Problems of Defining an Optimal Fiscal System
Again, we stress that while our approach may seem unconventional to Western economists, they are not to those who have a more global view. Such out of box thinking and new approaches are mandatory in the crisis we currently face. Traditional approaches and solutions don’t work or are not available. Thus the need for new solutions. Overall Fiscal Environment As of 2010, the short term government stimulus to boost the economy and shield the region from the worst effects of the Crash of 2008 have come to an end, and we can expect a decade of drastic austerity measures with the goal of cutting the national debt.
At the same time, we also face a massive and unprecedented need to support citizens facing massive and long term unemployment, reduced savings to meet basic needs, lack of access to credit, if not increasing foreclosures, therefore these same citizens will need support in the form of housing, food, medical care and other basic services, that the government must provide, otherwise we will literally be responsible for genocide.
While we have a better safety net than the U. S. unfortunately we need to look long and hard at what is really happening there as a worst case scenario, for several reasons, including as we discuss, the real possibility of a double dip global Depression. Furthermore we are faced with the problem of having to comply with EMEA’s requirements to retool our basic infrastructure to comply with carbon reduction and a new clean tech economy as Europe and the UK begin to build out their smart grids.
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The solutions we offer here are NOT untested. They just have not been applied on a wide scale in the Western world. Immediate Requirement to Drastically Reduce Public Debt
Infrastructure Income: Because it is the intent over the next eight years to lower if not eliminate the public debt, while simultaneously decreasing public spending, despite increased and unavoidable demands that will only force its increase, not only creates an impossible situation if attempts are made to fix this seeming paradox with traditional solutions. It also undermines the absolute imperative that any government funded projects, especially infrastructure, whether they are wholly funded by government funds or entered into with private partners, generate income for the state to help reduce the debt.
Just the interest on that debt is a waste of public funds that is inexcusable, considering there is another alternative and very simple solution – which we lay out here for your further analysis and study. Use of Sustainability Economic Modeling and Cleantech as the Solution There is still no institution or individual who is entirely clear how deep, wide or broad the true damage of the Crash of 2008 actually was.
For that very reason, all traditional analysis and modeling is useless in forecasting future economic growth, trends, business models and certainly using traditional approaches to fixing the problem at hand is akin to swapping proverbial deck chairs on the Titanic. Designing a tax system that will help us meet the needs we have identified requires a very strategic, realistic, conservative and disciplined holistic and new approach.
For that very reason, our assumptions about things like economic growth are extremely conservative (we project flat growth YOY for the so-called “lost decade,”) and a long period of extended and massive unemployment. We have set the bar high deliberately. We did not go into this with “Blue Sky” attitudes. Rather we anticipate the worst, and have presented ideas and an outline of a model, based on extensive research and analysis, which if implemented as planned, means that potentially we can hope for the best. The graph below is just one piece of proof that our assumptions are correct just about future growth potential in the economy.