Wednesday, June 6, 2012

Solving Our Nation's Economic Malaise - Fixing What Our Politicians Broke: Short Term Solutions

Okay, hopefully we got the bad economic news out of the way over the past four days. Skyrocketing national debt, persistently high unemployment and under employment, an impending double recession, low consumer confidence, the threat of a Euro collapse and the negative ramifications on our banking system, etc.

There should be no doubt that our country's economic condition and future are looking very bad right now. We need the political class in this country to act now and act boldly to get the vitality back in our economy before it is too late.

And we cannot allow them to do what they have been doing: their programs, inaction, and lack of economic intelligence have gotten us into this problem in the first place. We need an integrated plan, with both short term and long term components, to fix what they have broken. We need a plan that provides certainty and a clear cut path so that businesses and consumers have a sense of confidence of what is going to happen so that they can plan their spending and expansion with some degree of confidence.

And probably the most important component we need in this plan is the promise that the government and American political class will begin to withdrawal itself from the detailed workings of the economy and get out of the way. Their messing around in the economy has resulted in failed mortgage revitalization programs (e.g. HAMP), failed bank bailout programs (e.g. TARP), $16 TRILLION in national debt, failed monetary policies (e.g. quantitative easing), failed alternative energy subsidy programs (e.g.; Solyndra, Beacon, Spectra, A123, Ener1, Ecotality, Fisker, Tesla, the Chevy Volt, etc.), failed stimulus programs, and whole host of other intrusions into the market. These intrusions proved that 1) the politicians are not qualified to intrude, 2) usually resulted in abysmal failure, 3) usually were misuses of taxpayer wealth that reward their political cronies, and 4) wasted hundreds of billions of dollars in the process.

Thus, please consider the following steps as a path to fixing the economy, removing the political class, and the government it runs, from our daily lives, reducing government's wasteful spending, and restoring some degree of lost freedom to our lives.

Short Term Economic Recovery Components

- The absolute first thing that has to be done is to decide what to do with the expiring tax rules and regulations at the end of 2012. These include the expiring Bush tax cuts, the expiring marriage tax penalty, the temporary cut in payroll taxes, etc. Doing nothing is the worst thing that the political class can do, it just prolongs the agony of uncertainty into the decision making processes of businesses and consumers. And where uncertainty is present, the behavior is usually conservative and not conducive to growing the economy.

Probably the second worst thing that should be done is to act in any way that raises the current tax burden for EVERY American. This means we need to get beyond the foolish "tax the rich" mantra of Obama and the Democrats. Any actions that take disposable income out of the weak economy at this point in time is just plain stupid.

The minimal amount of money that the government would receive from "taxing the rich" would:
  • Not have a significant impact on reducing our national debt.
  • Not make up only a very small part of Obama's almost $4 TRILLION budget.
  • Not likely be put to good use by our politicians, if you read our recent set of posts on how wasteful the political class spends our taxes (e.g. lavish Las Vegas parties, useless building of Navy ships, useless construction of foreign consulates, massive and failed subsidies to alternative energy companies, earmarks, etc.) See the following post for the details of waste: http://loathemygovernment.blogspot.com/2012/05/wasteful-government-spending-week_30.html

I would prefer to live by Obama's words that he uttered back in 2009 when he said: "You don't raise taxes in a recession." You also do not raise taxes when we are in the dire financial straits we have described over the past four posts. I think that we have shown we are either already in another recession or are about to go into one, given all of the recent bad economic news. His words should be our guide for fixing the short term tax problems.

Let everyone keep as much of their income as possible, rich and poor, in order to give the economy every chance at turning around. Taking any disposable money out of the economy now and giving it to Washington to waste is just plain dumb at this point in time.

And get these actions done now, not after the elections when we are five months down the rat hole of economic decline. The world's and the nation's economy are in stress now, not after the November 6 elections. Start providing certainty and disposable income to the economy now, not in December when it may be too late to make a difference.

- Although making sure that people and businesses knew that their taxes would not be going up on January 1, 2013 is a good start, it is not enough. There has to be some sort of agreement that this situation will not change in six months, a year, or a year and a half. People need to be confident that their tax burden, business and consumer, rich and poor, is stable for a significant length of time.

