Hedgehog Party

Taxing

No one believes that our country can emerge from our current crisis without revision of our tax and spend policy.  Spending, particularly on entitlements, has been a third rail for politicians for decades.  Any attempt to limit spending (of almost any kind) immediately initiates a TV parade of the unfortunate that need government help. 

That leaves taxation as the only alternative.  One of the great advantages of the Democratic Party is that the benefits of the program of the day come first.  The costs come second.  Historically, "taxing the rich" and borrowing have shielded the middle class from the cost effects of government programs.  Slow inflation bleeds wealth from the middle class, and the rich gain deductions and and credits to mitigate taxation losses.  The electorate senses that this decades long game is nearing an end, and they are surely correct.

Greg Mankiw makes some simple calculations to demonstrate the potential for additional taxation.  http://gregmankiw.blogspot.com/2010/03/taxes-per-person.html  The prospects are poor.  The needed taxation (20-30% overall increases) will surely cripple the competitiveness of the US economy.  The ensuing decline in the US standard of living will pour more gasoline on the budding political firestorm.

The current political conflict is playing out in predictable ways.  Democrats believe they can establish new spending and co-opt enough Republicans in the next election cycles to dramatically increase taxes to avoid financial collapse.  Republicans are simply trying ride the backlash to political majorities with a vague, but unachievable plan to "rollback" recent Democrat legislation.

If the Tea Party successfully establishes a "limited" government theme, both major parties will suffer some disappointments.

Healthcare

My continuing point about healthcare reform is that patients should be driven away from an insurance solution...not towards it.  This blogger offers a similar perspective.   Think of a $25,000 deductibile insurance policy.  The reality is that few under 55 years old would ever exceed the deductible.  Of those that did, most would not go bankrupt.  They would save enough in insurance premiums to pay off the debt in a few years.  Those that did go bankrupt would become charity cases.  Our country has a good record of private charity.  And the wealthier it is, the more charitable it is.

http://captaincapitalism.blogspot.com/2010/03/eelkemacare.html

Freedom

"Freedom is just another word for nothing left to lose."  This line from the Janis Joplin hit song about the drug culture ("Bobby McGee") describes the plight of the Icelanders and their likely vote to default on souverign debt.  In the fullness of time, it will likely describe voters in other jurisdictions as governments try to impose draconian measures to maintain shaky financial structures.

Social transfer payments in many jurisdictions are unsustainable.  Yet, receipt of those transfer payments are the only wealth or potential wealth that large fractions of the voters possess.  There are rapidly approaching majorities of voters in many jurisdictions that have "nothing left to lose."

The financial governance sham is about to be exposed in all of its ugliness and pain.  But the voters do have a solution.  When the meal has been served and the bill arrives, they can just walk.  You could call the action a lot of names, and point out the negative economic consequences, but they will get a clean slate.  The well-connected rats and exploiters of our current system will have been vanquished.

The formula for wealth generation is fairly simple...sound money...produce more...save more.  If the body politic can reform in a way that promotes these ideas, all will be well.

Iceland

Iceland has been in the news in recent years because of the failed attempt to become a world financial centre.  A few bankers got very rich, but the whole enterprise ended in tears.  The current souverign playbook..."let the taxpayers bail out the mess," is not going down well with the voters. 

When the load becomes too heavy (as it is in many countries), the voters will likely choose immediate self-inflicted pain instead of generations of poverty. http://www.bloomberg.com/apps/news?pid=20601039&sid=amtqRO5zQX2g

Poor financial governance is an epidemic, and few governments have resisted the disease.  The Hedge Tax is a gamechanger.  Support it.

More Markopolos

Markopolos is making the media rounds to sell his book.  Hyperbole doesn't make the charges against Geithner and others untrue.  Mish Shedlock weighs in with a summary in this piece. http://globaleconomicanalysis.blogspot.com/2010/03/geithners-illegal-money-laundering.html

It is truly hard to get your mind around corruption and fraud of this scope by public officials.  The source of all is poor financial governance.  Good governance begins with accountability as supplied by the Hedge Tax.

Massive Fraud

The wages of poor financial governance is massive fraud.  Bernie Madoff perpetrated the biggest (hopefully) fraud in history.  This private interview of Harry Markopolos is both frightening and disgusting.  He is the man that exposed Bernie Madoff and the failure of a number of major government agencies.  http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/3/2_Harry_M._Markopolos.html

This interview is about an hour long, but you really should listen to it.  The growing populist revolt has a source, and it is the corruption in our government.  The worst is that the current unrest is based largely on intuition.  Soon it will be based on facts and the reaction could be brutal.

The Hedge Tax forces accountability...and it will create new governance.