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Hi Martin,



I'm grateful to read your thoughts on this; For if managed badly -- or even if 'well-managed' but 'managed' at the last-minute -- excessive public debt can wreak havoc on even the strongest economy.



And I'm certainly in strong agreement with you that all G7 nations should aim for debt to GDP loads of no more than 50% of GDP.



I think that your goals are excellent, and one that all nations should strive to reach, soon.



Getting to that goal requires a legislated timeline, and while some amount of progress must be made up from thoughtful tax expenditure reductions, it must also feature modest tax increases.



Trying to accomplish 50% debt to GDP over 5 or 10 years on the backs of (only) taxable expenditure reductions will result in landslide election results (and not favouring the incumbent who promoted those reductions!) while relying on taxation increases (only) would have the same effect come election time.



Possibly enough chaos would result from following a single pathway, that the likelihood of no progress at all over a 5-year or 10-year period might actually occur.

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For the meantime it looks like we are stuck at an average of 2% GDP growth in the United States.



Therefore, we can't expect growth to shrink our apparent debt to GDP, at least not in the final years of this decade, nor even the decade following -- especially if there is a real estate bubble collapse in China, which I expect -- and it may be a devastating one. (A 4% real estate haircut in the U.S. in 2007/08 was traumatic, but a 4% real estate bubble burst in China would be catastrophic, and not only for China.

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Lowering tax expenditures is a two-edged sword, as I will note below -- although I certainly agree with the need to cut wasteful and expensive programmes.



On the electric vehicle taxable expenditure:



Switching large numbers of cars from fossil fuel to EV will dramatically clean the air in our cities, thereby lowering healthcare costs. Which is one major reason that major cities require such incentives to lower healthcare costs for citizens, corporations and governments.



However, there is a better way to increase EV adoption without massive and widespread subsidies.



Palo Alto, San Diego, and some other jurisdictions have passed laws that all new homes must have pre-installed, the necessary wiring and connection for EV cars.



Although it adds incrementally to the price of a home, it is a cost that is recouped if the buyer of the home drives an EV and saves thousands of dollars annually on fuel costs. And the cost of the wiring and connection is recovered when the house is sold. (This has been studied)



So; Do TESLA buyers need a $7000. incentive, or a house that has an existing EV charger?



Yes, I wouldn't turn away free money either. But convenience is important too.



It would be much better in my view to pay Elon Musk $7000. for each SuperCharger Station that he builds in the U.S.A., henceforth.



Note: Non-TESLA EV's can also charge at TESLA SuperCharging Stations (although not for free, as in the case of TESLA owners)



Elon may build 1, or 2, or 3, TESLA SuperChargers per state/per year X $7000. -- which is many times better than the hundreds of thousands (of new EV buyers) X $7000. annually.



That too, is a way to get more people buying EV's, with already installed EV chargers (by law) in each new home, and more TESLA Superchargers

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If we limit mortgage interest deductions, that will slow housing starts and that's a no-go for the economy.

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On the exclusion from taxable income of employer-paid health insurance premiums, that is likely a good move -- especially if it can be partly countered with lower drug costs via some mechanism -- such as the use of generic medicine for prescriptions and OTC drugs.

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On the taxation side, the United States, while keeping NAFTA, TPP (assuming it is passed) and other trade agreements, should begin charging a 5% simple tariff on all imports and exports -- with no exceptions.



All countries need revenue to fund their operations -- and a simple, small tariff can add billions of dollars of tax revenue per year.

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It's either that, or a federal VAT of 7%, with half of the 7% revenue collected in each state, retained by that each state, to pay for administration of the revenue collection, oversight, and the collection of revenues generated by the VAT, along with responsibility for timely remittances to the federal government.



States would gain some revenue to shore up their own debt position, credit rating, and allow for serious, and frankly overdue, infrastructure spending.

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Finally, from the structural perspective, the U.S. government should pass legislation to prevent budget deficits of more than 4% in any year, and debt to GDP capped at a maximum of 55% of GDP within 15 years.



Once reaching a sound economic footing, it is a simple matter to stay under deficits of 4% of GDP and federal debt of less than 55% of GDP.



I would urge all 50 states to pass identical legislation.



https://johnbrianshannon.com/2016/04/15/nafta-tpp-tariff/



https://thisiseisenhower.com/2016/02/28/solving-americas-debt-crisis-by-the-numbers/



Thank you again, Martin, for publicly posting your fine essays at ProSyn!



As always, very best regards, JBS