Welcome back class! I know that it’s been a while since our last lesson but if you’ve been following my blog you might have already figured out the reason why. Since it’s been a few months since this course started let me recap for the newcomers around the room. This series was created to help people who have no experience outside of state houses or the beltway and would like to learn more about how reality works. We’ve come a long way since the beginning, starting with the painful lesson that it’s not your money. With that basic concept driven home we were able to start explaining the cornerstones on economic theory, Microeconomics (why prices matter), and Macroeconomics (how government fits into the overall economy). With the theory under your belts we went on to explain why you don’t create jobs, and since the class seemed to struggle with the concept a bit we took a small step back and explained how you do not create wealth, either. You learned that while the greed of the private sector is not necessarily bad, you learned that your personal greed always is.
As we got toward the end we got to some of the most painful lessons of this class. You learned that when you spend our money you do not invest – you only spend. We had to explain why the way you’ve managed our money warrants imprisonment, and almost as bad, why so many of your actions actually cause more harm than good. We are into the home stretch, and now that you finally have a firm grasp of economic theory and understand why your actions are so often harmful you are finally ready to hear Brother Bob’s proposed solutions. Being of sound economic mind you are probably expecting a lot of the standard free marketer advice – create a non-hostile business climate, reform entitlements, simplify the tax code, stay out of areas of the economy where you have no knowledge, such as repealing Obamacare. Actually, today we are not going to propose any of these basic cornerstone concepts.
These are ideas that you should already be agreeing with, and if you want simple ideas go read Thomas Sowell. That’s not to suggest that Dr. Sowell’s ideas are simplistic – not at all! It’s just that Sowell is one of the most brilliant economic minds I’ve ever read and can probably explain any economics topic in his sleep better than I could on my best day. In fact, each of the links above on the basic ideas I mentioned leads to a post written by the good doctor. If you have a few minutes and want to learn more on those subjects I highly recommend reading each of them.
Now, as for our solutions, we’re thinking outside the box. We’re going to throw out some ideas that fall into the category of “It’s so crazy it just might work!” One of the reasons for the long delay between our last lesson and this one is that as I started writing this final post I realized that some of my suggestions required a more detailed explanation and needed their own posts. So just like The Avengers couldn’t be made until the back stories of each of their characters was told, this final lesson could not be posted until several of these ideas were fleshed out. One last note before we begin – I want to give a warning to all of my conservative readership to put your coffee down before you start reading. Some of my ideas will surprise you at first glance and I don’t want you spitting coffee all over your monitor. Now with all of the formalities aside, let’s offer up solutions for our political class!
Raise Taxes
I thought we’d start off with an idea that will appeal to you! Don’t get too excited; you might not like who I’m proposing these two targeted tax increase proposals for.
1) Military spending. I happen to agree that it is ridiculous that the United States has less than one percent of the worlds population but accounts for 40% of its military spending. It’s time for the rest of the global free-riders to pay their fair share! A simple start could be to have the United States withdraw all of it’s funding for the United Nations and its accompanying agencies and use it to fund our military. It’s time to get those global free loaders to pay their fair share! The world can thank us later.
2) Heavy sin taxes. Our elected leaders like to levy taxes on things that they consider harmful to us physically, so why not take it a step further and start putting extra taxes on things that harm us economically. That’s right, let’s start dropping more regulations and taxes on trial lawyers, politicians, and lobbyists.
I told you that you might not like this.
We have to figure out how we can get back on a path to fiscal sanity, and before we do that we have to have a frank and honest discussion about our policies and our debt. First, ensure that everyone has had a look at our debt and what it would take to pay off what we already owe along with our projected debts. Yes, it is really that bad.
Leftists: Stop pretending that raising taxes can even be part of the solution. The problem is too big now, and that ship has sailed.
Conservatives: Stop calling for a Flat Tax or Fair Tax. While I actually agree with the concepts, politically neither one has any chance of getting passed.
Audit the government – Ron Paul had a good idea… I like his suggestion that we audit the Federal Reserve. For that matter, we should audit all of our government agencies at all levels. We can grant exemptions where appropriate (smaller townships, ones that produce detailed financials and are in excellent health, etc.), but just like we first had to identify the magnitude of our debt problem, we have to identify the sources of where we are spending the most and what can be eliminated. I’m thinking entitlements and pensions are going to come up big here. Which is why you are probably not expecting me to suggest that we…
Stop trying to reform entitlements -That’s right, as much as this needs to happen we’re not at the point where we can have a serious conversation about reform. The first step is to start talking about what needs to get done and eliminate all of the unrealistic and outlandish proposals, not to mention the “everything is fine, and any reforms are extremist” demagoguery. Once those are gone and an adult conversation can be had we can focus on reform.
