Broader and Flatter...With a Twist

Tax reform sounds great. It is the perfect plank for political succession promising an economy that is the picture of health...broader, flatter, leaner and meaner, but with a twist.

Broadening the burden and flattening the tax rate is the path to prosperity because, according to Romney and Ryan, it encourages us all to become rich and self-determined. In other words, to avoid being taxed it is necessary to be productive, but there's a twist. It is necessary, for example, to increase productivity with fewer employees, which will increase the capacity for self-determination by reducing it for others who are then taxed because they are not productive.

Right-wing conservatives claim we have a public debt that exceeds aggregate productivity because the top income class pays most of the income tax. The solution, then, they say, is to increase the burden for 99 percent of incomes in decline and reduce it for 1 percent of incomes rising in zero-sum.

According to conservative philosophy, the zero-sum increases productivity. Distribution of value in zero-sum (the 40 percent lost so far with the Great Recession, for example) provides the incentive for a net gain (the nearly 300 percent gain for the upper class). It "creates" more value than put into it. That is, the zero-sum incentive adds value that does not otherwise exist, but instead of adding value what is really added is an accumulation of risk that would not otherwise exist. This is what conservatives call "supply-side economics."

(It is important to understand that a free market keeps risk diffused. Risk is safely and soundly fully assumed and consumed ad hoc in non-catastrophic, unconsolidated proportions. It operates with a pluralistic model that is technically confirmed with unaccumulated risk, exactly the opposite of what we have now in a too-big-to-fail proportion that demands complex regulatory authority to keep the risk from deconsolidating.

The risk of loss is fully assumed but can be transformed and consumed in a catastrophic proportion. When risk gains a systemic proportion--when it goes gamma--a free market is not being allowed to operate and attempts to describe and explain the distribution of risk-reward as the product of free-market mechanics, post hoc, is a fraud, fully indicated by the technicals.)

Creating value that does not otherwise exist is the virtue of capitalism, conservatives contend, and react strongly to criticism that claims it creates more problems than it solves in zero-sum. There is truth to both positions. Capitalism, for example, increases productivity exponentially, but as the critique maintains, productivity that consumers can't afford to buy, and starving in the streets amid plenty, is hardly an improvement, providing the incentive for collective action (class warfare). To reduce the tendency for warfare (not increase it as conservatives contend) we have liberal policies and programs to conserve (correct for and retrace the value of) the elite hypothesis. The incentive to collectively act is coopted, bureaucratically structured to routinely task the externalities so the risk never goes fully gamma with the application of an elitist model.

When the externalities become too austere and counter-productive, we have the liberal alternative to the much-needed, trickle-down economic incentive that produces the slow GDP and high unemployment we have now. While it should be clear that neither really solves the problem, but retraces it, we keep doing the same thing over and over in impulsive and corrective waves, both long and short, which has a psychological, anchoring effect. The implication (the phenomenological effect) is that it can't get any better than what we have, which supports the hypothesis that history ends with capitalism.

The austerity required to cure shortages and increase productive incentive is, as we all know, premised on the trickle-down hypothesis. While it is continuously disconfirmed in the aggregate (the formula essentially being, give a little and take a lot long term), trickle-down theory still dominates the economic and political landscape.

Analyses of trickle-down economics seems cliche' at this point in history, but it is the essential principle for providing productive incentive. Capitalism claims that we will not be productive, but live like uncivilized animals locked in brutal conflict over scarcity, if we are not provided the organized incentive, the civility, to continuously add supply.

Capitalists claim they are not brutal bandits but benevolent beneficiaries of an economy that is always innovating new ways to improve the quality of life for everyone. The quality of life improves and people become more civil (or more demanding, which is a risk that is controlled by causing detriment that reduces demand) because we all want to get rich and be self-determined (like the king). Class mobility (which is as much a functional fear of non-conformity) provides productive incentive that is dependant on the amount of wealth (the detriment) that trickles-down, or distributes, to allow for self-determination on demand.

Trickle-down economics is a political scheme in the guise of economic necessity. It is not about adding supply but controlling demand.

The twist is that the more conforming, or dependant on civil authority whether public or private, the more self-determined we supposedly are, which results in cognitive dissonance. This kind of psychological disorder expresses as the binomialism that keeps our political system anchored to a relative benefit provided by the incentive to produce the relative value of the detriment. The value of the benefit is dependant on the severity of the detriment.

