“Soft despotism is a term coined by Alexis de Tocqueville describing the state into which a country overrun by "a network of small complicated rules" might degrade. Soft despotism is different from despotism (also called 'hard despotism') in the sense that it is not obvious to the people."
Saturday, March 08, 2008
Stopping the Coming Recession
For too many years excess liquidity has created an excessive expansion in credit in the US. The liquidity fed price increases in property, housing and financial assets. American consumers went on a spending frenzy and entered a zone of negative savings. The spending was largely for imported products and financed by foreign held dollar reserves. The consumer borrowing and spending was further augmented by huge federal deficit spending again largely funded by overseas borrowing.
A large portion of US energy consumption is from foreign suppliers and this further exasperates the trade deficit. Currently the collapsing values in homes is both a cause and an affect of a declining credit market. The Federal Reserve has tried to reverse the trend with declining interest rates but this does not seem to be working. What it is doing is further weakening the dollar and causing an increase in dollar denominated commodity prices. The congressional answer of sending everyone a $600 check is absurd and wasteful.
It is time for a change. The first change is to quit relying on consumer spending. There needs to be both incentives for saving and disincentives for spending. Tax free savings accounts are a simple solution and this can be further augmented with a forced savings program. Privatizing portions of social security could be used to affect the same result. Portions of the Social Security funds could go to capitalize semi-public corporations that expand fee-for use infrastructure projects such as bridges, roads and airports. The future fees would go back into Social Security.
Private capital should be given a fixed holiday period of tax free status for new factories and domestic energy sources. Corporate taxes and capital gains taxes should be further reduced. The goal is to increase the value of the dollar, reduce imports and increase real wages for American workers and allow them to save more money. These should be Republican values.