"If you make less than a quarter million dollars a year, you're safe"

In a potentially deflationary environment with a 4% twenty year t-bill rate, it is preposterous to think that raising the income taxes on the top 1% of American earners will yield enough money to address the eleven trillion dollar debt that was established during the period when the American upper classes effectively quadrupled their assets. The truly wealthy are buying tax free federal bonds, and preparing to hunker down for several generations of untaxed leisure. Needless to say, the economy will not heal unless consumption is goosed, but increasing consumption through middle-class credit card debt is a non-starter, and the current conjuncture that couples a shrinking economy with a large class of people living on the interest paid by the federal debt will beget coupon-cutting trust fund families who will not contribute to the tax base.

Replacing the income tax with an asset tax would release money into the economy if the people who accumulated money during the consumption boom were forced to spend their money before it was taxed away. Inflation is, of course, an extra-legislative asset tax -- and if it is managed along with inflationary social programs that provide a safety net -- it is difficult to argue with a policy that would encourages reckless consumption among the very people who pocketed the federal deficit during the Bush years.