[peter_co]

It seems that economics is one of the most divisive issues in the coalition, and in order to forge a sustainable coalition, I believe that we need to establish the skeleton of a policy that will be acceptable to all the coalition members. I suggest all the parties list their key demands, though please be reasonable and don't post half of your economic platform, since the goal is to find common ground. Finally, since there have already been attempts to between individual parties (especially the SLD-PNL) to reach a certain compromise, I would ask those who have taken part in the talks to give a brief overview of the major conclusions of those discussions, since those would probably offer the best starting point for this discussion.

[Dave]

PNL demands:

-Abolition of debt-based money (SLD agrees)
-No GMI for those who do refuse work
-Low corporate taxation (competitiveness? hello?!)
-All investment must be fully tax deductible for both individuals and corporations
-Social insurance to be primarily financed via mandatory savings
-Industrial policy

There are other things we would like, but first let's see if everyone can agree to that.

[peter_co]

-Abolition of debt-based money (SLD agrees)

On this point we are categorically opposed. Our country is barely now coming into its own and has the possibility of becoming a new Tiger in Europe. We do no see the wisdom in jeopardizing this path to prosperity through the foolhardy adoption of an experiment based on the archaic ideas of a century old Austrian school that are rejected by the mainstream economic community.

-No GMI for those who do refuse work

We agree.

-Low corporate taxation (competitiveness? hello?!)

Although our platform calls for the maintenance of current corporate tax rates, we are willing to accept their reduction.

-All investment must be fully tax deductible for both individuals and corporations

We can discuss the details of this plan later, however we are not necessarily opposed.

-Social insurance to be primarily financed via mandatory savings

As long as it's primarily and not exclusively, and as long as in addition to savings one includes investments, then we agree.

-Industrial policy

I'm not sure what this means. Are you simply saying that the government should have such a policy? In that case we're not opposed, since we do believe that government may use incentives to direct economic activity (particularly to stimulate the growth of a "green industry"), and this will necessitate the elaboration of a set of guidelines.

[Dave]

On this point we are categorically opposed. Our country is barely now coming into its own and has the possibility of becoming a new Tiger in Europe. We do no see the wisdom in jeopardizing this path to prosperity through the foolhardy adoption of an experiment based on the archaic ideas of a century old Austrian school that are rejected by the mainstream economic community.

The abolition of debt-based money is not exclusive to the Austrian school, and I would welcome the SLD to weigh in on this as well. Why should we pay interest on the creation of new money which accrues to private bankers?

Although our platform calls for the maintenance of current corporate tax rates, we are willing to accept their reduction.

High corporate taxes are extremely irresponsible, and I don't know how you could support them in the first place.

As long as it's primarily and not exclusively, and as long as in addition to savings one includes investments, then we agree.

Savings would naturally include investments. We support free state-financed education, as well as free single-payer healthcare for children. Thus we are not in favor of doing it exclusively via savings either.

I'm not sure what this means. Are you simply saying that the government should have such a policy? In that case we're not opposed, since we do believe that government may use incentives to direct economic activity (particularly to stimulate the growth of a "green industry"), and this will necessitate the elaboration of a set of guidelines.

We're saying the government should promote the direction of the national economy into the highest-value industrial activities, which produce the greatest amount of income and high-paying jobs.

[Dr House]

On this point we are categorically opposed. Our country is barely now coming into its own and has the possibility of becoming a new Tiger in Europe. We do no see the wisdom in jeopardizing this path to prosperity through the foolhardy adoption of an experiment based on the archaic ideas of a century old Austrian school that are rejected by the mainstream economic community.

It isn't just the Austrians that are opposed to the idea of debt-based money, and in any case we don't necessarily need to return to the gold standard. We could just as easily adhere to a monetary rule based on spending money into existence rather than manipulating interest rates.

Furthermore, we feel strongly about the opposite. Debt-based money inflicts massive damage to the economy, the full extent of which is hidden from the eyes of the public and mainstream economists by deliberately faulty accounting. Debt-based money results in continuous asset price inflation, which creates profitable investments that do not lead to fixed capital formation, thus crowding out the industrial sector and causing a decline in productive capacity.

I'm not sure what this means. Are you simply saying that the government should have such a policy? In that case we're not opposed, since we do believe that government may use incentives to direct economic activity (particularly to stimulate the growth of a "green industry"), and this will necessitate the elaboration of a set of guidelines.

