Wednesday, November 13, 2013

You Can't Cure Symptoms

When you have a high fever, it is not the fever that is your problem. The fever is actually part of your body’s defense against illness and is helping to kill the organisms which are attacking you. Further, doctors do not usually attack the fever directly, they seek to find out what is causing it and attack that underlying cause.

Similarly, the federal budget deficit is not our problem today, it is symptomatic of a much larger problem; that being our enormous and unremarked trade deficit. That deficit is a outflow of wealth which requires borrowing money to fill the hole which it creates in our economy.

So we know the cause of our problem and unlike doctors do nothing about it, frantically attempting to cure the symptoms instead. The result is that we move the debt around, from government to private sector, to business and back to government again, but never do anything about reducing it because we never even attempt to reduce the balance of trade deficit.

Why do we do this game of economic whack-a-mole with debt?

Because it is that game, not tax policy, which created and maintains the horrendous economic inequality in this nation. The money earned by the middle class goes overseas when they purchase goods made abroad, and that money comes back into this country as profits to the wealthy who own the corporations producing those goods overseas.

“Tax the rich” is not going to solve the economic inequality problem, because those tax increases are pennies; they amount to a few percentage points of income on the wealthy – single digits. The amount involved in this trade deficit is staggering, because income from overseas is, in many cases, the totality of upper class income, and the money going overseas for “consumer spending” is 70% of middle class disposable income.

In effect, the entire trade deficit goes into the pockets of the economic upper class in this nation; $25 billion to $40 billion every single month. Yes, that’s a slight oversimplification, but it is not mere hyperbole.

The solution to the federal deficit is neither “spend less” nor “tax more,” but lies in policies which solves both the federal deficit and economic inequality; “make more and import less.”

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