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What now? Part 1

Posted by Euroranger on November 3, 2010

Didn't work

Just so we're clear, this didn't fool anyone and was pretty damned insulting that you'd think it would

So, last night, the United States expressed their dislike for the direction the President and his party have been taking us the past 2 years.  It would appear that the shelf life of “Hope and Change” was somewhat less than 24 months.  As anyone knows that’s read this blog (yes, both of you), I’m not a fan of Obama nor do I tend to support the Democrat’s agenda.  To a great many people on the left this automatically labels me as a Republican and/or “stupid”, “racist” and “backwards”.  Problem is, like the majority of Americans who didn’t much care for the Obama/Pelosi/Reid show, I’m not a stupid, backwards racist.  What I am is an American who’s exceptionally concerned about the state of my country and didn’t have any place better to turn.  That is, a rejection of the Democrats is not necessarily an embracing of Republican/Tea Party virtues.  It just means that I care for one side less than I care for the other.  More than any other election I’ve cast votes in, this one was more of a voting against things than voting for them…and this troubles me a great deal.  Nothing good can come from a government that is the product of being viewed as the lesser of two evils and I don’t believe I’m alone in this.  I think my opinions on this matter are widely held by a great number of people.

So, with that in mind, we now have a Republican majority in the House of Representatives but a Democrat Senate and Presidency which means that unless someone decides to compromise on things, we’re in for 2 years of legislative gridlock.  In the midst of a struggling economy and with unemployment remaining stubbornly above 9.5% nationwide, this isn’t a good omen.  However, as I am a patriotic American and would like to see my country rebound and excel as I’m sure my personally hateful God would prefer, I am ready to offer some advice to our leaders as to how to fix the country.  Like all good ideas, my suggestions will be impossible to accept, will be panned by fools from both sides of the political fence and have as much chance of happening as a snowstorm in Hell…but that doesn’t diminish either their manifest need or their abundance of common sense.  Despite the fact that America faces around a gazillion problems right now, I’ll concentrate on only a few of the most important subjects.  These will be list items that, if solved or fixed, render the remaining list items as less important and can be solved at our leisure and probably a lot more easily with the bigger issues tackled and handled.  Because these items are SO large, I’ll list them here and handle one per post until they’ve been addressed.  They are, in order:

  • The Economy
  • The Deficit/National Debt
  • The Government Itself
  • ObamaCare
  • Immigration

So, to start off:

1. The Economy – This was, by far, the biggest issue with voters this election.  According to exits polls, Americans cite the current state of the economy as the biggest thing that motivated them to vote.  In this category, nearly 9 out of 10 people say the economy is in bad shape.  Now, when you say “the economy” to someone during an exit poll, you need to be careful what that exactly is.  In truth, it’s not “exactly” anything you can accurately define.  To most people though, this means unemployment (and underemployment), the deficit and national debt, the housing crisis and the stock market.  These are all likely to be the agreed upon definitions for what people would think of when you mention “the economy”.  That said, how do you fix “the economy”?

First, you need to realize that inherent in “the economy” is actually something less tangible that needs to be addressed first: Americans’ trust in the institutions that affect the economy.  Right now you have pretty much all time lows for Americans’ trust in their own government, in Wall Street and in the banking system.  Simply put: people don’t have as much confidence in these institutions as they once did.  Without that trust any economic recovery you make will be built on quicksand.  So, how do you re-establish the peoples’ trust in these institutions?  Simple.  You re-establish and enforce the regulation of Wall Street and the banking industries and in so doing you’ll be giving Americans a reason to believe in their own government again.  Now, regulating private industry is typically a Democrat talking point and I concede this.  However, as with most things in life, this is one of those areas where you need to be pragmatic and meet in the middle between leaving Wall Street and banks completely alone to do as they please and nationalizing them and running them as government businesses.  The happy medium is somewhere in between.  If we as taxpayers are going to set the precedent for bailing out these vital institutions (as both Bush and Obama have) then we need to make sure we craft laws and regulations helping to assure we don’t need to do it too often.

  • Regulating and approving the kind of investment vehicles available for speculation and trading (and making their contents transparent) is a good idea.
  • Deciding how much CEOs of private companies get paid for what they do is a bad idea.
  • Giving the Federal reserve and FDIC more power to ensure that banks are following every mortgage guideline and making penalties for their failure to do so exceptionally painful is a good idea.
  • Telling a bank how much it can charge for an ATM fee is not only a bad idea, it’s asinine and a waste of time.

