Brad Causey
Brad Causey,
Editor and Publisher
R. Shannon Pollard
Kevin Sommers
David R. Wehry
James E. Foy
The Freedom Letter
Ten Ways to Fix the Economy
At the time of this writing, we are a little more than a month into President Obama's term of office. The "Stimulus" bill has been passed ($800 Billion). The latest housing bailout has been announced ($275 Billion). The Obama bailout proposal is in addition to the Bush Bank Bailout of $700 Billion. Total bailouts and stimulus in the last 6 months: $1,775,000,000,000.00. For emphasis: The number is almost 2 Trillion dollars! This $1.775 Trillion is in addition to the $3 Trillion dollar budget which is not yet complete, but already in deficit. To those who voted for "change", congratulations! You have received it!
Since all of this Keynesian/big government/stimulus/bailout nonsense has been going on, the economy is worse off than it was a year ago. I will not join with the prophets of doom from the media and White House and tell you the sky is falling. It is not. Even with all the problems in the housing, automobile and finance sectors, the economy is 97% as good as it was 2 years ago. With the possible exception of Nancy Pelosi, no rational person was complaining then. (I am not attempting to imply that our House Speaker is rational).
It is obvious none of what has been tried in the last two years is actually working. Mr. Keynes was certainly an interesting fellow, but his theories have never proven to be effective. On the contrary, digging a deeper hole of debt and spending will not help us get out of the hole we are in. Or, as Winston Churchill said: ""I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle."
Here is my plan to repair the economy:
1.) No more bailouts! Banks, Automobile manufacturers and other businesses that are inefficient should be allowed to fail. We already have a system for this. For banks, the F.D.I.C. For everybody else, the bankruptcy courts. No whining! Failure has always been an option in this world. No one is too big to fail. Pan Am, TWA and Eastern Airlines are all gone, but we still have an airline business. AMC, Dusenburg, Marathon Motors, Auburn, Plymouth and Oldsmobile are all gone, yet we still have a car business. Dean Witter and Lehman Brothers are gone (or absorbed), but Wall Street remains. Enron is long since bankrupt, but we still have people working there to clean up the mess. Those that fail are allowed to die, or are absorbed by more efficient competitors. True capitalism is dog eat dog and survival of the fittest. To quote someone famous, "America loves a winner, and will not tolerate a loser." The laws of nature require that the weak not be allowed to poison or drag down the strong. Abraham Lincoln said it well: "You cannot strengthen the weak by weakening the strong. You cannot help small men by tearing down big men. You cannot help the poor by destroying the rich. You cannot lift the wage earner by pulling down the wage payer. You cannot keep out of trouble by spending more than your income. You cannot help men permanently by doing for them what they can and should do for themselves."
Cost to the taxpayers of the above: Zero dollars.
2.) Repeal Sarbanes/Oxley. This example of federal meddling was an over reaction to the collapse of Enron and M.C.I. The good parts of Enron still exist. M.C.I. is almost completely intact as Verizon Business. The crooks are either dead or in prison. None of these natural outcomes is the result of Sarbanes/Oxley. This law simply makes it harder to do business within the United States and damned near impossible to compete with rational businesses from other Western countries. Get rid of it!
Cost to the taxpayers: Zero dollars. (In fact, if we get rid of the bureaucrats currently enforcing this nonsense, we could actually save a few hundred million)
3.) Reform the income tax. If we were really smart we would get rid of the income tax entirely. Since this bit of rational thinking is not likely in the current congress, I propose something more modest. The income tax should be made simple. We should define income as specifically as possible. Based upon a new and rational definition of income we should have a $50,000 exemption for everyone with a job. You pay no tax on income less than $50,000. (this would be $100,000 for couples) Any income over $50,000 is taxed at 10%. No deductions, no other exceptions. While we are at it, we should get rid of the negative income tax/earned income tax credit. It is ridiculous to send someone a check who has not paid in. As for the "cost" to the Treasury, I really don't care! No one should be giving to the government more than they give to their God.
4.) Reform the payroll tax: For more details of the history of this atrocity, please read the archived Freedom Letter entitled "Social Insecurity." Short version: The payroll/social security/medicare tax is 7.65% for you and me. Your employer must match the amount, making the total percentage tax on payrolls at 15.3%. The Social Security portion is capped at $100,000 of income, Medicare has no taxation limit. First, make it optional. Those who choose to pay will have Medicare and Social Security available to them later. Otherwise, you are on your own. We should reduce the total tax from 15.3% to 10%. (5% each) Increase the cap to $250,000.00. (Obama thinks above this is "rich") The social security/medicare portions should be reduced from their current 6.2% and 1.45% to 4% and 1%. Get rid of the automatic appropriation and annually appropriate only as much money as the tax generates. If this means someone goes without disability and/or free health care, so be it.
Cost to the taxpayers: Incredible savings! (I hear screaming and gnashing of teeth coming from the IRS.) First stop whining. Second, quit the gestapo and get a real job. Third, money you never had cannot be counted as a loss. Sorry, but simply true. The incredible incentives these reforms will inspire will probably more than make up for the potential lost revenue. Getting rid of half the gestapo enforcement mechanism will actually result in dollar savings and more freedom.
5.) Repeal withholding. (I hear more screams coming from Federal office buildings.) Prepayment of taxes was instituted in 1942 in order to improve government cash flows in the midst of war. We were promised that it was our patriotic duty and it would be repealed after the war ended. Well? The war ended in 1945 and believe it or not, we are still doing our patriotic duty. Sorry, but government is NOT more important than mortgages, car payments, utility bills and buying groceries. All of which you pay for after you received the item or service. Time for the government to resume its natural role in society.
