Last night I had dinner with an old and dear friend.  As happens between us we got to talking about the upcoming U.S. presidential election and the state of the union.  As usual we had different ideas about what to do, but we could agree on the issues.

Given:

–Individual tax rates since WWII have been as high as 84% and as low as 15%
-Tax rates fall into 3 major classes; earned income, income on capital assets and capital gains
-Since WWII total federal tax receipts have averaged 18% of gross domestic product (GDP or income)
-People are people (human nature doesn’t change)
-In 2007 total Federal expenditures were $2.7 T for trillion ( a trillion is a 1,000 billion), tax receipts were $2.56 T and the GDP was almost $14 T
-In 2010 and 2011 Fed expenditures averaged $3.6 T and tax receipts were down to about $2.2T
–70% of all Federal expenditures are for Human Resources

Question:
Given the above what tax and spend policies would you recommend?  Yesterday Ben Bernanke exhorted Congress “To Do No Harm.”