Year 2012 - Introduction
My son made me aware of "the life of Julia" put out by the current administration. Essentially a marketing campaign to let us know that the strategies and policies of the Obama Administration creates an ideal environment for all of us from cradle to grave. This entire section will be devoted to an assessment of that proposed way of life, our current situation and a discussion on whether or not Capitalism, Democracy, and the role of Government in our lives lives on as the founders believed it should or whether the new wave of government involvement in our lives is better for us.
"The Constitution is not an instrument for the government to restrain the people, it is an instrument for the people to restrain the government - lest it come to dominate our lives and interests". - Patrick Henry -
Our Current Situation
Some things are well known, somewhat obvious, but hard to resolve. No political leader or aspiring political leader has offered anything but rhetoric as they try to persuade us that they are the solution to all of our problems. The finances of this country and throughout the world are in shambles. We are fighting wars and spending trillions while domestic issues lay under siege from our mounting debt. We are somewhat distracted by social concerns as the media focuses on the demands of the GAL Communities for the right to marry. While not an official number it seems that $25,000/year is a minimum subsistence level and even $40,000/year barely meets the needs of a family of four.
The divide between the rich and the poor is ever widening, The demand for cradle to grave caretaking by the government is on the rise which heavily influences politicians when they are faced with tough choices to balance the budget. The real jobless rate is closer to 15% (possibly higher), than it is to the 8-9% being touted by the politicians.
2012 Election Atmosphere
Got an email recently that had a good point. The Republican candidate that is leading should, right now, announce the entire list of appointed personnel that will assume command if that candidate is elected. And then let them lose on the campaign trail. Then the real issues and proposed solution could be brought into the dialogue for Election 2012. If that does not happen the possibilities of a accusation ridden campaign with little or no substance is not only possible, but probable.
It is up to us to call and write in to media to let everyone know that we want solutions not character assassination, 30 year old mistakes, massive generalizations with no content, inciting anger, and of course outright misinformation and misrepresentation.
If the atmosphere turns ugly, I hope everyone rejects such behavior and calls in, writes, tweets and emails their disappointment over such non-statesmen like behavior.
Issues to have a dialogue about
As stated in other places in this web site the following needs dialogue and proposed solutions during this election year. I will be amazed if any details show up in the media, very amazed.
* Term Limits - We all know this is necessary. But if you were in power would you voluntarily limit it? Restrain Government from the accumulation of excess power. How is this possible?
* A fixed tax code, simplified, balanced across all income levels. A flat tax, a tiered flat tax, a consumption tax.
* Election reform. No super pacs, public financing only, full transparency. No exchange of any kind (campaign financing included) between individuals, lobby groups, corporations and elected officials. Think about it. 2012 election efforts will consume a billion or more dollars. Where does this come from? What favors will be exercised once one takes office? Influence is important, but how that influence is exercised is very important. Transparency, transparency, transparency.
* Withdraw from War. The war machine is very expensive. I have heard 27 cents out of every Federal Dollar. There must be another way. Nation after nation has bankrupted itself with huge war machines.
* Agency by agency. Inventory, assess, shutdown as warranted. Agencies have creeping growth. Their purpose and funding must be constantly monitored. When it is time to let go, it is time.
* Shelve the Health care bill and address in simple terms the primary issues of health care: Hospital reform, Medicare reform, insurance reform, pre-existing conditions, legal reform, Doctor, Hospital and Pharma relationships, evaluate the marketing of drugs and the proper labeling of same, and above all require that all medical fees be announced up front. Aging people consume a vast amount of medical resources as they approach the end of their lives. This needs to be understood and addressed as a significant part of the overall costs of Health Care. Health care is extremely complicated. Hospital accountability is not enforced. Doctors do not invite Medicare or Medicaid patients. Medical malpractice is expensive and causes extensive testing and caution for any diagnosis. Health insurance is a very large segment of any family or Business budget. Insurance Companies are private enterprise, they must make a profit to stay in business. How their risks are mitigated across the healthy and the ill or injured is a numbers game. They are not part of the entitlement programs.
