In previous articles, I’ve discussed the inevitability of TNPL policies as the only way to achieve what current monetary & fiscal policy have not: lifting growth out of the doldrums, containing inflation, and putting a lid on the deficit. The pin that popped the bubble could have been anything, but it turned out to be coronavirus — and now the heavy stimulus has followed as expected. This time, however, with the painful supply shock, the risk of inflation has reared its ugly head. The nature of this crisis has already shown the need for one TNPL (New Physiocratic League) policy prescription: the Three Pillars of Income Support. In the United States, there already appears to be some bipartisan agreement for these types of policies, which includes a universal dividend payment and wage supplements. The speed of this realization has certainly been surprising, but very encouraging. These programs should be made permanent, but as a replacement for the patchwork of ineffective and bureaucratic social programs currently in place.
But with deficits soaring once again to new heights, and the central bank printing presses paying for it with new rounds of QE bond purchases, consumer prices will finally see the impact due to sharp cuts in production. It’s only a matter of time before tax reform is back on the agenda in order to get the fiscal deficit under control and keep inflation in check. However, if not done right, tax hikes will dig the world deeper into recession, or worse. There’s only one road out: The RAALLLI Plan.
R — Raise Real Incomes — Direct cash transfers in the form of a monthly national dividend, an income supplement, and an assisted savings program (as per the Three Pillars system advocated by TNPL).
A — Affordability — In order for the cash transfers to actually increase purchasing power and not to be eaten up by price gains, it must be ensured that there is steady support for the production of basic essentials through the Sectoral Bank system. As well, a land value tax must be in place to maximize the number of housing (and commercial) units on the market, keeping prices down.
A — Anticorruption — An anticorruption strategy with real teeth, and the inclusion of an independent investigative commission, is essential to ensure that the reforms are effective and minimize waste.
L — Land Opportunity Compensation — Replacing taxes on earned income, particularly personal & corporate income taxes, must be replaced with a tax on the unimproved value of land. Due to its inelasticity of supply, land is the only factor of production that can shoulder the tax burden without distorting or suppressing production.
L — Licensing Reform — A bureaucratic web of occupational licensing, overzealous software patents, and artificial barriers to entry have allowed oligopolies and cartels to form in many sectors, causing inefficiencies and worsening income inequality. There must be a concerted effort to re-open the economy to domestic competition.
L — Limited Government — By stepping away from the administrative aspects of health care, unemployment insurance, and education by offering full coverage through vouchers, and an ability to choose, the economy can spur new innovation while minimizing administrative costs and offering more choice to the public.
I — Industrialization — After many countries have seen their industrial base hollowed out by subsidized and distorting imports, the coronavirus crisis will be the nail in the coffin for the industries clinging on to life. This will leave many countries with alarming security risks, an inability to avert inflationary shocks, and an economic monoculture. Subsidies and monetary window guidance are not a solution, and would only be an avenue for corruption and misallocation of resources. The Sectoral Bank program as advocated by TNPL is only the road towards economically efficient industrialization.
Only with a RAALLLI Plan in effect will the free world recover from the Covid-19 recession. The other roads are already starting to look closed, and we’ve seen how US policymakers are already been forced into implementing a cross-section of these policies, in the form of cash transfers. The sooner the rest of the plan can be signed into law, the sooner we can recover, at least from the economic symptoms.
Read The New School of Economics for more insights into the possibilities for positive reform.
