The General Theory of the Hedgehog is that a simplified focus of voter behavior is required to correct our poor financial governance. Fragmentation of taxation and spending has severely weakened the ability of voters to influence legislation. To correct this distortion, we chose constitutional reform of the tax code.
The idea behind the balanced budget, single tax rate, single exemption and asset tax was to create a taxing authority that was 1), largely immune to special interest pleadings, and 2), could be directly understood by the mass of voters. The average voter does not have the time, tools, or interest in deciphering the effects of complex legislation. Arguably, our congressional representatives have lost that ability as well. The Hedge Tax forces a direct up or down vote on overall taxation and spending. Nothing could be more painful to special interests and our current political class. It is the belief of the Hedgehog that this tax plan would generate a new tax and spend regime and a new class of politicians.
The growing discontent with financial governance has broken into the open. Various interests have been deeply challenged and harmed by the recent financial crisis. But the core of the discontent is expressed by a frustrated middle class. The middle class has not fully participated in the robust financial growth of the past 20 years. Moreover, the crisis has fully exposed the structural financial weakness of the mainstream entitlements. This double whammy is the genesis of the populist revolt that we see before us.
The direction for change is undefined. Some are simply expressing anger and discontent, some want revolutionary change in government, and some want restoration of the old credit cycle. Few understand the need for fundamental reform of tax and spend. The risk is that reform will founder along partisan lines and that the economy will renew its decline. Should that trigger a currency crisis, about any political outcome is possible.
The country is desperate for a new leader that can articulate the necessary reform that will allow voters to control the reach of government. This must be accomplished in the face of the decline in the value of entitlements, and the need to assert control over deficit spending. If such a leader appears and is successful, he/she will be a central figure in history for the next 200 years.
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