For the vast majority (the non-elite) there is a significant dependancy that capitalism refers to as "economic incentive," which is as much a political as an economic function. As history unfolds, the majority realizes that the self is determined by a few want-to-be kings (plutocrats) and the incentive to support the elite is fundamentally compromised with a false attribution that must be applied with the force and legitimacy of public authority.

With the illusion of progress on demand, we toggle between liberal and conservative reactions. Both parties propose and apply solutions to problems created by the other party's policy program. By continuously reinventing the problem, power is conserved in the name of continuous improvement, typically in the form of regulation and deregulation. The solution to the welfare state (the capacity to demand the oversupply and cause the need for employment to cure shortages) is trickle-down economics, and the cure for the austerity that commands it is the welfare state so that the problem, rather than the solution (free-market economics ensured by the state in priority), is always in demand.

When combined with the Laffer curve (now referred to as "The Pledge" to not increase taxes), supply-side economics is supposed to balance the budget with the added value (which cannot be taxed without causing slow productivity, like we have now, with record budget deficits). As Reagan found out, for example, the budget doesn't balance and the deficit deepens.

The broader-based income the Laffer curve demands be taxed is in decline while the value added goes untaxed, which accounts for the added supply (overproduction). Instead of being a general benefit, the added supply is transformed into a categorical detriment for "mass" consumption. Risk gains an unavoidable, aggregate, systemic proportion, and the economy is a whole lot leaner and a whole lot meaner, which accounts for big government spending while revenues decline.

What increases with the Romney-Ryan plan is not jobs. Instead, prices rise against declining demand (a detriment is exacted in the form of a proposed benefit), and because supply is added with fewer workers at lower cost on demand (the new normal), deflation, not jobs, occurs "on demand." The added supply appears to indicate the economy is more productive when it really isn't (i.e., productivity per worker rises while capacity to demand the supply--income--is falling with the result being low GDP, or slow aggregate demand). The result is technical failure and the Fed responds with something like "Operation Twist" (selling short-term debt to buy long-term debt) to increase the demand for productivity that pays the debt.

More demand for long debt (supported with a higher price) reduces the long-term rate to create a yield inversion that indicates the risk to be avoided--deflation (fewer jobs and declining demand). Capital will then move into the higher rate to deflate speculative demand in speculative markets (since it really isn't being used to add supply), reducing the price of oil, for example, which will indicate a recovery on demand.

The inversion--the twist--is the new normal. It now signals recovery, but conserved in historical perspective, in a twisted way, still technically indicates a deflationary trend.

Ending the stagflationary trend with a "Twist" provides more money to demand jobs and pay the debt, but demand will be diminished to pay the debt, especially when applied with a broader tax burden. The twist is that recovery means applying the austerity conservatives say is in demand to create jobs.

Again, understand, jobs are not created, they are demanded. The concept of the "job creators" is a lot of pretentious hokum. It is a psychotic delusion constructed into objective reality with practical theories, like supply-side theory, the Laffer curve, and efficient-markets theory (repeal of Glass-Steagall) that technically fail. These elite hypotheses are hokum to poke 'em. They are designed and implemented to technically achieve (confirm) what we have now--stagflation with the solution being deflation by popular demand. Deflation occurs with the force and legitimacy of the popular vote--fifty-plus-one and the vast majority are bust on demand with repeated command performances.

Performances include, for example, the song and dance over class warfare--a perennial command performance in which the king asserts that all he possesses belongs to everyone collectively. Demand is "collected" (horded) for safe keeping (horded to prevent shortages and hedge the risk). For those who applaud his performance, all the wealth is consumed, and those who would divide the kingdom naturally possess all the risk. All those who know the wisdom of the king will surely share in the wealth created in his name and held in common (job creation on demand).

As we know, however, the king's concept of common wealth became the concept of the "commonwealth" but with the pretense of kingly aspiration conserved in historical perspective. Capitalists are sure that history ends with its regime of power because it is more pluralistic, but as it was with the king, power consolidates to maintain alpha dominance, and because having more power than everyone else is not enough, power is tested by exacting detriment to demonstrate its extent.

Competition among elites can be extremely brutal for the non-elite who must consume the detriment because it is more likely a test for pain rather than pleasure. Real test of power is not getting people to do things they want, but what they don't want, like being austere in a consumer society. When once the consumption occured on command, detriment is now exacted with more elegance on demand so that its consumption appears to be the product of popular consent, self-determined and ontologically derived by collective action in a free and open marketplace.

Today, the test of tolerance is more likely to be in the form of a burden described as broader and flatter...with a twist.