Interesting comments on Scandanavian countries. New Zealand's system may apply as well.
Very interesting post Bala Verde. This last bit caught my eye:
If one opts for lowering taxes, spending is encouraged, but hasn't that been part of the current problem and lead to the over-expansion of the economy?
Yes, within the way our system is set-up, I think so. It's almost impossible to pinpoint what got us here, but I think it's a dynamic form of a cycle, not a singular policy shift. We could point to about 1967 and LBJ and the hubris and military on one side, and the hippies and drop outs on the other. Or we could point to the tax code change of 1986 that cut taxes for the wealthy in half, but also grew the economy. But then look at Clinton raising taxes on the wealthy, but cutting capital gains, leading to growth. And W cutting taxes for the wealthy mostly, but everyone too, which didn't lead to much any growth at all it seems. So as you can see, no easy answer that can be fixed by what some sell as principles of policy. The economy, and country, is too dynamic for that.
Then there's issues on energy and oil dependence, and how we dug ourselves into this rut. Both by importing too much oil, not increasing CAFE standards, but also by rejecting nuclear power, while countries like Japan, Germany, even China or France have very successfully moved ahead with it.
As a slight aside, I'd encourage anyone in America to read Andrew Bacevich's book, or
watch this great interview with Bill Moyers. This guy really understands the US over the last 30 years and how we got where we are today.
I think large parts of the problem many are now facing is that working people have taken it on the chin for quite a few years for several reasons. Health care costs have grown much higher than that of inflation, pensions hardly exist anymore, we don't make many consumer goods in this country anymore, but refuse to buy that which is. Or what is (US autos for example) is perceived as poor product. Wages have also been stagnant for especially the middle class, for many years, while higher education has become very expensive. All while people got easier credit, and spent all of it without thinking. And we've been conditioned in a sense to think that's what drives the economy. Spend everything, don't save anything. It's a strange warping of Art Laffer's supply-side proposals some 30 years ago now.
One of the strangest things to me is that if you go into a bookstore all the books on how you can get rich without producing or making or creating much of anything. It's all on investments, or things like spam. Whatever happened to the old American saying about how "hard work pays off"?
One of the strangest things to me was when the bailouts were happening, how the fundamental changes in peoples principles were put to a crucible. And how some staunchly anti-government people voted in favor of the bailouts. This includes people like Henry Paulson, even Joe Wilson. While a perceived "liberal" like Peter DeFazio was against it. And how some people quietly voted for/against the so called "Bush" bailouts, while vocally supporting the so called "Obama" bailouts/stimulus bills. Or vice-versa. If you're for/against big government... did anyone stand on that principle and vote entirely in favor or against all of those massive government takeover/spending bills?
This leads to what appears to be an obvious problem - corruption. It seems painfully obvious to anyone that what most politicians do is go where the money winds blow. They'll favor spending, if those who benefit/lobby will back their re-election.
Finally, if you add up all the bailouts and stimulus bills dating back to the first auto maker loan in I believe early 2008. This includes all the financial bailouts, the Fannie/Freddie bailout, the bank "loans", the AIG bailout, and the auto bailouts, plus Obamas stimulus packages, the whole tab comes to something like
$42,000 per every tax paying US citizen
(have heard higher and lower numbers, if someone would like to try to verify). If the government would have just instead cut a check to everyone for that amount, everyone would have paid off their credit cards, caught up on their mortgages, and spent the rest, maybe saving a tiny amount. This would have probably caused a short spike in inflation, but long-term, no more than it will already. The mortgage crisis wouldn't have happened, the banks would still be in business, even AIG would still be afloat. And, people would be happier. But would it have changed the direction of the country?