problems with it.
#1: Having the Social Security and Medicare taxes is a complication on an already complicated taxpaying process. I don't know that I want to have yet another special tax in the mix.
#2: The Enemy rarely reacts to your strategies the way you want them to. I don't think the Republicans will go along with this. And if its forced down their throats...well, try to imagine how they'd get around it.
 
 
+1 Rank Up Rank Down
Sep 25, 2012
To clarify: Here is one way to implement what I'm talking about. Create a military tax to pay for the entire military budget in a given year. Active duty military and veterans would be exempt from paying - or pay at a reduced rate. The rate would be progressive with the wealthy paying a higher percentage - because they have more to defend. If we spend less on the military in a given year, the tax would decline, if we spend more, it would increase. Since conservatives tend to favor more military involvement - they can do so knowing their constituency will have more financial skin in the game - to make up for the lack of physical risk.

I would feel better knowing that if they choose to throw my kids in harm's way - they are also choosing to pay for it out of their own - and their donors' - pockets.

The rest of the budget would be handled separately - and folks like Romney could no longer lump recipients of military pay/benefits into the moocher category. It would also clarify - where we really do spend our money - and it would reduce the deficit by funding a huge driver of deficit spending with taxes on people who can no longer deny they benefit from that spending.
 
 
Sep 25, 2012
@whtllnew

I'm not prepared to say we spend more on the military than on social programs. I don't know if that is true or not. My point is that we spend an enormous amount on the military - and that if we committed to fully funding military expenditures, the rest of the issues would be far easier to address.

For one thing, the choking cost of health care would be much more obvious - as would the relatively small amounts spent on programs anti-tax folks like to make a lot of noise about.

Romney's 47%? That includes my son who currently eats up about $100K/year in tax-funded services and pays little, if anything, in taxes. He's a West Point cadet. Most (though, admittedly, not all) anti-tax campaigners would say that's an expenditure they support. OK then. Pay that and other military-related expenses upfront - and then lets talk about what's left. It's a much simpler conversation at that point.
 
 
Sep 25, 2012
@Dingbat

[My argument. My accounting system :).]

Do you or do you not want to make your point? If you do you should use a less confusing accounting system, one that shows how defense spending is greater than social spending (assuming that is indeed true). And Im sure not all of that 45 % is funded in the manner you specify. A fairer comparison would be to compare defense spending to the part of social services that isn't funded by social security and medicare taxes.
 
 
-1 Rank Up Rank Down
Sep 25, 2012
....Ummm....am I the only one who sees a contradiction here?

I hope not. It was not my intention to be unclear on that point.

Unless you are referring to 45% being larger than 20%. In that case, according to my own personal method of tallying this stuff up -- since we collect SS and Medicare taxes directly - I'm not counting that at 45%.

My argument. My accounting system :).
 
 
Sep 25, 2012
@Dingbat

[If there is one thing most democrats and republicans agree on - it is that the government should spend money on the military - which currently accounts for about 20% of US Government spending. If you consider that Social Security and Medicare comprise about 45% ...

...All those evil social spending programs pale in comparison to the cost of "defense."]

....Ummm....am I the only one who sees a contradiction here?
 
 
-2 Rank Up Rank Down
Sep 25, 2012
Maybe ask the wealthy to imagine a world which required young men and women to risk their lives to defend their way of life - and further, to imagine a world in which no one could be compelled to do so against their will. OK - we are already there, but stay with me.

How much would they be willing to pay to hire someone else's kids to fight to defend their lifestyle and privileges?

If there is one thing most democrats and republicans agree on - it is that the government should spend money on the military - which currently accounts for about 20% of US Government spending. If you consider that Social Security and Medicare comprise about 45% - and that a goodly percentage of the cost of those programs are collected directly from future or past beneficiaries (and then spent on other stuff, but that's another story), then it becomes clear that the military is the biggest collective enterprises we undertake and fund together.

We spend a lot of money to train and equip soldiers and a lot more on benefits - because we don't actually pay them all that much - relative to the expertise, risk and responsibility involved. (The next time you listen to a CEO defend the necessity of enormous pay packages, picture the job military commanders undertake for under $300K/year.)

Many of the same conservatives who were so eager to throw billions at wars in the middle east are now balking at paying the bill. All those evil social spending programs pale in comparison to the cost of "defense."

Many of the unpopular foreign aid programs that stand a chance of averting future wars are now run through the defense budget and administered by the military - because that is where they can get funded. It's probably not the best way to handle such things - but you do what you have to do in the face of congressional irrationality, I suppose.

