Larry, I agree with you that investors have been adding China to their long list of worries, and a recent piece from the World Bank (accessible via the CFR’s blog here) shows why. I’d also agree with you that the US corporate tax rate should be lowered (I’d add that some of its inequities need to be ironed out while we’re at it). But while a move in that direction might help, I suspect that it would have less immediate impact (and immediate is what is needed) than a tax cut for individuals (even if the Goldberg Moratorium goes a little, uh, too far in that respect): the consumer, after all, accounts for about 70 percent of the economy. Could it be time for a demand-side tax cut, and if it is (I think it may well be), is the federal income tax the one to go after (social security taxes, maybe, as an alternative)? There’s also the question of state taxes. If states increase taxes (and they are bound to, I reckon), that’ll likely counteract the beneficial effect of a tax cut at the federal level, so what, if anything, can be done about them?

Needless to say, even if such a federal tax cut comes through, there’s no guarantee that it will be spent. That takes confidence (translation: reasonable job prospects) and that (for all the very real worries about the private sector being crowded out) is where government spending could well come in.

Does all this beg countless questions, such as about the respective roles of the public and private sectors, the desirability of having an economy quite so dependent on consumers (and their borrowing) and, oh yes, how all this will ultimately be paid for? Yup. There are no easy answers here, none at all. And that helps explain today’s markets too.