*Legislation reform: separation of National interest legislation and Local impact legislation. Senator AB should not be able to demand and imbed local assistance (projects) as part of his vote for the larger bill. No National Legislation should have local projects imbedded. These local projects must be separate and transparent. All representatives must sign off that they have read and understood the Bill they cast their vote for.
* Mandatory balancing of the budget.
* Follow the Constitution.
* Subsidies: Identify, classify, and evaluate all subsidized entities. Document and prove the need or eliminate the program.
* Bailouts: Generally, no. Specifically, maybe but followed up with strict controls, criminal action if violations occur, and a serious reduction in all compensation for all executives until the loan is repaid.
* Finance Reform: All money in whatever form, that comes from the Government, must be only utilized as it was intended. If violations occur the full sum must be returned with possible criminal proceedings initiated.
Culture and Community (or) Rugged Individualism
Like it or not we are a community. How wide and encompassing you believe that to be is what helps fuel all the fussing over "socialistic" behavior. It has always been "We the people" and while we want everyone to stand on their own two feet, our sense of community moves us toward the "help our neighbors" side of the coin. How this sense of community translates into actionable behavior causes no end of discussion and disagreement.
There are certain events and conditions that set the stage for "help our fellow man". Natural disasters, which we have experienced many times. Man made disasters which we have a long list of. Our current world fiscal meltdown, unending war, and a complete denial of the quality of life for over half of the world's population, the dying pollinator (bees) and the economic destruction of our way of life all require emergency trauma care, only because getting ahead of these events requires thought, foresight, and a different view of our sense of community.
While this is not a rant about all of the things we do to harm ourselves it is necessary to expose what we do in order to have a discussion about the core concepts and the core issues that require our immediate and ongoing attention.
So what are these exactly?
Democracy - the freedom to pursue our lives in whatever direction that takes us, as long as we do no harm. The targeting of "identified bad guys" with drone strikes and the collateral killing of "non-bad guys, women and children" is a problem. A democracy is supposed to be run by the rule of law. When we absent ourselves from democratic values and pursue labeled killing in the name of terrorism I believe we have seriously missed the mark. The really bad guys kill to make a point and foment fear, they do not care who dies in the name of their cause. Are we the same? The president needs to explain this to the American public, and to the world. I see the practicality, I object because of the value system it reflects.
Capitalism - an economic system that permits (given democracy) everyone to gain and accumulate wealth through imagination, hard work, applied intelligence and plain old luck. The ability to cheat, game the system, lie and allow greed to over take fair play is strong in our system. This is one of the elements of the system that breaks the chain of good that the system generates. Integrity is one of the building blocks of Democracy and a free economic system. People who do harm must feel the consequences of that harm. If I violate the trust of a client and destroy his or her assets then I am no better than the one who steals from the cash register. Capitalism works, but that does not mean it is without flaws. Using public funds to support failures whether from Greed, incompetence or mistakes does not serve the long term value of our Capitalistic System. But when Government gets entangled in private industry, things get murky and hard to sort out.
Rule of Law - Everyone is "supposed" to be governed by the same set of rules. Laws are there to protect all of us against the attempts by a few to "take" what they cannot earn and thus bypass the hard road of accomplishment. You cannot legislate good behavior or greed, but you can have deterrents against unlawful behavior. The media is full of news about criminal behavior: politicians, Company Executives, Traders, Drug addicts, graft, greed and gluttony of every kind from all walks of life. Not all of these get the same measure of discipline when they violate our laws or cause sometimes great harm to others. The judicial system is overwhelmed, the jails are full and we are building more, and the cost to incarcerate is very high per inmate (I have read a figure as high as 60,000 per inmate per year). This is an institution that needs a new perspective. The point is we do not know what the representation is from the top rung of the economic ladder. Maybe a search on Enron Executives would give us a hint, maybe not.