Stability and certainty are paramount. When the expiring Bush tax cuts were temporarily renewed in 2011, it had a minimal positive effect on the economy because of the uncertainty it created just a year or so down the road. This time, fix the tax impacts for a long time to eliminate the uncertainty and not make the same mistake that was made in 2011.

The Fed has stated it will not raise interest rates until at least 2014, which provides some degree of economic planning certainty to the market. The same should be done for taxes, both business and consumer. Fix the tax issues so that taxes do not go up in these economically stressful times and boldly state they will not go up for at least five years. We need as much certainty and disposable income in the market and economy as possible.

Don't believe me about the need for certainty to get the economy moving again? Consider some recent words from an CNBC interview of Alan Greenspan: "If you want to learn what the degree of uncertainty is — and the level I've been using for quite a long period of time is to watch what corporate executives do, what proportion of their cash flow they choose to invest in long-term assets. That number in the early part of 2010 was at the lowest ratio since 1935. There were equivalent things in the noncorporate area, there's a significant type of contraction, very much for the same reasons in residential buildings. In short, there is a fear of the future."

- The President needs to reconvene his Debt Reduction Commission as soon as possible, expanding its membership with the following organizations:
  • Bipartisan Policy Center
  • Concord Coalition
  • The Cato Institute
  • U.S. Public Interest Group
  • The National Taxpayer Union
  • General Accountability Office (GAO)
  • Congressional Budget Office (CBO)
We have reviewed the fine work by all of these organizations in this blog at one point or another. All of these organizations have given much thought and deep analyses to how to reduce out of control government spending, almost always in a way that has minimal effect on social safety programs and most Americans and their families.

All of their efforts, if taken together, would reduce government debt and unnecessary government spending by TRILLIONs of dollars over the next decade. The purpose of immediately reconvening them would be to assign them a Manhattan Project type task of developing the ultimate plan to reduce unnecessary and wasteful government spending, reduce the national debt, and instill confidence that the country and its government actually has a short term and long term plan to fix our ailing economy.

Just the announcement of such an effort would provide some degree of comfort and certainty that things will get better. The one caveat is that short sighted people like Nancy Pelosi and Harry Reid cannot dictate whether or not the output of this effort even gets reviewed, like the way they sabotaged the original Debt Reduction Commission effort. The final plan must see the light of day and be voted on by the entire Congress, sans any amendments or changes.

The political class has proven they cannot be trusted to the the right thing. This enlarged Debt Reduction Commission does the hard work and develops the plan in total, the political class in the White House and the Congress votes yes or no, with no chance to change any component.

Since all of these organizations have already done most of the necessary leg work, the enlarged Commission would be given four months to blend all of these efforts together and the vote in Congress would occur before the election in November, we cannot afford to wait a day longer than necessary.

- Given that we already know from our own research, published numerous times in this blog, that the Federal government easily loses over $600 billion a year to waste and criminal fraud in its major programs (e.g. Social Security, Medicare, Medicaid, food stamps), there is great upside to be had if that waste and fraud can be eliminated.

Since above we are proposing that taxes not be raised for anyone starting in January, 2013, another way must found to fund necessary government functions and start paying down our outrageous national debt. The best way to to that is to recover $600 billion a year in waste.

And the best way to collect that $600 billion was laid out in our May 7, 2012 post where we introduced the National Bounty System (http://loathemygovernment.blogspot.com/2012/05/national-bounty-system-fixing.html). The inspiration for the National Bounty System came from a chance viewing of a county police TV commercial I happened to see.

The commercial hyped its crime stopper tip line process that the local police had instituted. This tip line facilitated citizens who wanted to report potential illegal activity, either via a phone number or email. If the tips resulted in stopping criminal activity, the tipster could be rewarded financially.

This is what the National Bounty System would do. It would deputize every American, under a strict process to protect privacy and limit harassment, to be on the look out for illegal activity that is being used to siphon off $600 billion a year in taxpayer wealth. As a reward for their vigilance, they could eligible for a cut of any taxpayer wealth that is recovered from criminal activity.

