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The only way to pay the government's ballooning bills and reduce the budget deficit during an economic downturn is to tax the bejeezus out of the rich. The alternative is to borrow more money, thus making things worse. Realistically, cutting government spending is a worthy goal, but it won't get us where we need to be. So I have a suggestion. It's impractical, of course, but you wouldn't be reading this blog if you didn't enjoy noodling about impractical ideas.

Suppose the government passes a law requiring all relatively wealthy people, defined in some practical way, to buy extra crap they don't need from local providers. The relatively wealthy could dine out more often, buy some extra shirts, get a flat screen TV for the garage, whatever.

The result would be a stimulus to the economy that would lift all boats and fill the government coffers. The relatively wealthy wouldn't feel so bad about this form of tax because at least they end up with more shirts and flat screen TVs. This is the same principle as the $600 tax rebates, in terms of fiscal stimulus. But it wouldn't increase the deficit.

I know, I know, you will point out that our shirts and TVs are made overseas. But the local merchants get their markups, and that helps.

The best part of this clearly impractical plan is that the rich would have lots of options on how to spend their money. There is a lot of science supporting the idea that having freedom of choice is essential to happiness. I would be happier spending $100 on two shirts I don't need versus paying $50 in taxes and having no control over how it is spent. Everyone wins.

The hard part is figuring out how to measure this "extra" spending compared to the baseline, so you can be sure the relatively wealthy are complying. So perhaps it needs to be voluntary, like recycling.

I can imagine a new sort of credit card that is used only for the "extra" purchases, provided by the usual banks and credit card firms, but with one important feature: Everything you use the card for is public record, on the Internet.

I am convinced that the main reason people comply with recycling is that their neighbors can see who is being a good citizen on trash day. Peer pressure is important.

Obviously you wouldn't use the special credit card for beer and condoms, because the neighbors would be watching, or could be. I think this would induce people to buy harmless additional consumer items, or take extra domestic vacations, or buy extra birthday presents for friends.

Yes, this idea isn't practical. But how are the other plans looking?
 
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Oct 5, 2008
I live in a small town and can not get my Botox injections locally. How does your plan provide for me?
T
 
 
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Oct 3, 2008
RayKremer,

You're right, it sure worked for the last 8 years. And the Clinton years were an economic bog, thank god that's over. I say we cut taxes down to ZERO for the rich, that way the federal revenue will be INFINITE.

Four more years!
 
 
Oct 3, 2008
Congress will not pass a plan like this. It does not involve sending the money to Washington, where they can take out their share before sending it back to us.
 
 
Oct 3, 2008
Perhaps a enhancement would improve this basic approach. Instead of encouraging consumerism by the rich, encourage, with tax breaks, efforts by those who can invest to invest in local and regional businesses as an alternative to the stocks of multinational companies who only trade in the cheapest product made in the cheapest environment, which at the moment seems to be China. A collection of strong, regional economies should result in a better looking national economy.

Of course, then you'd need to encourage consumers to purchase from local and regional businesses, and there is the rub. Consumers could have purchased from local and regional businesses all along but elected instead to send their limited wealth out of the communities they inhabit, resulting in weak, local and regional economies that combined resulted in a weak national economy.

Why punish the rich for the ill-advised practices of mass consumers? Tax the people who caused this mess: Naive consumers who crowd malls and marts.
 
 
Oct 3, 2008
Stop right at the first sentence. Raising taxes, on the rich or whomever, shrinks the economy and reduces tax revenue. Cutting taxes brings in more money for the federal coffers.
 
 
Oct 3, 2008
Just get married. Hey presto a house full of crap you don't need.
 
 
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Oct 2, 2008
There's an underlying assumption in your proposal that isn't true. The assumption is that without this policy, the money wouldn't get spent. The only way this would increase spending is if the rich people are currently hoarding cash under their mattresses or some similarly silly place. All money is either spent, invested, or saved. Money that gets invested gets spent by someone else. Money that gets saved in banks gets loaned out to someone else and spent. Find a way to get the money spent more efficiently, and you'll get actual growth.
 