Government - a group of elected representatives that have as their sole responsibility the governance of our country both foreign and domestic. To represent the people, protect the people, and serve the people. To honor the constitution. To create administrative agencies and a military force to monitor and defend this country from all threats to its sovereignty. Once established however, agencies and institutions seem to grow and demand more. They do not seem to shrink. So the size of government never gets smaller without extreme measures being taken by our elected representatives. The chances of that ever happening is pretty slim from my point of view. How to defend ourselves against this creeping growth is a serious question and needs a serious answer.
The Tax System - The monies it takes to administer this large government has to come from the economic success of the people of this country. While there is an attempt to appropriate the monies in a balanced manner across all levels of our society, the tax system is not just there to collect and spend. It also serves as an incentive program, an influence program, and a reward and punishment program. One of the problems basic to all large coffers is that the sum of money appears so large that discretion in its allocation is often ignored. Three point 5 trillion dollars appears inexhaustible, until you need 4 trillion dollars. So rather than take back what should not have been spent in the first place, each group takes a stand on the nobility of their announced value system. Meanwhile borrowing from the future is the defacto standard, kick the can down the street and let tomorrow take care of tomorrow. The liberals maintain that A thru Z must be taken care of (the rights of the poor, old, sick) while the conservatives decry the waste and demand more austerity, and, self reliance. A balanced budget is hung out on the clothes line for everyone to take pot shots at. In reality neither side wants to really make the hard choices and annoy their constituents. To plan ahead has been avoided, to make the hard choices is way past their pay grade.
Education - We want our children to grow up and take their place in our society. As parents we wish the very best, but the cost is great. Even now our children are strapped with huge student loans that allowed them to get an education they and we could not afford. And for now, the jobs are not there and even when they are the pay is relatively low. Some students will be paying 250 to 500 a month for a very long time. Our educational system needs an overhaul: administration, cost, teacher incentives/authority, and curriculum. This will never be attempted while the Government and Unions have a strangle hold on the innovation and creativity of our teachers. If Government money is freely available to the students, what incentive does the College or University have to reign in its costs, none. If it becomes necessary to cut back on the number of teachers, the Union Seniority policy takes away the new teachers and leaves the older teachers. The teachers contribution to their profession is ignored.
Some Basic Concepts
If consumption drives our economic system, then the solution for recovery lies in creating greater consumption. Whether you agree or disagree about the integrity of our Capitalistic System its very foundation lies with the consumer and that is what needs to be addressed. Why do I (individual, group, business or corporation) not buy some things, because I have less money than I need to do so. Or, I am worried about the future, so I save or hoard what I do have.
What starts this landslide? A number of events. Excessive speculation failures by Traders working for big banks, Housing loans with loose screening processes. Creative bundling of mixed bad and good loans to be sold, rebundled and sold again. Complete mismanagement by insurance companies, hedge funds, Banks and mortgage institutions. The collapse of several companies in the auto industry. It was an age of excess with the priority of making big and quick money, not products of consumption. Manufacturing left and the country could not replace all those jobs. The financial system became a larger and larger portion of our country's GDP. We are still in a culture of excess.
If I am leading the Country I have a different responsibility. I know that in a healthy economy there a plenty of jobs, which fuels consumption, which grows businesses and stimulates innovation which in turn expands the availability of goods and services. As a corporation, business or individual, if I need to, I can get a loan to finance my growth for the future. But when money dries up, and Banks make big mistakes, the faucet for funds is shut off. Business can't finance tomorrow and the revenue from today cannot meet expenses. The process of shrinking begins and soon turns into a complete rout. Jobs are lost, assets shrink, real wealth evaporates as equities lose value, savings wither away to finance a lower and lower standard of living. As a leader what do I do?