Now that we’ve established agreement over the magnitude of the problem and are ready to drop our ideological ideals it’s time to start looking for real solutions.
Reform higher education – We’ve got several ideas here, such as following some European examples, and phasing in free market solutions. Let’s see what happens when students are given the tools needed to make informed decisions and colleges are allowed to seriously compete for those students.
Develop an energy policy – We need energy. We have energy sources. We need jobs. Is this really such a difficult concept? First off, it’s time to invoke a favorite rallying cry of leftists and use Separation of Church and State to open up energy production. I am of course, referring to the religious cult of Climate Change. Sorry leftists, but I’ve offered you plenty of opportunities to prove that your beliefs are based on scientific methodology . Since you’ve been unable to do so we are going to have to rule that your beliefs are nothing more than that. And given that leftists generally feel that international law is superior to our own, we can cite this British court as legal precedent.
Now that we have that out of the way we can have an immediate injunction filed suspending any lawsuits or injunctions that are based on phrases like carbon emission, greenhouse gas, climate change, global warming, etc. Let the Global Warm mongers scream and file their counter suits and by the time it reaches the Supreme Court we can have a well publicized modern day Scopes Monkey Trial. My apologies if I’m being a bit uncivil in my tone but we’ve had enough of the lefties calling their opponents flat earthers, holocaust deniers and anti-science for the crime of following scientific methodology. If it takes a good public humiliation to settle the debate so be it. That said, I’m not saying that the warm mongers are flat out wrong, but the flawed evidence they’ve presented and their inability to explain away counter evidence does not support the case for drastically altering our lives and punishing the world’s poorest people. If you’ve got better data we are listening.
Now that we’ve moved past the junk science that’s holding back a key sector of any economy, we need to look at the other externality of energy production, and on this one the leftists are correct. I am of course, talking about pollution. One of the key parts of the current administration’s “None of the above” energy policy is the pollution produced by various energy sources. What we need to do is get all parties involved and find out what our standards for pollution should be and levy the appropriate levels of taxes needed to clean up within reason. As much as the left would like to deny it, we aren’t going to become a society that gets its energy from solar panels and wind mills. That said, our next step is to…
Invest in Renewable Energy – Sorry conservatives, I probably should have warned you that another coffee-spitting moment was coming. Leftists are absolutely correct that our fossil based fuels are a finite resource. One other point that I agree with the greens is that we should plan for that day when those resources are depleted. When that day will come and how we should prepare is where we immediately start to disagree, of course. So how do we fund this? Leftists are always calling for “windfall profit” taxes on energy companies. Why not lower the bar a bit on that threshold and instead of collecting those taxes have the companies spend that money toward renewable energy. And they can pick where to best spend these funds. They already have a track record of producing energy, so let them choose where to best direct that research, whether it be for solar, wind, algae, or even if they want to find a way to make dilithium crystals. No more Solyndras, we can get the greens on board, and the only downside is that this limits your opportunities for graft. A win win all around!
Phase out market-distorting subsidies and tariffs. The more drastic the change the more resistance there will be, so this needs to be done slowly over several years. We all know there’s a reason that no politician who wants to be president will call for ending corn subsidies before the Iowa caucus during the primaries or call for ending sugar subsidies (Florida) before the general election. While it will hurt targeted industries in the short run we can offset it by lowering our corporate tax rates across the board – flatter taxes, anyone?
Don’t repeal Obamacare – Accelerate it! By the time that most people are reading this post the Supreme Court will most likely have handed down its decision over this controversial law. Conservatives are naturally fighting this law while leftists continue to support it. Personally, I think that we need to move forward with it – every last bit. Forget all of the vaguely worded provisions that will kick in down the road – let’s make getting every last detail hashed out and implemented right away. Why? Because the American people are starting to wake up and are noticing the reality of having an economically illiterate leftist as president – it seemed like such a cool idea back in 2008! Now America is already seeing the broken promises of Obamacare – “If you like your plan you can keep it” and “Your rates will not go up” have proven to be worth as much as the man who said them. We didn’t fight hard enough to stop this law from getting passed, and now we get to deal with the consequences. What we’ve seen so far has pushed many Americans away from the left, and once people start tasting the long waits and rationing that are inevitable results it will destroy the Democrat party and pressure from the likes of the Tea Party will force the Republican majority that will be swept into power to not abuse it this time around. Ha ha – just kidding about that last part! We know how power goes to your heads, but at least if we can learn our lessons of how leftist economics work in the real world we just might be able to stop silliness like this law from happening again.