 
Oct 2, 2008
How does Scrooge McDuck swim in a vat of solid metal coins?

But you have a point. There were a lot of happy people working for Uncle Scrooge. A pilot, a butler and a security guard among others.

As for stealing gold, it is true that FDR took people's gold and replaced it with worthless scraps of paper.

Gold is just a metal that is pretty and has a low oxidation state. When the rich buy this, the money goes to someone else. What is better, buying and selling gold for profit or having some privateer kill for gold? I give the pirates in Blackbeard's day credit. At least they were smart enough to not kill the people on the ship.

Another thing. I just wish they would quit calling the golden goose the golden goose. It's not. It's the goose that lays the golden eggs. "The golden goose" is a misnomer.
 
 
Oct 2, 2008
I just now noticed that the cow was female. Very subtle and very sneaky.
 
 
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Oct 2, 2008
I think wealthy people already buy a lot of stuff and services - do you think the rich are all like Scrooge McDuck and keep their vast fortunes in opulent basement vaults?

This only works as long as they are feeling secure about the economy.
Just ask any yacht broker what happens when the news is bad on the financial page.

 
 
Oct 2, 2008
Scott Adams, these comics are the best I've seen in a long time from any comic. I wonder if they were inspired from those throwaway comics you did on the cows and Dogbert that never got published.
 
 
Oct 2, 2008
Every bill passed in the Senate already does this. Government giving subsidies to buy wooden toys and other yard sale crap. CBS's radio station said this was needed to get the bailout bill passed.

The Democratic Party and their pet Republicans are making some really big carbon footprints with this bill.
 
 
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Oct 2, 2008
say... how many t-shirts do we need to lift the economy?
 
 
Oct 2, 2008
Lets see. Encourage conspicuous, ostentatious, exorbitant transparent spending by the rich. Wonder how this will go down with a struggling lower income family seeing some fat cat gadfly drop 10 grand on an set of exotic end tables for his fourth vacation home.

Will really make them feel good while they are suffering foreclosure on their home, found out their employer just merged with another company wiping out the pension plan and making their job redundant. Ops, wife just learned that she is pregnant, again. Let the good times roll. Can we spell REVOLUTION...

But you are right Scott I do not have a better plan to offer and it is easy to criticise anyone who offers a solution. I just wish our leaders would go back the basic principles envisioned by the founding fathers as stated in the Constitution. A government of laws (not rulers) was created to work for the people, not other way around.
 
 
Oct 2, 2008
Alas, it's not so simple. Investment is related to savings and consumption (this is a basic Macroeconomics 101 fact). As consumption goes up, investment must go down, which will have other impacts and possibly be bad for future government revenues. Saving more or investing more is more likely to help in anything but the short term than blind consumption.

-Kevin
 
 
Oct 2, 2008
Three things:
1) Holy !$%*! Most of your readers take you and themselves way too seriously. I used to love reading comments before you had to log in. Since then, the humor factor has dropped exponentially around here.
2) Given #1, I'm surprised no one has pointed out the fact that bulls don't have udders.
3) Eventually, people will run out of products to buy. So, maybe the rich need to purchase more services. I used to know a guy who had a business going to rich neighborhoods and cleaning up their dog !$%*! He charged about $20 a house and could do 40 or 50 houses a day just by himself, not counting what his employees brought in. Rich people might buy a lot of 'stuff' but I think selling services is the real, sustainable way to make money out of them. They can only buy so many TVs, but will pay a fresh bill every month for cable, for example...
 
