I have a question about adverse economic impacts the following scenario could have should it become a reality.
Election Platform
Suppose independent candidates running on a Parecon platform win majorities in both houses. Their platform consisted of the following…
- Elimination of all taxes such as income taxes, property and school taxes, etc.
- All credit card debt, personal loans and mortgages, or public debt with any financial institution, is wiped out.
- Every citizen will qualify for a tax free pension up to $40,000 at age 65.
Implementation of Election Platform
So they set out, and prepare legislation, (1) to abolish the federal reserve; (2) seize all banks and; (3) create institutions that would be responsible for issuing funds for business ventures, personal loans, mortgages, paying civil servant’s wages and issuing pensions.
The purpose of the first task it to take control/abolish the existing monetary system; the second is designed to start the process of creating the ‘commons’. Eventually all businesses would be folded into the ‘commons’. The third task is a subcomponent of the participatory planning process, which in time would be forthcoming. The ideal roll out of the Parecon is not necessarily the point of this post, though it would be worth having a discussion at some point around it.
Intended Outcomes
All debts would be cancelled; citizens would no longer pay taxes; and the elderly would now have the means live a decent life. This would create a surge of disposable income for most, if not all of the adults in our society. Obviously, this would stimulate a lot of economic activity, given people could afford to purchase so many more products/services.
For example, housing starts may surge upwards, demand for hard goods like refrigerators etc may increase, not to mention travel, and so on. The list goes on. It may take a while for businesses to eventually meet demand, especially given that so much manufacturing no longer exists in the US.
Unintended Outcomes
With all of this disposable income suddenly becoming available and businesses struggling to keep up with demand, what sorts of negative consequences might occur? Might there be inflation to the point where it wipes out any of the gains made by increasing people’s disposable income? Anything else? What strategies could be put in place to mitigate any adverse, unintended affects?