No defensible rationale

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October 14th, 2009 :: Permalink

Aloha Keahi ~
Mahalo for your response for this is the NUMBER ONE reason why we are failing as an 'ohana today. You wrote, "but cuts have to come from somewhere."

This is incorrect. If we lived in a "fair and balanced" society, you would have added, "or revenue must be raised somewhere."

Many don't think this way in America any longer so Keahi isn't alone. When tax revenues fall short, leaders don't say, "increase our taxes." Instead they reduce the number of government employees or their pay, which essentially means to cut services.

Beginning with Reagan, our nation embarked on a new trajectory. Experts such as Arthur Laffer told us by cutting taxes, primarily on the most rich, we would open marvelous new business opportunities; jobs would be created by the millions; and tax revenues would actually rise due to the increased economic activity.

So where are the jobs? Where is this greater prosperity? After 30 years of Reaganomics, our national government is bankrupt as are most households. The only time Americans reaped this benefit was under Clinton between 1995-2000 due the boom of the Internet. The most rich are doing fantastic ... thank you very much!

If the government changes the tax laws and gives me an extra 1% of income to take home, say $500/yr or about $40/month, I'll likely spend all of it LOCALLY going out to dinners or taking in a few ballgames.

If the government gives a wealthy person an additional 1%, say a million dollars, this person will likely take a risk with the added capital and venture into a new business. We admire wealthy people as they are good at making money.

As an economist I agree that Laffer's hypothesis makes sense in principle - yet only in a "closed" environment.

Why would a venture capitalist re-invest in America? Why not chose markets in China, Brasil, Russia or India? Capital doesn't simply chase capital; capital chases the greatest return on capital. Since America is a mature market with lower risk, the most lucrative opportunities lie outside our borders - and that is where our dollars are going. This is why the economies of Dubai and China are exploding while our nation has fallen into a slump.

Laffer didn't account for our global economy. He was correct that a wealthier person will reinvest the money; he was wrong about where.

On the other hand, our present financial crisis stems from another flaw in the Reaganomics paradigm - decreased regulation does not open new opportunities, it simply allows greed and corruption to run out of control.

Both of these flaws have led to our sickened economy. Tax modifications and deregulation advocated by the libertarian right have failed us. Now they argue the solution is to punish state employees and the middle class that depends on these services. The workers gave up private sector perks such as bonuses and rapid pay increases in good times for a degree of security. This is part of Hawai'i's social contract with our civil servants. Where is the PONO now?

Regardless of current tax revenues, we still have the same number of Keiki to educate; we still have the same miles of roads to repair; and per this article, it remains critical that Hawai'i pursue lucrative film and business opportunities.

I do not feel sorry for America's wealthy. They asked us to participate in a grand social experiment ... this failed. I expect our most fortunate now to demonstrate KULEANA and sacrifice in return for America.