Now that we’ve explored some policy ideas we also need to look at the overall culture that has spawned so much bad policy in need of a severe overhaul. It’s time to steal one of those favorite terms of the lefties and use it for our purposes and apply “Sustainability” to our government.
Reduce the size of the federal government – I know, I said that there wouldn’t be any standard conservative talking points here, but I think that I have enough of a twist on this to warrant inclusion today. Over the last few years federal government hiring has expanded, and it can not continue to do so at the expense of the private sector. Remember that audit I proposed? Let’s see where we can consolidate agencies or eliminate redundant functions. No, we don’t need to start laying off federal employees, but as the audits show opportunities to consolidate parts of agencies will be closed. Closures won’t happen overnight, and we can use natural attrition to manage workforce reductions.
Phase out Public Sector Unions – The Wisconsin recall election was probably a tipping point for public unions that needs to continue. And it still leaves one unanswered question about why public sector unions are needed…
Pay as we go – Borrowing too much dooms any individual or any business, and on a national level it’s no different. Just as we need to agree on acceptable levels of pollutants in the environment we need to agree on acceptable levels of debt. Beyond that, rather than raise the debt ceiling we raise taxes across the nation to pay for them. Here is a tax schedule so we can spread the pain fairly and progressively. This takes away your ability to kick the can down the road to pay for promises you know you can’t keep. If we want to overspend, then we also overpay and feel the consequences now. And you face them at your office or at the ballot box.
Individual protection – You’ve passed laws to protect us from insurance companies, from bankers, from energy providers, but you haven’t passed any laws to protect us from someone far more destructive – you. The American people should have an advocate against abusive government officials or agencies. Just as lawyers can be disbarred or doctors can have their licenses revoked we should be able to bar officials from any kind of government work in the most egregious cases.
Expand the federal government with one new agency – Sorry conservatives, I couldn’t resist one last coffee spitting moment. Over at Cafe Hayek I found a link to a wonderful agency in the state of Kansas – The Office of the Repealer. The office is pretty self explanatory – it accepts suggestions from citizens to help identify laws that for whatever reason no longer need to be on the books and repeal them. And we can take this a step further, fining any officials who create new agencies or pass laws redundant to any already on the books. How will we pay for this new agency? Easy – it gets funded one year at a time. It will be funded by any programs or offices that it eliminates each year, taking funding only for the following year for the eliminated office. So how do we fund it in year one? Easy – eliminate all of Obama’s czars and use their funding for that first year. They’re not contributing anything to society anyway. Ideally, the ultimate goal of this agency will be to repeal its way out of existence.
So there you have it – a set of out of the box solutions! Are they flawed? Oh, yes. Are they likely to ever see the light of day? Probably not. This exercise wasn’t here to tell you what to do, but to get you “thinking outside of the box” and to begin looking for creative solutions to our problems. An example will of one that will be coming soon is an interesting tax reform proposal called “The Neutral Tax.” I’m guessing you haven’t heard about it yet, but you will. Stay tuned!
Hopefully this series has given you more interest in the subject of economics. Looking to read more? For starters, I highly recommend the Thomas Sowell links from the start of this post, not to mention anything economic in general he’s written.
My favorite econ blog is written by Russ Roberts and Don Boudreaux, two Econ professors at George mason University. You can find them over at Cafe Hayek.
Greg Mankiw’s blog is a good source of external links
And even though his site is more focused on libertarian politics in general, John Stossel’s blog often focuses on economic solutions.
And of course, Brother Bob’s blog isn’t going to stop posting on economics, or approaching problems from the economic perspective. For quick reference here are the previous chapters:
Lesson One: It’s Not Your Money
Lesson Two: Intro to Microeconomics, or Why Prices Matter
Lesson Three: Intro to Macroeconomics. or So that’s Where Government Fits In!
Lesson Four: You Don’t Create Jobs – It’s Time to Get Over FDR!
Lesson Four A: By Definition the Government Can Not Create Wealth
Lesson Five: Businesses are Greedy – That’s Not Necessarily a Bad Thing!
Lesson Six: You are Greedy – That is a Bad Thing!
Lesson Seven: You Don’t Invest; You Spend
Lesson Eight: Do You Know What an Unfunded Liability Is? It’s Why You Belong in Jail!
Lesson Nine: Unintended Consequences – Bonus Section for Journalists!
