Many Americans oppose Keynesianism(I do too), but if we’re going to have it anyway… how could it be made to work best? Even something deeply flawed has varying levels of functionality. Drinking and driving is always stupid, but it is less dangerous with beer than vodka.
So, even if Keynesianism is fundamentally unsound, applications can range from utterly stupid to somewhat workable. How may we make it as workable as possible?
The current brand of Keynesianism is fundamentally flawed for trying to have it both ways. Huge increase in government spending, small increase in taxes–and only on the rich. (Of course, current policies may force drastically higher taxes down the line.) So where will the money come from? More printing? More borrowing? Dumb and dumber.
Imho, Keynesianism can only work by spending and distributing actual wealth, not inflated paper or borrowed money. Most of the actual wealth in America is the accumulated capital of the rich.
We all heard countless times that the rich got vastly richer while most Americans have been in the stagnant income bracket for the last 25 yrs. Keynesian economists warn us of wealth that concentrates rather than circulates. Using anatomical analogy, a condition where blood doesn’t properly flow through the entire body is not good. (To be sure, it’s a flawed analogy since every person has brains, ability, and potential to be productive and accumulate his own wealth instead of waiting for wealth to fall on his lap. Still, most people are not natural businessmen nor have the talent to succeed in highly skilled fields. Most people have jobs where they are told what to do, and as such, are kind of like parts of the body. If our economy cannot gainfully use such people, there will problems of wealth circulation.)
Since many rich people have more than enough money to run their businesses and take care of their needs(basic and luxurious), much of their wealth remain in savings. Though wealth in banks and other institutions are lent and thereby circulated throughout the economy, the recent crisis has raised doubts about its viability.
Furthermore, in a severe downturn rich people aren’t likely to invest or expand because of poor economic prospects. So, the vast fortunes of the rich remain in banks, as real estate holdings, and other stuff by whatever name they go by.
With the vast fortunes of the rich locked up in savings and portfolios, where is the economic activity and dynamism necessary for us to climb out of this hole? If Keynesianism really the only solution? If yes, which kind of Keynesianism?
The Only Keynesianism that makes any sense is one confiscating the wealth of the rich and spreading it far and wide. Raising top tax rates from 35% to 40% won’t do it. Vast amounts of accumulated wealth will have to expropriated and spread throughout the economy.
The people will spend the money, and the economy will buzz with activity; eventually, much of the wealth will flow back to the rich who own the big corporations.
If a store owner is rich but customers have little money, economic activity will be low. But, if we take half the rich store owner’s wealth and spread it around, people will have money to spend. There will be renewed economic activity with customers buying things from the store owner.
Of course, this is a very stupid(and unethical) way to run an economy and will probably lead to inflation since people are gaining purchasing power without comparable output in production.
It’s also true that rich people don’t horde their wealth in some secret hole in the ground. Whichever financial institution or investment is employed, the wealth circulates through the economy somewhere and somehow. Even so, in the past 20 to 25 yrs the wealth hasn’t sufficiently circulated through large segments of the American society. Also, with all the financial hijinks, vast amounts of wealth have been squandered by ‘the smartest guys in the room’ who now demand tax payer money for bailouts.
And, though vast amounts of loans have been made available to ordinary–and even poor–Americans, mounting debts have only served to corrupt and/or pauperize many people. Given recent developments, leading economists and politicians have reconsidered the merits of Keynesianism. And, it is in this light that I offer the confiscatory lottery policy. In an era of euphemisms–where anti-white discrimination is ‘affirmative action’ and welfare checks are ‘tax credits’–, it should be called the Voluntary Donation.
Two major problems of Voluntary Donation will have to be considered. One is constitutionality. Government, as far as I know, doesn’t have the power to grab large amounts of accumulated personal property. (I could be wrong). Perhaps more important is the likely loss of motivation on the part of the rich and talented. The wealth will eventually return to the rich in the form of consumer spending, but it’ll be wealth stolen from them in the first place. Destroying meaningful incentives for the capitalist class is like killing the golden goose. If rich people had to routinely fork over huge portions of accumulated wealth, they will slack off and the economy will suffer.
Okay, but how about a system that essentially safeguards the wealth of the rich(and therefore their motivation to work) while, at the same time, grabbing a big chunk of their wealth for ‘wealth redistribution’?
This is where the lottery based Voluntary Donation comes in. Suppose we divide up rich people into several categories: super billionaires, billionaires, super millionaires, mega-millionaires, millionaires. Rich people would be divided up into these groups according to the amount of accumulated wealth not directly invested in their business or primary real estate. Suppose every year, 10% percentage of each group(chosen by lottery) has to hand over a substantial amount of their ‘excess’ wealth for redistribution. 10% of millionaires will have to hand over 20% of their wealth. 25% for Mega-millionaires. For super-millionaires, 30% of their wealth. For billionaires, 35%. For super-billionaires, 40%.
The unlucky rich will be chosen randomly(like for Jury duty). The chosen will get a 10 yr reprieve so that no one can be chosen more than once every 10 yrs. Most of this appropriated wealth will be given to ordinary working people(in credit card form to ensure circulation through the economy).
To compensate for loss of wealth, a special hall can be built in the Washington Mall to commemorate the ‘generous’ rich people who ‘voluntarily’ gave up substantial portions of their wealth for the common good. Bigger donors will of course receive greater honors. Millionaire donors will be honored with plaques with their names and photos; super billionaire donors, with giants portraits painted by leading artists. They lose wealth but gain a slice of immortality. Rich people can take pride in knowing that their mugs will rest forever in the Smithsonian along with those of great presidents, scientists, astronauts, movie stars. Vanity goes a long way in boosting morale. Big donors also get trophies and special mentions at the State of the Union address.
The Voluntary Donation policy both preserves a reasonably high motivation level among the business class and circulates the wealth through the economy. Especially with the rise of globalism, the knowledgeable and well-connected elite have grown much richer than rest of America. Globalism has provided us with cheaper goods and services, but it has led to the concentration of wealth in the top while causing stagnation among middle and lower classes.
I don’t endorse wealth redistribution and would prefer to see more of a traditional patriotic capitalism. But, if globalism continues to concentrate ever more wealth at the top while hollowing out or keeping the middle section of America economically stagnant, growing numbers of people will demand a way, even a radical way, to circulate some of the ‘excessive’ wealth of the rich to rest of America.
Printing or borrowing money to ‘spread the wealth around’ simply sounds stupid and irresponsible. Confiscating and redistributing the real wealth of the rich is economically sounder, but it would demoralize and dis-incentive-ize the wealth-creating class.
But, the Voluntary Donation policy balances the needs of preserving capitalist incentives and circulating the wealth throughout the entire economy. In decades past, vast numbers of American workers were paid well, and they purchased the products of American employers. The wealth circulated up and down, back and forth. This no longer seems to be the case in the global economy. If wealth cannot circulate ‘organically’ through a free market capitalist process, more Americans may demand a Keynesian or even a socialist way to get the job done.