I can pump massive amounts of money into the system and I can start with the banks. If the banks have enough liquidity, they will loosen up and provide the loans that business needs to expand. Am I smart enough to put controls on how that money is spent, maybe! I also start huge infrastructure projects throughout the country to create construction jobs and fix the ailing roads, bridges, water and sewer systems. Of course I do not have this money, so I borrow it. If I borrow enough I scare people which has its own ripple effect and reduces investment confidence. Meanwhile the consumer, the people who need jobs to consume, still have no money, no job, and a serious decline in confidence. To temporarily solve this problem I increase unemployment benefits on a massive scale and I might even figure out a way to reduce or forgive all those student loans. As far as the foreclosures are concerned I can work with the banks to refinance loans and prevent foreclosures for some period of time. Meanwhile the stock market depletes peoples nest egg, and the entire asset base of the country takes hit after hit. Those who do have wealth start buying homes and equities at bargain basement prices. So who is suffering here? The politicians, the wealthy, big business? Not likely, mostly the middle class and below.
So the real question is what is the best possible path for stimulation to occur to put the money into the hands of the consumer and increase confidence that jobs are or will be available soon?
We have two big issues here. The concept of growth as an ongoing and expanding necessity to fuel our way of living. This is the foundational belief of all of those who manage the finances of this country. They believe that no matter how bad things are now, growth will cover up the ills of the economy and provide the monies through taxes to pay for excess spending today. Growth solves everything but this is predicated on the belief that consumption is the driver of the economy. When we walk through the details some difficult issues rise to the surface. One of those already mentioned is that growth consumes more resources (finite resources) which is a long term problem of its own. Though I agree that the crisis of the moment has a higher priority than the longer term issue, sooner or later these concerns must be dealt with. Today's long term concern becomes tomorrows crisis of the moment and the cycle of mismanagement continues unendingly.
If every society grows and consumption increases then that means raw resources are used at an ever increasing rate. While we all look to technology and innovation to solve this potential but real problem there will come a time when this concern will present itself front and center. Today when so many do not have their basic survival needs taken care of, our first priority is to get everything moving forward the way it was. But, there is that debt thing. Nation after Nation has a huge debt. The weight on recovery is huge. This is not only a present issue but a future issue also. There are ways to handle this debt. Paying it down without interest over a long period of time. Defaulting, a form of bankruptcy, where the debt is cancelled out. Getting a greater inflow of money to pay it down quickly (the jobs come back and the tax revenues multiply). Allow even more debt for the time being (the famous kick the can down the road idea). Or, we strip spending to the bone until what revenue we do have is more than we spend.
There are some that will tell you the debt does not really mean anything. As we do now we borrow to pay off yesterday's debt. If we can do that forever we avoid paying the piper for our mismanagement and excesses. While our creativity at dealing with the debt causes a great deal of concern among some, the reality is until the cost of borrowing (interest on the government bonds) exceeds our ability to pay we can continue to spend, borrow and thus increase the debt. But, as shown with a few of the Euro Countries their borrowing interest has risen (8 to 30 %). This is an extreme debt to place on tomorrows growth. Debt does matter. The real issue is can we revisit our priorities for War and Entitlement programs and find better solutions for the problems we are trying to deal with (terrorism, dictatorships, National health, Economic Growth, Tax revenue, Human Rights. ???).
So, we table the running out of resources issue for the present moment. People who do not have a job don't care if a resource will only last another 30 years, food on the table, shelter and medical care are more important. We also table the debt issue. We know the future people should not be burdened with our excesses but right now we have to get things moving again. We can pare down the debt later. Beware though, these are real problems and cannot remain submerged for very long.
Where does that leave us? Back to consumption. Back to supply and demand. Lets be clear, the government does not make anything. The Government is a giant consumer. Its source of revenue to pay for all that equipment, people and supplies comes from you and me. It is only the ability of each citizen, as individuals or groups, to create products for consumption that fuels our entire economic system and pays for the Government expenses. So far so good, except. It is fundamental in a Democracy that the leaders are elected and they in turn hire all others to run things: military,cia, fbi, epa, fda, nasa, health and safety, irs, the judicial system, money printing, staffs, cabinets, and a host of others. As these entities become entrenched and grow they assume their own eco system. It become almost impossible for the budget leaders (Congress) to keep a careful watch on their activities and their size and spending. So one of the first questions is "How do we get control of the country's spending?".