Cost to the taxpayers: Zero dollars. (in fact this would increase our personal cash flows)
6.) Get rid of Mark to Market accounting. This ridiculous nonsense requires banks and other institutions to guess what something might be worth now, even if is not for sale and was not recently acquired. If this applied to a personal car loan, you would be over/under and have your new vehicle repossessed before you were required to make your first payment. Removing this single regulation would solve 90% of the bank crisis without actually costing anything.
Cost to the taxpayers: You guessed it--Zero dollars.
7.) Repeal the Community Reinvestment Act. When Jimmy Carter was President, this law was enacted. Basically it blackmails banks into making loans that a normally rational loan officer would quit his job over. A federally regulated bank must have some percentage of its loan portfolio in ghetto housing and giving low interest loans to people without jobs or income. No rational business would be involved in this losing proposition unless forced to do so. That is the essence of this law. Subsequent Presidents have either left the law alone, (Reagan, and Bush I and II) or expanded its scope and enforcement (Clinton). Considering this very ill conceived piece of legislation, it is amazing we have any profitable major banks at all. Get rid of this now!
Cost to the taxpayers: Zero dollars.
8.) A freeze on new regulations. When Jimmy Carter was President the federal register (a listing of new regulations) was an average of 65,000 pages. Reagan reduced it to about 40,000 pages. Bush I increased it to around 55,000 pages. Clinton increased it to around 70,000 pages. Bush II increased it again to about 74,000 pages. These additional burdens on the ability of businesses to provide products we want at a cost we can afford are unnecessary even in good times. Now, it is simply insane. Whirlpool does not need to be told by the government how to design and assemble a refrigerator or washing machine. General Electric does not need advice from Al Gore on how to make a light bulb. Ford, Honda and Toyota do not need lessons in car design from bureaucrats at the Department of Transportation. Stop the nonsense now!
Cost to the taxpayers: Zero dollars.
9.) Relax or repeal some current regulations. Let's look at a passenger car legal to sell in the United States. Federal regulations include, stop lights, headlights, turn signals, seatbelts, safety glass, side door beams, emission controls with catalytic converter, padded dashboards, air bags, 2.5 mile per hour bumpers, and a fleet average of 27.5 miles per gallon. I will not argue with the logic of seatbelts, lights, safety glass and a bumper standard. The rest is debatable. Side door beams maybe. How about a cost/benefit analysis? Air bags? They are proven killers. If they do not actually kill, they generally increase minor injuries and always increase the expense of repair. It is crazy to make us buy them. Make it an option. I love clean air as much as the next man, but we could all plant a minor forest for the cost of a single set of emission controls which run in the thousands. Cars pollute a little less than they did in the early 1970's. However, what they do emit is 150,000 times more toxic. The overall improvement is problematic at best. Get rid of CAFE (Corporate Average Fuel Economy) standards. What is wrong with a car company providing us vehicles we actually want at a price we can afford? If the oil companies were allowed to refine gasoline as they wanted, gas would be cheaper to buy and burn more efficiently. No more ethanol mandates or subsidies! Please allow us to buy toilets that actually flush the first time without pneumatic assistance. Why is the government telling us how much water our shower heads should use?
Cost to the taxpayers: A savings in the billions to start!
10.) Reform Entitlements. In fiscal 2008, Medicare, social security (all types) and Medicaid combined was over 60% of federal expenditures. These "transfer payments" or "entitlements" or "mandatory spending" are simply taking from the productive and giving to the non-productive. The real term that should be applied to this is "redistribution of wealth." Redistribution of wealth is an anathema to a free society. All redistribution of wealth programs are also unconstitutional at the federal level. People should be responsible for their own retirement. If they want disability coverage, have them buy it in the private insurance market. If they are sick, they should either make an effort to eat and sleep better and pay for the doctor themselves, when necessary. Most employers offer (and or pay for) health insurance. Get some! Take care of yourself! Be careful! Stop smoking, eating fast food, and drinking excessively. If you want to die young doing things you should not, fine, but do not expect that the rest of us should help pay for it. Personal responsibility should be rewarded. Being an idiot should have consequences. Yes indeed bad things do happen to otherwise good people. But, the federal government, funded by you and me and debt, is not responsible. If it is unconstitutional, and/or something better done by others, the national government should not be doing it at all.
Cost to the taxpayers: Savings and incentives in the billions.
If I was not restricting myself to ten points, I could think of at least 25 things we could do to improve things. None of them would involve an increase in an already huge and oppressive federal government. Thomas Jefferson said two things which pretty much sum up the philosophy of our founders. "Government is best which governs least." And, "As government grows, liberty yields." Do you believe in keeping your hard earned money? Or not? Do you believe in personal freedom coupled with personal responsibility? Or not? Do you believe in property rights? Or not? I believe (as our founding fathers did) that government is a necessary evil. It is not a source for good, nor should we expect it to be. I believe that if you work, you should be allowed to enjoy the fruits of your labor. I believe that honest Americans are perfectly capable of providing for themselves and their families if simply left alone. Those that cannot should try a little harder. I conclude with another quote. This one courtesy of Vin Suprynowicz "An economic system which grants to the lazy and shiftless some 'right' to prosper off the looted fruits of another man's labor, under the guise of enforced 'compassion', will inevitably descend into envy, theft, squalor and starvation."
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