This is one of those areas where we’ve learned (much to our personal pain and suffering) that letting the market regulate itself is a great notion but in practice it sucks.  It sucks because the existing laws in place to accuse and prosecute wrongdoing are too damned arcane and the penalties are too lenient, slow and difficult to apply to act as an effective deterrent to sloppy or criminal activity.  When people say Republicans are all about “laissez faire” and being pro-business they’re kind of wrong.  What Republicans are about (and have always been about) is following the rules and making sure the rules aren’t so restrictive as to crimp off performance.  What I’m proposing is better enforcement of existing rules, real and consequential penalties for breaking them, but not making the rules so restrictive as to make both institutions virtual branches of government.  Just like children, businesses need clear and unambiguous rules…and then government’s role is done with the exception of enforcing those rules.  Give business rules, tell them to play by them or they don’t get to play at all…then get out of the way.

Hope and change

When people voted for "Hope and Change" I'm pretty sure they didn't mean "I HOPE I don't lose my home because all I have is CHANGE to pay the mortgage with".

If you do this, home foreclosures will level off, lending will return, businesses will be able to generate capital for expansion and jobs will be the inevitable by-product.  In turn, people will be able to say “hey, government didn’t completely screw the pooch on that” and some small bit of confidence will return.  So, with Wall Street and the banking industry taken care of, let’s talk about another facet of the economy that’s in desperate need of fixing: tax policy.

The taxation situation in this country is…well…pretty damned awful.  Now, a fair chunk of this will actually be applicable to the next post’s subject (The Deficit/National Debt) but it also applies to the economy because of the effect it has on those being taxed (as opposed to the effect it has on government revenues which is better addressed next post).  The short answer for this problem is: we need to scrap the existing tax structure and start over fresh.  The current federal tax code is incredibly huge, unintelligible, is neither explicit nor consistent in its application and is too much in the business of promoting social agendas, certain industries, and government policies.  Its current regressive nature is inherently unfair and because the code is riddled with loopholes and avoidance maneuvers, is ineffective.  Here’s an example.  Yesterday I discovered that for the salary I earn I am in the 25% tax bracket.  I thought to myself, “wow…that’s a ridiculous amount of money to expect me to give up to the government”.  However, I also immediately recognized that I’ve never come close to actually PAYING the government 25% of my salary so I went and checked my tax returns for the past three years (2007, 2008, 2009) and discovered an amazing thing: my effective tax rate was anywhere from between 0.78% and 2.69% per year.  Now, think about that for a moment: I go from 25% down to less than 1%.  How is that?  Well, in my case it’s because I get to write off my wife, my kids, my mortgage, my business losses, my depreciation on several items and so on.  This is stupid.  I actually went back to 10 years ago when I was making around half of what I make today and my worst effective tax rate in any of those years was 6% (before I owned a house or had kids).  So, what’s so wrong with this you might ask.  I say: plenty.

First of all, I typically get a tax refund each year which means two things: the government took too much of my pay out of my check to begin with and they got to use that money interest free until they gave it back.  But consider for a moment what all that means.  It means that my employer has to calculate an amount of money to withhold based on whether I’m married, have kids or state whether I’m exempt from some things or want to withhold more from my check.  This requires forms, an accountant and a fair amount of effort in the form of time and salary to do correctly…and they still end up taking too much because I get a refund check in the end.  This is all increased costs for my employer.  On the government side, they need to collect this information about me, do their own calculations, keep track of all the money coming in and make sure it’s enough.  Again, this all requires forms, an army of accountants and an enormous expenditure of time and treasure: just to discover that while the government says I’m in a 25% tax bracket, I’m actually going to only be assessed, at most, less than 1/4 of that at the end of the process.  It’s a huge waste of time and effort and it can be simplified by simply scrapping the existing tax laws and enacting a new one that said “for each dollar earned, you give the government X cents of it”.  That could be 2 cents, 5 cents, 10 cents, 15 cents or whatever.  However, no loopholes, no marriage penalty, no bonus for having extra kids, no bonus based on whether you own your home or not…just a flat X cents per dollar.  The calculation is easy which means the IRS could probably be run by 3 guys with a PC working out of a closet in the Treasury department.  As an added bonus, the government’s revenue gets pegged to the GDP and the general financial health of the Americans being governed AND it gets the government out of the business of crafting business and social policy through punitive taxes.  If you want to craft business and social policy that’s what the Congress and Supreme Court is for…not the IRS.  If extended to business taxes, it eliminates all the attraction of headquartering outside of the United States.  In fact, if the rate was low enough, it could be an incentive for foreign companies to relocate here to take advantage of the simplified tax system which would mean even more tax revenues from business.  In short, as the government you greatly reduce your overhead while increasing your revenues.  A simple, common sense step.

There’s a ton more I could say about how to fix the economy long term but those are smaller issues, would make this blog post more like a blog novel and some will be covered in subsequent posts.  So, in summary, how you go about fixing the economy in a long term, sustainable and advantageous way is to revamp and enforce regulations for how Wall Street and banks work, give those regulations real teeth and actually police and enforce those regulations when needed as well as scrap the existing taxation system in favor of a non-biased, fair and across the board flat taxation rate with no loopholes or other political gimmickry.  Up next: The Deficit/National Debt.

My name is Euroranger and I approved this message.


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