What do our leaders do when necessity, I mean stark real necessity, forces them to take a position on finances, on spending, on the debt, on the source of revenue (taxes), on their own failure to manage the finances of this country. Well first they deny there is a problem. When that no longer flies, they separate into good guys and bad guys. You and I do not know who are the good guys and bad guys, all we know is what they say about each other. They pound the table, shout down their opponents, and then express in very statesmen like speeches that their solution is the right one and the bad guys are at fault for not playing fair. We then have a thing called brinkmanship where everyone plays chicken right up to the closing bell. Do we get a well thought out solution? Of course not.
A free market. What is it? In theory, as long as I do no harm, I create a product that you want or need, I sell it to you at a profit which pays for my life's expenses. When we are free to innovate, create, and produce, a lot of stuff gets moving through the system. Not everyone succeeds but many do and over time jobs are created, new businesses emerge and even newer opportunities appear out of the complex mix of people and ideas. What role does the Government play in this "Free Market"?
Safety. Monitor and intervene if public safety is at risk. Air, water, food, personal health, personal safety, locally and globally.
Taxes. Establish a process of taxation that everyone participates in so that the expenses of the government can be met. What those expenses are or should be and should not be is a thorny question. It is a question that to be answered with honesty requires great transparency. For example the farm bill 200 to 300 billion dollars is a complex mix of paying for not growing, paying for growing, and paying for the shift from food to energy crops. Who gets this money and why is of great concern and even though you can find out who gets the money stopping the flow is very difficult. Subsidies unbalance the free market. And food across the globe gets more expensive, specially for those whose main food source are rice, corn and wheat. Many concerned citizens are fighting this 2012 farm bill, very few on the hill are listening. If the farm bill is way off track try to imagine how far off the defence budget is. I have read that 27 cents of every tax dollar goes to defence. So the next time you hear one of our representatives tell us that the education system needs serious cutbacks to trim the budget, please question loudly.
What else: Some believe that the above is it as far as the free market is concerned. The idea of subsidizing some areas of the economy (in order to encourage) has many proponents, I am not one of them.
Where does this leave us? Take away the encouragement! Remove all subsidies. Remove all tax incentives that warp the system. Does the oil industry really need tax incentives? Do we really need to pay farmers for not growing crops? Do we really need the government getting involved in innovating and creating new products for public consumption. no. Step 1, get out of the free market or it is not a free market.
Addressing What Needs Addressing
Stop the war. Reduce the defense budget. Bring the soldiers home. How?
Congress must defund the war. No one else will act until the financing of the War(s) is put under scrutiny. There are obviously many concerns with these objectives. In a bad economy bringing 100,000 soldiers back into civilian life doesn't bode well for the soldiers or their local economies. Ignoring the terrorist argument for a moment, how do we bring our men and women back into civilian life? Education , personal financial assistance. Each returning soldier gets an unemployment benefit and a voucher for retraining under the guidance of a professional. I know this is a big temporary expense. But think about what we have created. These people have been in the midst of war. They have been terrified, angry, injured, and their friends killed. They are soldiers and have themselves killed the enemy. For those who survived, the emotional and psychological changes are many and unpredictable. Assistance in returning to civilian life is the least we can do.
Reprioritize our role as a member of the United Nations. Are we the police of the world or are we here to promote and assist the United Nations new agenda for Global Management. Rechannel our financial support for other countries into farming, industrial incentives and education for the citizens. Drop all direct monies that go to the goverrnments to mitigate corruption, graft, and redirection of our assistance to that country. Supporting dictatorships in any fashion should be stopped. If those dictatorships commit human rights violations then either sanction them or get rid of them and do it through the United Nations. This of course means that the charter, membership, and organization of the United Nations needs a serious overhaul.
