How to Restore the Good Name of Government

New Economic Perspectives has the Joe Firestone article How to Restore the Good Name of Government.

Nor will they legislate anything useful after it unless 1) Democrats get a majority in both Houses and 2) Democrats who constitute those majorities are willing to move away from corporatism and legislate in the interests of people. So, if something can be done in this area, it must be done by the President. There are four very important things he can do before the elections of 2014 that would help to restore some faith in Government and, as a by-product, at least tentative trust in the possibility that renewed Government deficit spending may help people.

1. The President can re-institute the rule of law in the area of national security and secrecy by ending mass surveillance of the US population immediately, ceasing all investigations and attempts at prosecutions of journalists who have been trying to tell the public about the overreach of our intelligence agencies, beginning investigations and prosecutions of intelligence operatives who have broken existing laws in gathering intelligence, ending current prosecutions of whistle blowers, and issuing pardons for those who already have been tried, convicted, and jailed.

2. The President can re-institute the rule of law in the area of FIRE sector control and mortgage frauds by beginning investigations and prosecutions of high level executives at too big to fail FIRE sector organizations who have committed fraud including those that caused the financial collapse of 2008, which, in turn, led to the Great Recession and the destruction of so much middle class wealth.

These first two initiatives are supremely important because they will deliver a very visible presidential message that the Government is re-instituting honest government and a single system of law, which, in turn, will give people some reason to believe that renewed spending by the Government will be carried out honestly for the benefit of people, and not for the benefit of FIRE, health care, energy and other elite corporations.

I leave it to you to read the other two things that can be done.

I chose to respond to the following statement from the article:

Finally, these Democratic promises will surely be met with a campaign emphasizing the bogeyman of hyperinflation. Democratic promises will be estimated in a primitive way totaling up what will they cost over the two year period. The assumption will be made that they won’t be countered by automatic stabilizers producing increasing fiscal drag as the US approaches full recovery.

The trouble with the cut in tax rates during the Reagan/Bush/Bush era is that it severely weakened the automatic stabilizers that prevent inflation from happening when the economy is in full recovery.  A marginal tax rate of 80% to 90% then in effect is a far cry from top rate in the 30’s that is now prevailing.  If we cannot get these tax rates restored now, then when inflation comes along, the stabilizers won’t be automatic.  They will require legislation that takes a long time to get approved at just the time when they need to immediately and gradually start kicking in before inflation can take hold.

There is a real reason to have high nominal tax rates with loopholes that kick in in times of recession.  Nobody is explaining this to people.  When the Republicans emphasize the high nominal corporate tax rates compared to other countries, the Democrats only explain that the effective tax rate is actually very low.  They never explain why this method is advantageous.  So you get all these calls to simplify the tax system with no explanation of what would be lost if we enact some of the simplifications.

There are probably very few politicians that even think about this and would be in a situation to provide an explanation.

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