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Camels Rating System in Bangladesh

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Why Balance the Budget at Nine Percent Unemployment? More than one deficit should be remedied.

First, aggregate demand increase is necessary but not sufficient for growing the economy and eliminating deficits and gaps. Second, reducing government investment without raising investment demand elsewhere in the domestic economy would slow down desired economic progress.

The need to build new capacities for industry, the environment, agriculture, and in education goes beyond raising aggregate demand. We are not going to China just for cheap Chinese labor. Mexico also has cheap labor.

Balanced Budget and Budget Deficit:

A balanced budget should have targeted a low unemployment rate. We have a severe case of structural unemployment in the US economy alongside a freshly cut financial crisis. Job-outsourcing generates a savings deficit through falling U.S. personal incomes and rising consumption. Rising U.S. domestic consumption puts pressure on imports and increase the trade deficit and borrowing from abroad. Focusing narrowly on government deficit in isolation could generate instabilities elsewhere in the economy. Unbalanced approaches do not fill critical gaps and deficits in an uneven economy.

The economy could be endangered with austerity and the erosion of fiscal policy on both the tax and investment side of the government sector, federal, state, and local. Further, war expenditures should be funded from raising war bonds rather than from income tax revenues, with government contractors and big businesses playing a major role using their profit incomes.

Between 2006 and 2010, data from the U.S. national accounts show that private sector investment fell by 10 percent, while public sector investments rose by 5 percent on average. Should the public sector be used to create jobs? Congress could act wisely to avoid a man-made implosion through surgery that reduces government investment spending in an economy in distress.

Individual income taxes are 82 percent of total tax revenues, while corporation taxes pay the remaining 18 percent. Opportunities to reduce tax subsidy re-deployment should be a criteria to expand investment and create more jobs. Merely granting subsidies and lowering tax rates on corporate income do not push the U.S. domestic economy forward. If subsidies are necessary, infant industries should benefit. Raising more government tax revenue from households or corporations would require raising tax rates if the Laffer curve is used. Should government tax revenue be raised to fund government investment or pay down the national debt? The results of the Bush tax cut are in--job loss, jobs outsourcing, and higher consumption spending by households. Tax cuts should stimulate investment spending. It makes sense to raise the debt ceiling and use cheap money and liquidity for



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