 
Oct 2, 2008
You've made two underlying assumptions that I think are kind of dangerous. First, you assume that the only way to encourage the rich to help the economy is through taxes. Second, you assume that the best way they can help the economy is through spending. If the latter were true, many of them would not be rich. I would propose the creation of a Congressional Medal of Weal awarded by the president to those who have done the most to stimulate the national economy. Not necessarily the ones who got the biggest paycheck but the ones who through ingenuity or sacrifice improve things the most for the rest of us. Kind of like the Medal of Honor but for peaceful purposes.
If you are looking for things to tax, how about taxing the things we really don't like to see? Tax the bejeezus out of any salary over a million dollars per year. Tax remittances sent by immigrants to people in other countries (this money is just leaving our economy anyway, why not catch a piece of it?). Tax punitive damage awards (this money isn't to compensate the plaintiff, it is to punish the defendant). While you're at it, tax awards for lost wages as though they were earned wages (why should you live tax free just because you got a big court award?).
If you want smaller government, pay the bureaucrats based on how much work they get done and INVERSELY in relation to how many people they have under them. As it is, they are rewarded for hiring extra people whether they need them or not. Make them focus on efficiency and productivity and I think you'll see just how few people are really needed. On top of this, put a bounty on government waste - 10% of the money saved goes to the people reporting it. You'll balance the budget in no time!
 
 
Oct 2, 2008
For easier reading (or to comment back), I've posted this comment at http://blog.jonpeck.com/2008/10/buy-less-crap-local-or-otherwise.html as well.

I'd like to say that this post was inspired by Scott Adams. But it wasn't. It was inspired by all the dingi (how DO you pluralize "dingus"? "dinguses" has too many syllables...) who responded to his Buy Some Local Crap Tax post.

Okay, not everyone who replied is a dingus; there are some genuinely good ideas on how to "fix" the economy, at least in the short term -- and there's the problem. Every time someone talks about tax cuts, or stimulating the economy, they are only proposing a short-term fix, because they are missing the real reason that any economy crashes: we spend our money on crap.

Don't get me wrong. I like spending my money on crap. Especially gadgets and coffee. But time is money, so I realize that whenever I spend cash on something I don't need, I'm robbing myself of time. Doubly so if I spend it on something that wastes my time (56-inch HD TVs come to mind -- no, I don't own one).

I could go on ranting for hours, so lets get right down to basics. There is only ONE class of "real" jobs in the world: the primary producers of our economy, farmers and such. People who convert natural resources -- specifically, sunlight, since that's where all our energy (nuclear excepted) ultimately comes from or came from -- into the stuff that keeps out bodies running. Scientific note: land and water are just catalysts; but for this reason we might lump "water purification" and similar positions into the same category. Oh, ok, we need places to live in too...so lets throw a few builders into the mix. Waste management too.

Got that all? Okay, then we have an economy that should last for a while, so long as there aren't any major catastrophes and the sun keeps shining. Of course, when a disease comes along we'll need doctors...and if we use horses and tools to farm, a blacksmith would be nice...if machines, machinists...and so on. You get the idea. So far, we are more-or-less OK.

Now the problems begin. Retail. Marketing. Cheap plastic toys which get thrown out after 2 months of use. At first, these influences seem innocuous. But over time, more and more of our workforce is devoted to jobs that do nothing. They are working just to make/help people buy more stuff. The are wasting their own time to make others waste their time.

By the time we've reached this point, other villages/states/countries are looking our way, thinking "Hey, cheap plastic crap! We want some!" Or, worse yet, we have so many people living in one space, producing nothing useful, that we start running out of food and land and water, and start thinking we should go find some more. Either way, people start building swords, then guns, then warplanes, and we're running off to other countries to take their crap. We spend billions of gallons of oil just getting across the ocean to blow other folks up so we can take their oil.

If you're still with me at this point, you either don't think I'm crazy (foolish, foolish reader), or you do but find my insanity to be the compelling, manic kind, not the boring, lithium-induced variety. If you fall into the latter group, take a minute to ask yourself: how many people do you know who actually produce or provide something important on a regular basis? Do you spend your afternoons growing organic tomatoes which you'll trade for pasta at the local market? Or do you, like me, browse YouTube at the nearest internet cafe -- burning electricity on a resource-intensive piece of plastic and silicon produced in China, while sipping coffee shipped 8000 !$%*! across three continents and one ocean?

