Sunday, January 18, 2009

A Real Stimulus Package for the President

In the spirit of hope and change, Life At The Margin offers the following stimulus package for consideration by the new president and his people:

1) Withdraw the U.S. military from the world. Primarily this means closing bases and bringing soldiers home from Japan, Korea, Germany, Iraq, Afghanistan, and Kuwait. But U.S military personnel are stationed almost everywhere, and should not be. We should end all wars immediately as none of them have any use in the defense of the United States and its people. The process will be difficult and may take long. Some countries have gotten used to our presence and may prefer us to stay in the short run. But in no case is it in the long run interest of either the local populations or the people of America for these sustained imperial outposts to continue. Each government of a land that hosts the U.S. military should immediately be told that we are leaving and negotiations should commence as to how to accomplish this with the least negative impact on the local people.

The end result should be this: The U.S. Army should never (except in time of declared war) go outside the borders of the U.S., the Navy should never go farther than 150 miles from our coasts, and the Air Force should never go more than 500 miles from our coasts. U.S. soldiers should train to prepare for the unlikely event that a foreign army attempts to invade our country. They should spend their nights with their families in their homes.

2) Abolish the Department of Homeland Security. As described above the homeland should be made secure by the Department of Defense.

3) End the trade embargo on Cuba. This misguided policy, designed to ensure the political support of a very small, misguided group of citizens, only does harm to the people of Cuba and those of the U.S. Due to geographic proximity our relationship with Cuba is of great importance. Economic cooperation will enhance prosperity for both nations and loosen the grip of tyranny inside Cuba.

4) Pull out of all multilateral trade agreements (WTO, NAFTA, etc.). Adopt a policy of unilateral free trade with all nations and peoples of the world. It is unambiguously good for U.S. consumers to allow unrestricted imports to the U.S. Those products that can be made cheaply in other countries should not be made domestically. This will free up American resources to innovate and produce goods and services that we have comparative advantages in. Other countries may not reciprocate immediately but that should not weaken our resolve. The standard of living in the U.S. will increase and other nations will eventually see this and follow.

5) Change the federal tax code to read, "All income of any type is taxed at x%." Here, x would equal whatever number would equate revenue under the old and new systems. As spending decreases, and only as spending decreases, the tax rate would decline. The ultimate tax rate could probably be as low as 5%.

This tax overhaul would have massive direct and indirect economic benefits, both immediate and long-lasting. A tremendous amount of resources are wasted in support of the tax code. Accountants would be free to produce something of value and resources devoted to lobbying for tax incentives could be diverted to productive enterprise. In addition, no one would be confused about the tax policy.

As nice as it is to offer tax relief to the poor, the zero tax rate on low-income people has greater cost than benefits. A huge percentage of our population is indifferent to the profligate ways of government because they perceive it as having no impact on them. In reality they are still subject to the stealth tax of inflation. A balanced budget with reduced spending will significantly reduce the threat of inflation, and a low tax rate for all would be a small burden for all, including the poor.

6) Raise the starting age for social security benefits to equal life expectancy and cut the social security tax in half. Social security was never meant to be a retirement program. It is insurance, and only really old people and disabled persons should rely on it in any way.

7) Increase the tax on use of fossil fuels and eliminate all subsidies for "alternative" fuels. This would solve myriad problems, including the global warming issue. The increase in the tax could be 2 or 3 dollars per gallon of gas or equivalent. All energy sources should compete in a free market based on costs and benefits alone. Fossil fuel use causes a negative externality (a cost not borne by its users) which can be internalized by this simple tax. Revenue from this tax should be used to pay down the federal debt. Once the debt is reduced to zero, the income tax can be reduced.

8) Eliminate all federal aid for college tuition. This includes loan subsidies, grants, etc. These programs are sustained on rhetoric of affordability, and the intentions of lawmakers may well have been to that end. But they serve to make higher education less affordable as they feed the increases in tuition rates. Banks and universities are the beneficiaries, not students.

9) Eliminate tax incentives for retirement plans. This is part of number 5, but deserves specific mention. IRAs, 401(K), and similar plans should be eliminated. We are a debtor nation; retirement is for savers. Far from encouraging the nation to save and invest, these programs have encouraged perverse behavior, such as earning a modest return in an IRA while borrowing on credit cards to consume. They have also created a false sense of security for many citizens. The values of these accounts is not guaranteed and retirement is not an entitlement. In addition, many of these plans have restrictions that prevent people from optimally employing their savings.

All assets held in these accounts should be made immediately available for withdrawal without tax penalty. Any contributions already made, or gains accrued to date should be taxed, or be free from tax, according to current law. Future gains should be taxed at the regular rate and no new contributions should occur.

10) End all bailouts. No single business is so important that it should be propped up by taxpayers. The "too big to fail" idea is a hoax perpetrated by those who stand to benefit from the bailouts. Bailouts are theft from American workers and an assault on economic freedom. They are also a disincentive for innovation and productive work.

If a particular service is important to the functioning of our economy, people will compete to offer that service. The bailout policy only causes poor businesses to survive at the expense of strong ones. Once the country gets a clear indication that the bailouts are over, we will set our sights to creating value for people. Only then will the economy truly recover.

Some of these changes will cause short-term pain for a lot of people as the economy adjusts. Most notably, many will lose their current jobs, but new jobs will be created for those people to fill. On average the new jobs will be better than the old ones as greater value is created. In the meantime, we still have unemployment insurance to ease the transition for those who need to find jobs. There is no way out of the pain. Current policies only push the pain into the future. But by doing so, they make the ultimate level of pain much greater. We have to go through this to get through this.

Monday, January 12, 2009

Bush Disappointed That Saddam Was Not Armed To Destroy

"There have been disappointments. Abu Ghraib obviously was a huge disappointment during the presidency. Not having weapons of mass destruction was a significant disappointment. I don't know if you want to call those mistakes or not, but they were -- things didn't go according to plan, let's put it that way."

That's a direct quote from Mr. George W. Bush. Pay particular attention to the sentence, "Not having weapons of mass destruction was a significant disappointment."

I don't believe anything else needs to be said about the character of the man that the people of this country elected to its government's highest office...twice.