More indications Japan will ‘pay for’ the earthquake reconstruction

Seems to be the way of the world right now.

On Mon, Apr 25, 2011 at 12:26 AM, sean wrote:

looks like japan will raise tax to destroy the demand that the quake couldn’t

JAPAN RULING PARTY’S NAKAGAWA: THINK BEST TO SEEK PUBLIC UNDERSTANDING FOR SALES TAX HIKE TO FUND RECONSTRUCTION

JAPAN RULING PARTY’S NAKAGAWA: RECONSTRUCTION BILL WILL CALL FOR GOVT TO MAINTAIN FISCAL DISCIPLINE

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30 Responses to More indications Japan will ‘pay for’ the earthquake reconstruction

  1. bobGS2030 says:

    okay, i am very new to this site. We have been led to believe that the government builds our roads, bridges and infrastructure..etc. and we pay taxes to “Pay for those services”. Are you saying our (Japans) tax dollars will not go towards this rebuilding efforts? if not, then how does the infrastructure get re-built? where do our tax dollars go?

    thanks

    Reply

    WARREN MOSLER Reply:

    when govt taxes, it simply reduces the balance in your account. it doesn’t get anything.
    and when it spends it just credits your account, it doesn’t give up anything.

    therefore taxes function to regulate demand, not to raise revenue per se

    please read ‘the 7 deadly innocent frauds’ on this website

    Reply

  2. John Little says:

    Dear Warren,

    I had been following closely your blog and fairly understood the message that you are trying to conveyed.

    I have a question. As we all knows that much of the population are saddled with huge personal debt. Since a sovereign government can create and issue money (by changing the accounting numbers), why can’t the government “pay-off” the debts? With this action, the population can start afresh. From there onwards any future loan application must be scrutinize. With this it is hoped that it create a stable “aggregate demand”. What do you think?

    Reply

    WARREN MOSLER Reply:

    the govt could pay off personal debts, but that would not be considered a ‘fair’ thing to do, as those with the most debt would be the biggest winners.

    instead, my proposal is a fica tax suspension, which substantially increases take home pay and allows people to service their debt (if they want to) and it isn’t considered unfair for the govt to stop taking that many dollars out of people’s pay check.

    Reply

    MamMoTh Reply:

    the fica tax suspensions is unfair to the unemployed though.

    Reply

    ESM Reply:

    Something that is prospective isn’t unfair. Everybody has an opportunity to take advantage of the new institutional structure. And by the way, a FICA tax suspension will make it MUCH easier to find a job.

    jason m Reply:

    He also offers anyone not working a federal job to transition to the private sector don’t forget.

    WARREN MOSLER Reply:

    back up a bit. taking it from the employed is unfair to them. Why should they be taxed for doing the work and producing useful output for everyone else?

    so all i’m proposing is to stop taking it away

  3. MamMoTh says:

    Is it so nonsensical to raise taxes?

    With the fall of production due to the disaster and the planned government spending for the reconstruction, isn’t it within paradigm to raise taxes to avoid excessive inflationary pressures?

    Reply

    alex Reply:

    What inflationary pressures?

    Reply

    WARREN MOSLER Reply:

    If that was the reason, it would make sense.

    However they are still united in their desire to fight deflation

    Reply

  4. Chris says:

    Every day this onslaught of contrary thinking…I’m starting to wonder if we aren’t crazy.

    Reply

  5. Marcello says:

    Warren,

    I sent an e-mail to the governor of Indiana with this website (and your name) referenced.

    Is this something that you can encourage folks to also do and send to their congressmen and senators?

    Reply

    WARREN MOSLER Reply:

    works for me, thanks!

    Reply

  6. Dan F says:

    Crap that is Sweden at 22nd Switzerland is 19th ;p

    Reply

  7. Vincent says:

    Warren,
    Could you dissect this article? Many thanks!

    http://www.marketwatch.com/story/imf-bombshell-age-of-america-about-to-end-2011-04-25?link=MW_home_latest_news

    Reply

    WARREN MOSLER Reply:

    what difference does it make which nation has the largest gdp?

