Raise the Hammer

Ryan, I noticed you failed to address the numbers regarding the "Golden Age of Capitalism", namely non military government spending as a percentage of GDP. Are you calling for a return to less government spending and a larger private sector?

Furthermore, I would love to hear your opinion as to why, when marginal tax rates were 91% (1960), tax receipts as a percent of GDP were only 25.95%, while in the 3rd quarter 2008, receipts came in at 29.03%, even though marginal rates are only 35%. How do you explain this? Shouldn't lower tax rates lead to less money for government?

>> Finally, in the short term we desperately need both a fast, hard infusion of cash into the economy to kickstart demand, and a credible promise of stability and predictability so that investors feel safe to start cirulating their money again.

You can't cure problems brought on by over consumption by inducing more consumption. The fact is, nations can only consume what they produce, so unless you find a way to increase real output, you are simply borrowing from future consumption.

In the Golden Age of Capitalism (1950 -1969), the net savings rate in the U.S. was around 10.5% of GNI, and GDP grew at around 3.5-4%. Since 2002, net savings has fallen to around 2% a year and the economy has only grown at 2%. Therefore, if you are to believe the numbers, a better way to get the economy moving again would be for the nation to stop spending and start saving. Therefore, rather than send out quick cash, the government should start reducing the deficit.

Just to prove how important saving is to an economy, in 1929 net saving as a percent of GNI was 9.6%, in 1933 it was -7%. Therefore, unless the U.S. economy wants to destroy more wealth, the government should stop trying to spend itself to prosperity. Successful nations invest in the future and do not let their immediate wants destroy future consumption.