And keep your eyes and your mind open – you’ll be amazed at what you can learn. I still remember how surprised I was back when all of those dry economic theory classes that were required for my major back in school came to life with my Senior year course “The Economics of the Great Depression.” It’s not every day that you learn that everything you knew was true on a subject turns out to be wrong.
Thanks to Curt over at Flopping Aces for cross posting this entire series along with all of the side posts that went with it. The original ten postings have received over 3,200 hits I would never have gotten. So far…
And thank you to everyone who took the time to read my posts, especially those who took even more time out of their lives to comment, whether at my site, Flopping Aces or on Facebook.
Until the next time!
BB
Cross Posted at Brother Bob’s Blog
BB, you are ranking right up there with one of my favorite new (to me) economists, Kevin D. Williamson.
I continue to be astonished at how ignorant of economics our current White House resident is.
The other day Obama took possession of ALL jobs in the country, public OR private: “Romney’s never stood up to China — all he’s ever done is send them our jobs.’’
They are NOT all Obama’s jobs to dictate who gets to hold one….although I know he’d love that level of power.
Matter of fact, Government Motors right now outsources more jobs to foreigners than Romney did in all his years at Bain!
Only 37 percent of the production value of an average GM vehicle is generated in the United States.
I guess those 63% of jobs are OK with Obama if foreigners do them.
BB, we need a new name for ”sin taxes,” in such a secular world.
You are correct that trail lawyers and lobbyists are ”sinners,” who deserve heavy taxation.
But we need to redefine what constitutes a ”sin,” to be taxed.
Can’t stick with the old-fashioned religion-based definition.
And, if we don’t clearly define it, the Left will simply say “you are doing it,” whenever they need more money.
I would love to see Ron Paul made Treasury Secretary or appointed as the head of the Federal Reserve!
Of course fossil fuels are finite, but the US has vast quantities of that resource as yet untapped. We can afford the time to do proper research and development of alternative “free energy” resources without the unscientific headlong panic inspired stampede to transform our current energy infrastructure before the technology is refined. (One problem with the Left is that they always overreact, which results in knee-jerk, poorly thought-out solutions. Puzzling and ironic, as they consider themselves so much more intelligent than everyone else.)
Military spending: Part of the problem here is also congress critters who force the military to buy things they neither want or need. Another is that the military pays far too much for items that are ridiculously cheaper if bought on the commercial market. (What is needed here is a law that tells military suppliers that price gouging the government will no longer be tolerated, and that if their prices are not comparable to those in the common marketplace, that they will be penalized. They shouldn’t have to itemize in order to protect national security, but Black projects need to be paid for without subterfuge, instead assign a committee of Congressmen; who can pass a top secret clearance; to oversee black projects.)
Taxes: We also need a simpler and more fair system. Perhaps separate personal capital gains from property sales from capital gains from corporate profits, stock sales and dividends. Everyone who pays capital gains knows that just like in gambling, the taxes are on the profits not on the amount invested. (Note: and don’t give me the Establishment Republican crap about how raising taxes on personal capital gains “discourages job creation” or the line “I never got a job from a poor man.” Most jobs are created and paid for by monies spent at businesses by the lower and middle class, which means that the majority of jobs are paid for by those without silver spoons)
Inheritance taxes: another heavily propagandized Establishment Republican red herring. The truth is the “death tax” doesn’t kick-in until the estate is worth far above what the majority of people have in assets at their death. (The actual “kick-in” assessed level changes, but for the most part it is on estates valued in excess of a million dollars.) There is no reason at this time with the current deficit why this tax should be repealed. When the nation has been back in the black for a few years, then it can be revisited.
Entitlement programs need to be audited, and the fraud addressed.
Obama care: I disagree. Obama care was a one-sided purely political fabrication and needs to be dumped in favor of a new bi-partisan program that addresses real solutions to our nation’s healthcare system without the corrupting outside influence of special interest groups.
Reform Higher Education: One of the main problems with higher education is the out of control inflation of education costs by money hungry institutions (far worse than the “price gouging” of big oil). The costs need to be brought back in line where even lower classes can afford a college education. While on the subject, we need to get Democratic party operatives out of education. They have had over three decades of a near monopoly control of our school systems and it’s only gotten worse. Political propaganda and indoctrination must be culled from what is taught our children.
I agree with you on most subsidies but I’m fine with tariffs.
Reduce the size of government: Substantially!
Public Sector Unions: Conflict of interest that can only lead to corruption. Even FDR agreed. The need to be done away with.
Pay as you go: Deficit spending is taxation without representation. Future generations are not represented, ergo they should not be taxed to pay for the excesses of a previous generation.
