Did someone point out that 50% of the US population effectively don't pay federal tax?

This is not surprising.

If economics dictate that half the population could not afford to live on their wages if they were taxed, then there would be riots if they were taxed.

The human race is entering a phase in economics where having competitive markets will be seen as necessary, to achieve growth and prosperity, but will also be seen as a curse that creates huge inequalities and the poor, weak, less capable will always do poorly/suffer.

I can give you several examples of the reason this happens.

There was a person in the UK that won the lottery, there was another person who won the pools several years ago. Both ended up poor and on benefits, because they spent all the money on consumer goods. There have been a few examples of the children of the landed gentry spending their entire inheritance on drugs.

The common factor in all these is that they do not work to protect the capital, to get a return, and they ended up in a state that was entirely of their own making.

If you want the government to spend money, what should it be spent on?

If it is on foreign goods, you are borrowing money from foreign countries, to spend on their goods. Effectively you are just making yourself more indebted to them. This is what Greece did, and look where it is now!

If you cannot spend the money on creating a product or a service that brings in currency from other countries, you are making the problem worse. Germany is doing so well because it is exporting, it is making products that others want, so is China.

It became an unpopular measure many years ago, but the balance of payments is far more important than many realise.

If you want a balanced economy and a balanced world economy, then all countries have to sort out their balance of payments, else the currency has to devalue, if the balance of payments is negative.

Richnotbroker

Your post 91

Actually, Keynes did borrow to invest, or speculate on his own account. He did not do it with his College's funds.

Keynes the Speculator

I agree with most of the rest of Post 91.

Having the government buy or build housing for the poor? Don't you know that is shocking, disgusting and immoral? You must be some filthy Socialist. Ask any of Thatcher's goose stepping friends. No, the idea is too sensible for any modern politician to dare adopt it. They would be howled out of office by the Daily Mail.

Your Post 92

Making everything yourself, even when foreigners can do it cheaper or better is bad economics. Without your imports, the rest of the world has no cash to buy your exports. Look up "comparative advantage".

Germany did well only by lending money to its customers in peripheral Europe without doing sufficient due diligence on whether those customers were using the money wisely or were likely to pay it back. Now the Germans are upset because they lent money to the prodigal son. The Eurozone mess is as much German made as Greek or Spanish.

The balance of payments does balance: that is why it is called a balance. Current account deficits (buying and selling goods and services) are financed by the capital account (borrowing and lending). How long a current trade deficit can last is like asking how long is a piece of string. Britain exported capital throughout the nineteenth century and ended up owning railways, ports, factories, mines and so on all over the world. This was mostly nationalised and sold off to pay for the two world wars.

Britain's nineteenth century current account surplus was other people's current account deficit and was exactly matched by Britain's capital account deficit and those other countries capital account surplus.

So things are not as desperate as you think on that front. Not to say that I would not prefer to see us become a world leading manufacturing success story. But I am not holding my breath while I wait.

Your Post 93

Governments are not like companies and so should not think like them. Aside from having different and wider aims, governments can print money and can mortgage the incomes of future generations.

There is a good case for applying businesslike efficiency to government administration. But politics does and should trump the idea of making a profit. It would be very easy to run the NHS at a profit. Introduce charges and don't treat those who cannot pay. Have a look around at the poorer people you know and see the missing teeth. They cannot afford to pay the NHS dentistry charges. There are three women on the checkouts of my local supermarket who fit that description.

Government should be aware of how businesses think and work. Governments should be aware of the business consequences of their political decisions. Governments should not be businesses.

But isn't this the nature of the capitalist system?

Perhaps there needs to be an understanding between the rich and all the governments. In hard times, the rich take a hair-cut on their wealth, and that means all the rich.

But which rich person would agree to that - not any dyed in the wool capitalist beast.

But then they actually force themselves into that position. Governments default on their Debt, they get a bail-out, else the country's economics collapse - didn't someone say that word - blackhole?

Then the rich get nothing back, or make a loss, after all, if the money belongs to the rich, the borrowings and the bail-outs are their money.

It's interesting how the equations are no different, if you look at money as energy.

And so economies have to reorganise, adapt, change their nature to survive.

In fact it looks more like a global battle of the survival of the fittest.

Specialised economies can prosper - when the economic conditions are OK for that specialisation, else a fully diversified economy will always be more stable, with much better longer term prospects.

Perhaps we will go through a few phases, where manufacturing will be shifted abroad, then our economy declines, until we are all at the same level, or a cheaper manufacturing base, or will we be able to specialise in the high tech and thrive?

Of course you will get the number of crashes - e.g. Greece, which will take mass migration of the young to the expanding economies, and this would be a process that happens again and again and again, until the whole world economy stabilises at some future structure/state.

But I doubt that stability will ever occur, there are too many changes in the world, political, economic, diseases, etc etc, that will always keep providing challenges.

Wouldn't it be boring if everything was always the same?

But then, why do the governments give money to the rich?

If the poor people have no ability to make money, and the governments are always printing money - they have to if it keeps going to the rich, and the rich keep it to themselves, don't the governments have to print money, to cause inflation, to ensure that they make the rich relatively poorer?

But it needs to be printed at a certain rate, so not to cause hyper-inflation?

The quantitative easing was the worst thing that could be done, as it just went to the rich to buy the debt or whatever financial instruments that the rich own, which made the rich richer again.

But if one country does this in isolation it causes a problem for that one economy.

But if the rich are in government, then they will always act in their own interest, but if Labour are in government, we seem to end up going cap in hand to the markets or the IMF.

Basically you have to face it, it's a paradox, and anything you do in government will be right for some people and wrong for other people.

Who do you want to upset?

A rock and a hard place?

Perhaps this is why the population splits roughly 50% 50%, conservative / labour - an obvious outcome if each member of the population is asking what is in its own best interest.

Perhaps the question shouldn't be "What would Keynes do?"
but what kind of capitalist system do we want.

It is interesting that the UK system is effectively half capitalist and half communist
Companies giving employment, tax, jobs, etc
With the state acting as the communist part with social help for the vulnerable and weak.

Parliament - of the people, for the people, not a pure capitalist business, a family business.

Richernot broker
"It is interesting that the system is half capitalist half communist.
Companies giving employment, tax, jobs etc.
With the state as the communist part with social help for the vulnerable and the weak."
I am guilty of both in the family - helping family members in hard times , but running a business otherwise.
I find this definition of communism confusing.
Are caring members of society all communists?

Richnotbroker
Just wanted to clarify something.
Are all caring people socialists?
And , does that mean that all people who are part of Cameron's Big Society socialists, like for example, people who help in food banks?