 Please visit the link above for the details. This process would immediately begin to fill the void left by NOT raising anyone's taxes in 2013 and beyond.

- Obama Care needs to be repealed as soon as possible for several reasons, all of which have been extensively covered and detailed in previous posts:
  • It has no chance of being successful since its authors never understood the underlying root causes of our escalating health care costs. If you do not understand the root causes of a problem, you have virtually no chance of coming up with an effective solution to those root causes.
  • Obama Care will significantly increase the growth in our national debt, the exact opposite of what the economy needs.
  • The massive set of regulations and rules that businesses will have to deal with as a result of Obama Care is causing businesses all over the country to curtail hiring or turning their permanent employees into temporary employees to avoid the additional cost burdens  of Obama Care, the exact opposite of what the economy needs.
  • The many additional fees and taxes coming out of Obama Care will remove even more disposable income out of the economy, the exact opposite of what the economy needs.
Given that Obama Care will not work and it is causing the exact opposite type of business behavior that is needed to grow the economy, it needs to be repealed, or found unconstitutional, as soon as possible. Doing anything less is just plain egotistical, stupid and selfish behavior from the political class.

- An article from The Week magazine several months ago summarized many articles as it related to an estimated TRILLION dollars that American companies are holding in overseas accounts. The reason for keeping those profits overseas is the taxes that would have to be paid if those profits were brought back home from the foreign operations of American companies.

Nobody wins under this situation. American companies get little use of these funds since they obviously do not have anywhere else in the world to invest them if the funds and profits are just sitting idly in foreign banks. The government gets none of the benefits since the political class wrote the tax laws that make it too expensive to bring those funds home. The domestic economy, that is in desperate need of a jolt, gets no positive impact of an idle TRILLION dollars left overseas.

How about we do a one time tax holiday to bring that TRILLION dollars back into the domestic economy? I am not a tax expert like some of those that discussed the upside in The Week article but the tax holiday might have the following rules and conditions:

  • The money would have to be brought back into the country within a year.
  • The funds could be used for dividends or stock buybacks since both actions would inject cash into the economy.
  • The offshore funds could not be used to fund an increases in executive pay, with nonpartisan experts constructing the parameters and rules to ensure this does not happen.
  • The offshore funds cannot be routed from foreign accounts to domestic accounts and not be put to work in the economy. Again, nonpartisan experts can establish the tracking and accountability parameters to ensure this does not occur.
  • Penalties and additional taxes would be paid if executive pay and idle funds resulted from the tax holiday.
  • If those conditions are not attractive to any company, they can leave their funds overseas and continue getting very little return.
  • The Federal government would place a 5% tax on the returned money.
The Week article points out that some people are opposed to this effort, feeling that companies should pay the full tax load on this stranded TRILLION dollars. Nice in theory but pretty silly in reality. We are in dire economic straits. Any funds that do not further burden the American taxpayer should be put in play to get cash into the economy.

To sit back and say American businesses already get too many tax breaks is cutting your nose off to spite your face. That money is doing nobody in America any good sitting in foreign bank accounts. Better to try and get it flowing back to us under some type of structured tax holiday program that funnels the returned wealth into the economy, ensures that it will actually make it into the economy, conditions the return on not increasing executive salaries, and getting at least some tax money to the Federal government to reduce our debt.

To leave those funds overseas serves no purpose. The tax code needs to be overhauled to make sure this does not happen in the future. However, from a short term, urgent need, a tax holiday is the best bet to quickly inject a TRILLION dollars into the economy. Doing nothing gets you nothing.

Okay, this post took longer than I thought it would. Today we will be content with the urgent short term steps needed to get the economy out of the ditch. Tomorrow, we will focus on the complimentary long term steps that also need to be taken for the health and survival of our economy and our democracy.


We invite all readers of this blog to visit our new website, "The United States Of Purple," at:

http://www.unitedstatesofpurple.com/

The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.

The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at www.loathemygovernment.com. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:

http://www.cato.org/
http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment/

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