Term Limits - Everyone must step down and in phased elections replace themselves over one term of office. This means that they cannot run for office on the next election cycle unless they have completed only one term of office. The length of each term in office is four years. When you have completed your service to this country you must return to civilian life. No elected representative can take a government job after they have served. If you serve on a committee then you are responsible for training your replacement a year before your term is up.
Consumption Incentives - Taxes - Reduce taxes while the tax system is being redesigned. The new form 1040 has no deductions except for charities. Your gross income from any source is taxed at 7%. This applies to all taxable entities, including charities. The tax system must be rewritten within one Congressional term cycle.
Legislation - One Bill per legislative objective. All National bills exclude local needs. Local bills are on their own. All representatives must sign off that have read and understood the bill they are voting on.
Consumption Incentives - Banking - all monies from the Federal Government must be used to further individual and private enterprise for growth and improvement. These loans cannot be more than twice the interest of the Federal loans to the banks. All financial enterprises must separate and guarantee that private investment monies and Federal monies are not intermingled.
Consumption Incentives - All banking and financial enterprises must phase in this separation and guarantee that 80% will be loaned out. The restrictions behind these loans will be enforced in a phased manner and as all current loans are paid up the monies will revert to the above separation between private funding and public funding.
Consumption Incentives - All current student loans will be phased out over a 4 year period. No new student loans will be authorized. The education grant program will be extended to include only vocational and technical programs that are job specific. To pay off existing loans students must participate in a community service program at a fixed hourly rate at no more than 3 times the minimum wage allotment.
Consumption Incentives - The Universal Health Legislation needs to be defunded. It is too complex and misses the serious reform needed in medical practice. Insurance and medical practice is not an entitlement program, it is private enterprise. However these entities (Doctors, Hospitals, Insurance Companies) do need a check and balance system. One option is to include a medical tax for each community for all people who live or work in that community (like the school tax). All entities must be accountable for the services they provide each patient (a price list), the value of the procedure, its risk reward valuation. All hospitals must provide an upfront accounting and standardized pricing for each hospital room and all of its associated costs (supplies, doctors assigned, nurses, food, and category of room (emergency, overnight, extended stay, critical, ICU, isolation). Of course insurance must be national and transportable between location and company. If insured by one company and a change is required, another company must also insure at a competitive rate. The concept of a preexisting condition must be excluded and although the cost of such coverage can be more than the norm it cannot be punitive (no more than 10% of the person's income). There are many other areas of reform. The Health plan must separate these areas so that each entity can understand and be able to implement the area that most concerns them.
Consumption Incentive - Continue the Infrastructure Upgrade program
Consumption Incentive - All future Mortgages for residential properties will be held by the bank issuing the mortgage. There will be no bundling of these mortgages. All existing foreclosed properties will be allowed to filter through the system. The government may buy these mortgages to clear the books but no new foreclosures will be sold or migrated beyond the local community that they reside in.
Consumption Incentive - Community by community create a Service to the Community Program that will pay 3 times the minimum wage and be funded by a community service tax and one third by the federal government. The local tax will include all residential, apartment and business properties and cannot be more than .0015 of the county property valuation.
Stop the subsidies. Relieve the congestion caused by forclosures. Stop the student loan program, energize the community service program, focus all grants and assistance on specific job opportunities. Fix the tax code, simple and balanced across all parties. Fix the legislative process, eliminate local projects as part of national legislation, transparency, transparency. Defund the war. Really balance the budget. Term Limits. Scrap the Universal Health Program, really reform the medical system, insurance programs, hospital accountability. Create a national ID card. Fix the immigration issues. Create a comprehensive "reintegrate our military into private industry" program. Commit to the constitution, every elected official. And finally create a world referrendum on the United Nations, mission, goals, financing, staffing.