So imagine this: a pay-as-you-spend system for funding the military with those who have the most to lose and the least inclination to risk their own (or family member's) skin - kicking in a higher percentage of the cost. If we do that, the rest of the debt would be solvable.
 
 
Sep 25, 2012
Put a ban on lobbying, vote out all federal reps. If caught receiving contribution strip all assets with life imprisonment. Harsh? not really... voting for special interests over the goodwill of the people is treason. With the information age lobbying is pointless. All lobbying does in current state is facilitate bribery. Some sort of moral and intellectual competence test couldn't hurt either along with the right to administer MRI analysis of truthful statements. These are the people deciding you and your childrens future...trust shouldn't be taken lightly. If they can backscatter radiate us and get a load of our junk every time we step on a plane out of national security I don't think it's a stretch to ask the same level of intrusion.
 
 
0 Rank Up Rank Down
Sep 25, 2012
>The country has capital to invest, and savings to spend

Are you talking about the United States?
I can't see what savings you refer to (unless it is Chinese savings).
 
 
Sep 25, 2012
@Kingdinosaur

[As of may 25, 2012:

http://www.worldwide-tax.com/russia/russia_tax.asp]

Okay, so you're describing Russia as of today, but the fact remains that they're able to do this because of heavy taxes on oil exports and for us to do this wed need to either A) cut almost everything from the budget or B) find a way to raise several trillion dollars a year that doesn't involve income taxes.
 
 
Sep 25, 2012
[The President's plan of taxing the rich doesn't feel like optimism; it feels more like the stranded survivors of a plane crash voting to eat the fat people first.]

Hilarious. It's amazing how the right comparisson can quickly and perfectly describe a topic.

 
 
Sep 25, 2012
As of may 25, 2012:

http://www.worldwide-tax.com/russia/russia_tax.asp
 
 
Sep 25, 2012
Hmmm, the censored bit of my post implied a reliance on government tax on the part of those running leveraged buy outs and was not obscene, honest.
 
 
+11 Rank Up Rank Down
Sep 25, 2012
Personally I would like to imagine a future in which hard work, creating really good products or indeed services that innovatively provided good value for consumers, making recognisable and trustworthy brand, was more highly valued that the most obvious, gangster-inspired, short-term government !$%*!$%*!$% cash swoops.

http://www.rollingstone.com/politics/news/greed-and-debt-the-true-story-of-mitt-romney-and-bain-capital-20120829

It'll never happen.
 
 
Sep 25, 2012
Sorry, just to be clear, the quote from that last post was from Kingdinosaur, not Scott.
 
 
Sep 25, 2012
[BTW, the commies (Russia) have a top income tax rate of 13%, which is our bottom tax rate (payroll taxes). If the russians can do that, I say we can do better. I imagine a USA where we have a business tax rate of 10%, no income taxes, and still provide fundamental government services. Theoretically, if we had a corporate economy of 30 trillion or so and the dollar had today's value, 10% of that would pay our national budget. So all we need to do is imagine a valid way to create a $30T economy with little inflation.]

???...what are you talking about? Do you mean todays Russia or the Soviet Union? If the latter you ARE aware that they were the center of anti-capitalist anti-rich sentiment in their day? That their society was geared towards making it nearly impossible to get rich? If the former, you're forgetting that the price of oil is now at $90 a barrel and most of the money the Russians get from that goes to their government. In other words, they have a major alternative source of tax income. The USA will go broke if it tries to provide the services it does now AND lower taxes to the level you suggest without creating a major alternative source of income. Any volunteers to be that major alternative source of income?
 
 
Sep 25, 2012
I think the days of optimistic capitalism are behind us. Taxing the rich is a solution I loath, but I really don't see an alternative. Well, there's quantitative easing, but it's really the same thing... devaluing money held by the rich isn't materially different from taking away money held by the rich. Even if we slash our social programs and cripple our military, our budgets will still be out of control.

The fed has to keep interest rates low to protect the debt -- the government can't afford to pay more than a fraction of a percent on new bonds. These artificially low interest rates make it silly for banks to lend money (no margin to cover defaults) and further results in banks issuing punitive fees to customers, because they can't make money the normal way (i.e. interest on loans). I don't think imagination is going to fix a fiscal problem where the math ultimately prohibits finance.

Also, I think you need to encourage the right people to have imagination. Imagination isn't a fundamentally positive thing; I'm sure Hitler had an impressive imagination and plenty of motivation. Then again, I guess he did help fix his economy...
 
 
 
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