by Randolph T. Holhut
Chief of AR Correspondents
November 18, 2010
ALTERNATIVES TO AUSTERITY
ANGEL FIRE, N.M., Nov. 17, 2010 -- Bemoaning Queen Elizabeth's wealth dropping to a mere $695,000,000 CNBC-TV's David Faber wondered aloud if the Monarchy had been depleting assets like "sort of Sir Robin (Hood) of Locksley."
This started me thinking about the U.S. political neophytes who try to explain economic realities in terms of both the direct, and inverse aspects of Robin Hood:
The problem is that both polarities are simplistic and fail to address the very real needs and responsibilities of both citizens and government in a democracy.
The abuses of mortgage applications, credit agencies labeling pure speculative derivatives as "investment grade," and bailing out the largest insurer in the world, will be debated for years.
Yet the legacy of regulation, de-regulation, re-regulation and sometimes no regulation of financial services and markets is a nation deeply in debt in dire need of a workable recovery program.
I am not the first to express hope that President Obama's latest austerity and recovery plan is a right step. The details at this early date are less encouraging that the headlines proclaiming both Tea Party Republicans and Liberal Democrats think the plan stinks.
A call to cut government spending and raise revenue (taxes) denounced by the ideologically entrenched extremes of both parties can't be all bad.
So, in the Spirit of Robin Hood, I propose some general fixes which will continue to irritate lots of folks while repairing a growing debt and deficit. Remember, whether you agree with Robin and his Merry Men looting the nobility to feed the peasants, legend tells us that the Sheriff of Nottingham, was, after all, a wicked crook.
THE WAR TAX -- Either the United States is still at war in Afghanistan and against Global Terror or not. If not, declare victory, and cut the defense budget. If we are still at war, start increasing or even doubling the tax on things denied to or difficult to get for the men and women in uniform - the tiny percentage of Americans who proect us. Start with wine, beer, liquor, movie and show tickets, concert tickets, theme park tickets, hunting, fishing, camping, firearms, ammo and shooting gear, and all sporting events. In addition all tax payers AFTER computing their gross adjusted income, must add 3 per cent to the total to pay for the war.
MORATORIUM ON CAPITAL GAINS -- Billions of dollars are locked into American families because long time savers and investors - especially retirees - won't spring for a new roof, a furnace, a vacation, or a knee replacement.
The money is there, but to "tap" the money means selling an asset which has been held for 20 or 30 or more years, and paying a big chunk of cash to IRS.
Congress needs to instruct the Treasury Department to suspend all capital gains tax until July 1, 2018. Why 2018?
It puts us smack into the middle of the next two Presidential election cycles, defusing the immediate jawboning on the merits of the idea.
CHURCH, STATE, AND MUNIS -- The tax law loophole scam of "tax exemption" has strayed long and far from the original views of the Founding Fathers.
Your church should be exempt. The gospel albums sold on infomercials to sustain a satellite-tv megachurch are not. Building a much-needed dormitory for a public university might just qualify as a legitimate tax-exempt bond; a sewer plant, aqueduct, or waste transfer station is OK.
But a city parking garage to benefit private developers and downtown shopkeepers, or a port authority that could just as easily be developed by private financing, is bogus.
It is time that the middle-class taxpayer who never bought a bond in his or her life gets subsidized by private enterprise, thus benefiting from tax-free bond metamorphosis.
FAIR TRADE FOR WHOM? -- "The American consumer is a driving force, buying what they want, wherever it is made," the talking head proclaimed on TV, applauding increased Wal-Mart retail sales.
Others feared consumers would not pay $41,000 for an electric Chevrolet Volt unless unleaded regular gas rises to $4 per gallon.
The issues are connected. Caterpillar can purchase a mining machine company, and export U.S. equipment to the Panama Canal, United Arab Emirates, China, and Chile, but unless the USA monitors and protects U.S. manufacturers of ball bearings, hoses, compressors, and hydraulic fluid, we lose jobs.
When Toyota builds a plant in an anti-union area of the Deep South, it is good for the local economy and U.S. jobs. But it would be even better if an estimated 85 percent of component parts for those cars were not imported from Toyota contractors in Japan, Korea, Taiwan, etc.
From the White House to your house, each family must decide if the stocking hat made in Maine, selling for $4.99 for the kids, versus the $3.49 version made in China and sold at Wal-mart, is preferable in terms of your ultimate financial security.
Similarly, GM needs to show rednecks with hound dogs, bikers with blondes, Trump with tramps, and Toby Keith with soldiers - all in Volt showrooms - as a political statement in aupport of U.S. petroleum independence, not just a way to save $900 a year in your personal gas bill.
SOCIAL SECURITY GROWS UP -- After 80 years, it is time Social Security grew up - and recipients shut up. People live longer and for the most part better.
IBM, Chicago Transit Employees, and Members of Congress do not rely upon 4% 30-year US Treasury Bonds for their retirement happiness. They have pensions which are diversified in the future of America. Self-directed, investment-grade, prudent portfolios are not "privatization." No one is handing your Social Security benefit to Bernie Madoff to run from his jail cell.
People under age 30 today should start drawing full Social Security benefits at age 70, with the option (or not) of self-directing 50 percent of the contributions from now on, to portfolios under a university pension model such as TIAA-CREF. All Americans under age 20 get retirement at age 72. As they start working they go into a 70-30 plan where 30 percent of their escrowed SSI funds are still in US Treasury instruments. The rest is self directed as above.
The new financial regulatory czar will allow workers to choose from the top 100 portfolio and fund managers, as monitored by an independent advisory panel of public and private pension administrators. Each year the bottom 10 per cent of sub accounts are fired and replaced by better performers.
This approach creates some competitive incentive, but also keeps the bulk of steady performers in place for many years. Finally, there must be an absolute prohibition against any Congressional, White House, Federal Reserve or other agency commingling Social Security Trust Fund balances in any balanced budget computations.
STRATEGIC IMMIGRATION REFORM --Finally, just as Little John and Robin jousted their way on a log above a bonnie brook, the United States of America needs to defend its economic turf. Filling America's graduate schools with students who suck our brains and technology and inject it into Mumbai, Beijing, Taipei, and Sao Paolo to compete with the United States must stop.
Immigration should be less about who the dimwits "keep out" of America, than who Microsoft, Intel, GE, Pfizer, Boeing, Dow Chemical, and Chevron bring "into" the United States. The first two centuries of American miracles were built on waves of striving, struggling, and over-achieving immigrants.
The fiber of a nation was strengthened with new threads, not weakened. Let Brazil, India, China, and Russia continue to improve their own universities.
But let those who come to Carnegie-Mellon, Sloan- Kettering, Stanford, Vanderbilt, Scripps, or Mayo - and who want to stay here - be encouraged to do so.