Well the idea here is not to lead a green shift. The nation we govern is wealthy on account of a very prosperous agricultural sector and vast oil and gas reserves, but it is barely industrialized, and the result is a lack of highly productive jobs and high levels of urban poverty despite the nation's total wealth.. What we propose is nationalization of oil and gas and a program of preferential trade policies and industrial subsidies designed to create internationally competitive high-technology industries.

[Paradigm]

On this point we are categorically opposed. Our country is barely now coming into its own and has the possibility of becoming a new Tiger in Europe. We do no see the wisdom in jeopardizing this path to prosperity through the foolhardy adoption of an experiment based on the archaic ideas of a century old Austrian school that are rejected by the mainstream economic community.

We're not talking about a gold standard. We're talking about debt-free fiat money. There is historical precedent for this, including the early American colonies, particularly the middle ones such as Pennsylvania. After England removed the right of the colonies to issue their own money, poverty ensued, and Benjamin Franklin cited this as one of the main reasons for the revolution.

[Dave]

Most money throughout human history was not debt-based, in fact. Debt-based money is a historically recent phenomenon which centralizes the control of economies under bankers to an unprecedented degree. There is functionally not much difference between inflation which comes via direct issue or via being loaned into existence, except that the latter results in bankers directing the flow of new money and requires that interest on new money be paid to bankers.

The PNL finds both hard money and the debt-free issue of fiat money to be acceptable, although in the case of the latter we would demand strict limits on inflation to prevent economic chaos.

[peter_co]

We're saying the government should promote the direction of the national economy into the highest-value industrial activities, which produce the greatest amount of income and high-paying jobs.

As I've said, we are not opposed in principle to the government influencing the direction of the economy based on a certain policy. For example, we are willing to use tax incentives to encourage certain economic activities such as the development of renewable energy sources. However, of course we are opposed to a centrally directed economy. That last thing we want is NRA-type control of the economy.

[Dave]

The PNL is a capitalist party and certainly not in favor of central planning. And the NIRA, which restricted industrial output in order to keep prices high, is the absolute last thing we want.

As an example of our strategic industrial policy, we believe that all public universities with a science/engineering school should also have a captive industrial park, venture capital fund, and business incubator, so that bright students (and faculty) get assistance in starting successful technology firms.

[peter_co]

The PNL is a capitalist party and certainly not in favor of central planning. And the NIRA, which restricted industrial output in order to keep prices high, is the absolute last thing we want.

Nice to hear, in that case our position on this issue does not seem to be that different.

And I'll come back to the issue of fractional reserve banking, since there were many replies in between my posts. As I've already said, we view abandoning fractional reserve banking as a risky experiment that contravenes modern mainstream economics. Of course the system as it exists now is imperfect, but for all its flaws and crises, history has shown that it is conducive to growth and is functional. We do not want to jeopardize the entire economy by going on such a risky venture that could leave our financial system in tatters and put us a decade (if not more) behind if it fails.

[Dave]

We do not require the abolition of fractional reserve banking. The PNL desires 100% reserve banking for political, not economic, reasons, but this is not essential for us. We would request a gradual move to a 20% reserve ratio in order to prevent over-leveraging from ever being an issue in the banking system.

As you may recall, the gold standard existed in tandem with fractional reserve banking, and what Paradigm proposes would not abolish fractional reserve banking either.

[Paradigm]

and what Paradigm proposes would not abolish fractional reserve banking either.

Not necessarily, but that would be my preference.

[Dave]

Good to hear, but I imagine we'll need to compromise on that for the sake of the PUC and CA.

[NYYS]

I would oppose the total abolition of fractional reserve banking, but if a compromise is necessary we can certainly raise reserve requirements.

[Paradigm]

Raised reserve requirements would be acceptable.

[peter_co]

Raised reserve requirements would be acceptable.

We have no objection to that.

[Karl_Bonner_1982]

I think we need more reserve requirements to reduce the chances of bank insolvency and the domino effect of excessive leveraging.

As for corporate taxes, keep in mind that the fewer loopholes there are in the corporate tax code, the lower the rate can be for honest companies. Since we're in a bad recession right now I'd suggest a modest tax credit for employers who expand their payrolls over the next 2 years. This would combine producerist and Pigovian principles and be good for promoting hiring.

Some other things I would support:

Green energy subsidies and eco-modernization tax credits.
Wage supplements for the working poor based on hours rather than gross income, to preserve incentives to work more.
A universal but optional public insurance plan funded by a combination of payroll, carbon and excise taxes and a sliding-scale premium based on income.