Two earlier columns focused on War; the War on Terror, and the War on Poverty. Herein I continue with the War on Drugs and provide commentary on three of what I consider the seven defects of American governance; empire, monetary policy and fiscal policy. To conclude, trade policy, income inequality and social justice will be covered in part 4.
The War on Drugs: As with the War on Terror, again stupidly enacted, stupidly conducted. Last May, the Associated Press reported, "After 40 years, President Nixon's declaration of war on drugs has cost $1 trillion and hundreds of thousands of lives, and for what? Drug use is rampant and violence even more brutal and widespread. Even U.S. drug czar Gil Kerlikowske conceded the strategy hasn't worked."
Jeffrey Miron, a Harvard economist, in a 2008 study "estimated that legalizing drugs would inject $33 billion in tax revenue per year into our economy. Legalization would also result saving $44 billion in spending--in reducing the well documented racism associated with drug related imprisonment and the freeing up of police activities for the prevention of violence.
Drug addiction should be treated as a medical problem, not a criminal problem. Besides that, the Libertarianism in me, maintains it's none of my business or that of our Government what you might choose to recreationally ingest provided no harm befalls another.
Empire: We have long foregone classic colonization. Rather, the obtaining of favored economic status for American-International Corporations has replaced it. Modern methodologies employ the C.I.A., economic hit-men and jackals, the World Bank and the International Monetary Fund to maintain or change, as the case may be, the bribed regimes favorable to our corporate economic interests. Iraq is the modern day exception. There, the Bush Administration chose direct military involvement to obtain regime change and, though the plan failed, to privatize the national assets and gain control of its oil.
The long history of failed empires contains a single thread of over extension; militarily and financially. Our country is most probably reaching the end of our empire thread and is standing on the precipice of failure and collapse.
Monetary Policy: The Federal Reserve System (Fed) is charged with maintaining the value of the dollar and low-full employment. Since its inception in 1913, the purchasing power of a dollar has been reduced to less than $0.05. Current unemployment, if measured as it was in the 1980 according to www.shadowstats.com , is 22--23 percent, no more than 2-3 percent below 1933 when unemployment peaked during the Great Depression. Avoidance of a double dip, an official recognition of another recession, will be miraculous.
Maybe the discipline of a "gold standard" needs to be reestablished. By one means or another, a complete revamping of the Fed is a high priority. Any weakening of the credit rating of Treasury Bonds is certain to result in runaway inflation. At minimum, Congress should pass legislation to rename the Fed, The Federal Reserve Financial Asset Bubble Formation System.
Fiscal Policy: It's time to get congressionally serious about both revenue and expenditures. This implies, of course, that we have an electoral process that facilitates election of serious elected officials that respond to the general welfare of "we the people" rather than to "they, the special interests funding their campaigns"; no easy task.
U.S. taxation is too low running at 24.0 percent of GDP. The weighted average for those countries making up the Organization for Economic Co-Operation and Development is 34.8 percent; Australia, Canada, and Japan are 27.1 percent, 31.1 percent and 28.1 percent respectively. Increased tax revenue is mandatory, not only on the rich but on all of us. A tax on financial transactions must be created.
Subsidies and loopholes must be eliminated. Off-shore tax havens must be foregone. These permit U.S. Corporations to pay tax at well below the 35 percent legal rate and as a result in 2009, according to Bloomberg, "the U.S. tax ratio dropped to 1.64 percent of GDP. That year, the U.K., with a tax rate of 28 percent, raised 2.8 percent of GDP. South Korea raised 3.4 percent of GDP with a rate of 22 percent. Belgium raised 2.5 percent of GDP with a rate of 34 percent."
Congress should reduce tax rate on corporations to whatever is required, after eliminating the various deductions now provided, to obtain revenue equivalent to 2.5 percent of GDP. Then and only then, will corporations be paying a fair share of the tax burden.
To be continued.