    Reply

    Dave Begotka Reply:

    +1

    Reply

    alex Reply:

    +2

    jason m Reply:

    +19 trillion

    Tom Hickey Reply:

    China and India both have over a billion people. GDP is public and private spending. Go figure. It’s a matter of time.That’s why US multinationals are doing well now. They have expanded external investment and operations, recognizing that growth rate is in the emerging nations greatly exceeds the developed nations and the promise of consumer economies in those countries is the future for them. Sec. Geithner want to see US financial institutions even larger so as to compete (dominate) in the emerging economies.

    Also consider that a significant portion of US GDP is due to the perpetual war and the military-industrial complex. The purpose of this is to provide protection for US external investment and operations. Expenditure for military purposes does not add to US national productivity or prosperity because the goods produced are neither consumer nor capital goods.

    The relevant issues are distributed prosperity and standard of living. There are small economies that have a higher standard of living than the US. Even though China and India will surpass the US in nominal GDP, they will not catch up with the standard of living and distributed prosperity for some time, if ever, because these involve political choices as well as economic ones.

    Reply

    Dan F Reply:

    I really doubt that Switzerland cares that it will go from 22nd to 23rd. It will still be a great place to live.

    Reply

    alex Reply:

    Saying that “expenditure for military purposes does not add to US national productivity or prosperity” is not true and you know it.

    A lot of technology is developed by the military. It is no coincidence that periods in which there was excessive military spending (WW2, Cold War, etc)happened to be times when there were great technological advances.

    Of course I understand your general point that defense spending is often a terrible waste, and I agree, but remember that is not always the case.

    Reply

    Tom Hickey Reply:

    You get my drift.

    Of course, a lot of technological advances have come from military uses. But that is hardly an argument for huge military expenditure. The space program would be a more wholesome alternative (if space were not militarized in the process).

    Military expenditure is inherently inefficient, and nations support it for only two reasons, legitimate defense requirements and “other.” The US is way on the side of “other.” A great deal of US military expenditure is essentially leaf raking. It is spred through congressional districts to garner support as a public subsidy that has become necessary for the local and regional economy. It’s a vast public boondoggle that is self-perpetuating because it leads to an ongoing arms race. The US doesn’t even have a credible enemy.

    WARREN MOSLER Reply:

    the public purpose begins with national defense

  8. Craig says:

    george friedman, owns stratfor, has a interesting article on the “geography of recession”

    http://www.stratfor.com/weekly/20090602_geography_recession

    his take on things are usually insightful

    Reply

  9. Mario says:

    I thought Japan learned their lessons from the 90’s and all that. I guess not.

    Reply

    roger erickson Reply:

    Japan learned one lesson from us pre 1941, another during ’41-’45, yet another post WWII, and yet another post 1980

    you have to excuse them for getting a bit frustrated;

    How long has it taken our own electorate to learn “do as I do, not as I say” from our own banking lobby? (Hint: it’s 200 years & counting; it’s been almost learned, and then actively un-learned, but the lesson’s never stuck)

    Reply

  10. roger erickson says:

    Definition of a serf is he who won’t take time to talk, won’t take time to discuss what he doesn’t like to hear, and therefore cannot tune his interactions to adaptive Public Purpose. That person is a slave to his task, and is not free to evolve his role. Worse yet, he deprives his group of his interaction, and thereby condemns his neighbors and children to be less than what they could be. That’s the ultimate contributor to an Output Gap – anything that reduces return-on-coordination. All other limitations are secondary.

    The ultimate fraud is always self fraud, whereby a foolish population and it’s return-on-coordination are soon parted.

    Reply

  11. roger erickson says:

    So Japanese people will work even more & consume even less. Sure sounds like nominal logic! Any investors want to encourage them? [Actually, the answer is probably yes.] Will they take the nominal investment in return for their indentured servitude? So far – because they’ve a lot of affinity – but how long?

    “Un jour tout sera bien, voilà notre espérance. Tout est bien aujourd’hui, voilà l’illusion.”
    (“One day everything will be fine; here is our hope. Everything is fine today; here is the illusion.”)
    —Voltaire (1694-1778)

    It’s simply amazing to view how long components in a system can be kept distracted to their locally assigned tasks, oblivious to their actual role in group potential.

    Who assigns? Who owns? To what end? All fraud is stupidity draining group potential to tactical method. Fraud is simply the friction between individual and group logic. The former doesn’t scale, while the latter does – but only when there’s enough interaction to adequately expose coordination options.

    nice summary of issues here: http://www.swans.com/library/art17/desk109.html

    Reply

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