Don't get me wrong; I'm not implying that we should all drop our retail jobs, give up computers, and go farm the land. But I am suggesting -- nay, stating -- that unless you are an ag worker or a plumber or a sanitation engineer, you have a responsibility to live a little more simply and waste a little less. Not out of some hippie-yuppie compulsion, but for the sake of our economy. Every time you throw away an iPod because it's not the latest and best model, every time you drive to the corner store instead of walking your lazy butt the half-mile, every time you buy a Power Rangers figurine instead of reading to your child, you hurt the economy. You make the whole nation a little less efficient, putting more cash into stuff which creates waste, spending your hard-earned time to waste your time, trickling your income up into the pockets of CEOs and marketers.

Scott has it half-right: DO buy local. But DON'T buy crap.

DO spend more money on fresh, local, organic produce than you do on your monthly cable bill and gasoline combined.

DON'T drive when you can walk.

DON'T watch advertisements: the mute button is your friend (if you can manage, don't watch TV at all).

DON'T buy anything "disposable"; that word is just a synonym for "wasteful".

DO recycle and reuse: give up tupperware, rinse out that glass salsa jar and put your leftovers in it instead.

DO carefully consider every purchase you make: do you need it, will you throw it out, does it waste your time and money?
 
 
Oct 2, 2008
Scott,

This is in response to your "Buy Some Local Crap" Tax posting.

While your suggestion sounds like it might help, initially, I think there are some big holes in your plan. First of all it would be based on the voluntary actions of the rich. Some people would respond by spending a little extra, but where will they spend? At high-priced stores, shops & restaurants, probably. This type of plan looks too much like the trickle-down theory.

But the biggest flaw in the plan is that most of the extra stuff that is bought will be donated to someone or some cause, thus giving the buyer another tax write-off which would generate even less income for the government.

So what can we do instead?

Well, the government tried something earlier this year and hoped that by boosting spending they’d boost tax revenue. But it didn’t. According to H.R. 5140, The Economic Stimulus Act of 2008 would increase budget deficits (or reduce future surpluses) by $152 billion in 2008. That’s money we’re borrowing from ourselves (or foreign nations) that we’re going to have to pay back some day. Or this week, actually.

The Economic Stimulus Act of this year only succeeded in increasing our national deficit. With rising fuel prices and inflated mortgage payments due, most people used the $600 to pay mounting bills and did not splurge on luxury items as was intended. What we were told would boost the economy ended up hurting it, and now we need even more tax revenue to cover the country’s losses.

So how could we tax everyone fairly. Here’s one idea: a short-term national one cent sales tax.

Last year economic growth outpaced population growth. If the 2007 Gross Domestic Product was13,807.5 billion dollars, a one cent national sales tax would have generated 138,750,000 dollars. That’s almost enough to cover the Economic Stimulus deficit. Sure, it’s only a dent, but it helps and is fairly painless.

The one cent National Sales Tax would have a smaller impact on lower-income families while generating more revenue from higher-income families: the more money spent the more tax would be collected, and those with higher incomes will purchase higher-priced items. New cars, upper-scale homes, and eating out at over-priced restaurants will generate funds that buying used cars, smaller homes and eating Macaroni & Cheese won’t. It’s simple math: you make more money, you buy more stuff, and you pay a little more tax.

I’m not a fan of any type of taxation, but in order to keep a strong country I believe we need to keep a strong economy. And, sure, there’s the chance that the Government will go wild and increase the National Sales Tax to unbearable proportions, but I haven’t seen any other ideas that make much sense.

Thanks for the constant stream of new ideas!
Greg
 
 
Oct 2, 2008
You know, we could probably just raise the death tax to 100% if we could figure a way to stop folks from giving away money to relatives. Maybe we make the death tax '100% of the money you have made in your life minus the amount you've spent" - would also punish gray and black market commerce too!
 
 
 
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