Punitive Taxation

The tax policy discussion surrounding the use of tax money and assessing the value of executive compensation schedules of TARP recipients is a micro case study in the theory of retributive value described in several articles at griffithlighton.blogspot.com.

The value assessed by the public sector to be retributed to the taxpayer for the use of public financing, at this point, is 90 to 100 percent of the value assessed by the private sector with the "punitive" tax rate assessed proportionate to total income (a progressive tax rate).

Progression of this punitive rate is sensitive to the measure of fairness to retribute the value as discussed in the previous article, "Your Tax Money at Work," but it took a punctuated micro event for a progressive tax rate to gain serious credibility beyond mere rhetoric for a practical macro application. It indicates that the will to employ the best measure for recovery is to be a populist gaming event to be utilized at the micro level. It is political gaming that will continue to slow implementation of policy that will quickly and most effectively achieve economic recovery and reinvestment.

Notice that neither the executive or the legislature is expressing the efficacy of quickly progressing the tax code to most efficiently achieve the fairness the taxpayer is demanding, or to most efficiently retribute the value. While the president expresses the need to progress the tax code, the commitment appears to fade into the tactical designs and maneuvers of the legislative leadership to win a game. The needed measure and its full effect will be likely compromised.

A rapid recovery will most effectively occur from the bottom up facilitated by a progressive tax code, giving value to the currency now suffering depreciation (inflation) from the Fed's newly announced trillion dollar, Keynesian measure to finance the recovery from the top down by buying treasury bonds and expanding the debt obligation.

The latest Federal Reserve measure to give liquidity to the credit market expands the money supply. The expansion is not only anti-deflationary by making credit easier to increase purchasing power, but to give liquidity to the previously overleveraged assets to be trickled down, or what does not verifiably work.

It has been critical to quickly move forward with a progressive tax policy to avoid the Keynesian measures that will take us right from a deflationary to an inflationary trend. That will, in turn, sustain the recession as prices increase with no growth, regressing back into the stagflationary phase of the cycle. Not exactly progress.

It is not that economic policy is being poorly managed. It is being managed to fit the Hamiltonian model with economic recovery (expansion) being dependant on borrowing the capital from a small class of economic elits--the upper class (the accumulation phase of the macro cycle), to be paid largely by the non-elite (the distribution phase of the macro cycle).

The Fed's trillion dollar expansion of the money supply in the form of buying treasury bonds renders economic expansion dependant on a debt to be paid to the creditor from the wealth trickled down. Economic expansion is, then, a way to pay the debt, and not an economic recovery per se. Nor can the recovery be considered economic expansion since what is gained has to be repaid. It is the means to service the debt without the debtors suffering enough detriment to demand immediate and full retribution of the value (what is classically called the subsistence wage; neo-classically, Keynesian economics allows the retributive threshold to be mainatined at a much higher level without sacrificing the accumulation of value, expressed as the public debt instead of people starving in the streets).

The bonds the Fed is buying represent borrowed money, a debt, that has to be repaid to the people that have the money to lend--the upper class. The cycle is completed into recovery and is ready to be repeated. The cyclical change will not be the change We The People need, just the status-quo, cyclical trend in progress that will be argued as change.

Yes, we are smarter than that.

The first step to change the operational model in which technocrats are to confirmably operate to execute "the change We need" is to legislate a progressive tax code post haste!

Conservatives want a progressive tax code to be considered "punitive" like the taxation being levied on the executive compensation of TARP recipients to suggest it is a temporary change. Otherwise, it is the means for switching to a more pluralistic operational model of power, or the change we need. Both parties are part and parcel to preventing this change with a false pluralism of competing ideologies and practices. At this pint in our political-economic history, partisan politics is not fooling very many people very much of the time.