As a general principle, deficit-spending by the government should only be undertaken in depressed times as a means of offsetting in part or compensating for the lack of private activity. Conversely, when private debt is rapidly expanding, there should be a contraction of public debt as a counterbalancing and stabilizing influence."
"First, we sought to show, on the basis of general reasoning and observation, that an increase in savings at the expense of consumptive demand would reduce the construction of new capital goods as well as of consumption goods. Since business men are concerned with making profits, and since profits from the use of new capital depend upon the manufacture and sale of consumer goods by such productive establishments, we contended that an expansion of plant and equipment will not take place in any large way when consumptive demand is declining and the general business situation as a whole is accordingly unpropitious.
KELTON: Common sense suggests that a businessman would not ordinarily borrow to expand his business when he’s experiencing a decline in sales."
The point I wish to make is that it would be to the interest of capital under such conditions to advocate such taxation on a broad income tax base as would, in effect, sustain buying power and thus make for a sustained and expanding production which, in turn, serves not only to protect existing capital investment but also to provide a productive and profitable outlet for accumulated private savings.
The idea is by no means new or untried, for we have an example of its application in England and some of the other capitalistic democracies, where the level of taxation is extremely high— and bear in mind that I am just as unenthusiastic about paying taxes as you are— but where by various public expenditures a reasonably even flow of purchasing power has been maintained and production has been kept at continuously high levels. It seems to me that this is very much in the interest of the capitalist because he is better off in the end, since the products of the mill and factory continue to find a market and the return in profits to the owner of capital, after paying the higher taxes, is far greater than would be the case if the economy bogged down, the plants had to be closed and the value of all investment sharply depreciated.
KELTON: Capitalism runs on sales. If there aren’t enough customers to buy what our businesses are capable of producing, capitalists will suffer. It is the government’s responsibility to do what it can to maintain a proper balance between saving and investment on the one hand and consumption on the other. Rebalancing the economy might involve raising taxes."
Reading Between the Lines: A Memo From Fed Chairman Marriner Eccles
Does this sound like our current state of affairs in this Nation?
The conclusion seems to be that higher taxes would solve our problems.
The question generated is: Do we need higher taxes?
Other (please explain)