The failures of capitalism

By From page B3 | July 16, 2014

I love capitalism. I truly believe it is the best system in existence. Whether you want to call it greed or ambition, a capitalistic system drives people to seek success.

As Warren Buffett said, it is this system that makes America the most successful country in the world, not something exceptional in the individuals that make up the country.

Years ago, Buffett also proposed more aggressive taxation of the rich. I have come to agree that this is the right thing to do. I believe for capitalism to thrive, we need for the players in the system to be motivated. Unfortunately, we have reached the point where a few players own too many marbles, and too many have none.

There are several consequences to this situation. In an era in which government assistance is too accessible, and generally results in a better lifestyle than modest income, we are killing the golden goose of capitalism — the ability of the average worker to achieve the American dream. We are encouraging dependency (disability retirements, government aid) because most people are unwilling to kill themselves for basic existence, and this is understandable.

At the same time, there is oodles of money in investments with little return, i.e., U.S. treasuries. The lack of return has caused risk takers to create a stock bubble. If this money were in the hands of middle-class consumers, it would be spent and drive further growth.

So, what are the solutions?

1) Put an effective cap on very high income earners with a steeply progressive income tax starting at $1 million per year.

2) Make capital gains tax progressive, beginning at the $1 million per year level as well, and consider decreasing capital gains for middle-class investors.

3) With that added government revenue from 1) and 2), feed that money in to subsidize people actually working for a living instead of voting for a living.

4) Shrink, do not grow, the government through attrition.

I believe these changes would allow flow and growth in what is basically a constipated economy where money is made and destroyed in a sequence of phony bubbles.

Greg Johnson


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