Office of the Repealer: Yes, this would have to fall under a judicial branch! On all levels of government, and previous or current government officials must be barred from serving due to conflict of interest! Perhaps include a jury nullification advisory committee comprised of eligible voters with the Chief Repealer as chairman. They would of course also be authorized to rule on regulations that were not created via legislation, and be able to examine and rule on legislation changes due to Judicial activism.
There has to be a way of reforming the election campaign system, taking away the corrupting money influences without limiting free speech. There also needs to be a way to reign in the corrupting influence of lobbyists and the “wink and a nod” secret Quid Pro Quo deals between politicians and special interest groups. The current “ethics” panels are wholly unable to address this problem because they too are standing up to their own knees in it and are thus “part of the problem”. Just as it is ridiculous to trust a President’s administration to “impartially” investigate itself, the same goes for the legislative branch. Nor can any government body realistically be expected to reform itself from within. Might I suggest instead that such “ethics panels” be comprised of a “drafted” jury of voters who are registered as “independent” (thus, not beholden to any party).
RETARD ALERT!!!!
I almost stopped reading when I saw this. This completely shows a total lack of understanding of the second law of thermodynamics and demonstrates the author has no business pontificating on ANYTHING.
Right now I bet those folks in Colorado wish we had done as you recommended about defense spending, BB.
A C-130 fitted with the Modular Airborne FireFighting System (MAFFS) can drop 3,000 gallons of fire-retardant material in 5 seconds, and reload in just 15 minutes. This tempo is crucial to containing wildfires like the one devastating Colorado Springs. However, of a current fleet of nearly 380 C-130s, only eight can be fitted with the MAFFS—and four of them are already in the skies over Colorado.
Obama’s defense budget cuts 65 C-130s from the fleet over the next four years.
Will they include all 8 which can be fitted with MAFFS?
Cutting more C-130s puts a greater strain on the entire Air Force fleet. It means fewer planes will be available for possible conversion to the MAFFS configuration. And that means that as hundreds of houses burn in Colorado, only eight planes can be called upon to help the thousands of firefighters on the ground.
America should not have to make such tradeoffs.
Talk about a false economy.
Wow! Only 70 views and 5 comments and great comments so far!
@Nan: I hadn’t thought about your point on “sin taxes”, but yours is a good one. Any ideas for a better name?
@Ditto: Raising taxes on investment makes it more expensive and we’ll see less of it. Probably not the best idea right now.
On inheritance taxes the bar is too low that it affects business owners who want to pass their business onto their kids. And the people who you really want to hit will never pay it – check my link on raising taxes.
On Pay as you go: LOVE your term of “Taxation without representation!” I’m so mad at myself for not thinking of that one myself!
On your last point about reforming the election system: None of the free speech limiting approaches will ever work. The best solution is to remove all of the governmental ways of increasing the cost of business. Make it cheaper to invest in a business versus buying a politician and we’ll see more job-creating activity.
@Ivan: Love your consistency, and glad to see that your latest post is on the same level of intelligence that we’ve come to expect from you!
@Nan G 5: Sad consequence of our government’s mismanagement, not to mention the entire forest fire mismanagement
@Brother Bob:
Raising taxes on anyone right now is not a good solution, but I am against any more reductions in capital gains while income tax remains so high. Until Government deals with the deficit and their spending habits I’m against giving them any more revenue. But I think that those who get a majority of their income from capital gains, can afford to pay a little more on their profits. If we can come up with a fair sales tax system that perhaps includes reasonable excise taxes on luxury and sin item purchases then OK, but we can’t deny that there are some very wealthy people who honestly pay relatively little in taxes, and in fairness if you’re going to insist that even the poorest wage earners pay something in taxes shouldn’t those who make multi-million dollars from capital gains pay a more comparable rate on their profits? Unfortunately most of the schemes I’ve seen for a flat tax results in a reduction on what taxes the wealthiest currently pay while raising taxes on the poor and middle-class. The legal loopholes that some wealthy use to avoid paying taxes need to be closed.
I agree. I admit I don’t have an answere as to “how”, but there has to be a way of taking campaign profiteering and bribery out of the mix. Congress’ “solutions” have only made the problem worse.
Thomas Sowell – Poverty & Dependence:
Pimp economics
@Ditto: OK, how much would we raise from the taxes you’re proposing?
@Mossomo: Thanks for that example – see what I mean about Sowell? He takes the most basic concepts but phrases them better in his sleep than I could on my best day.
Reference points for those interested ^^^ … oh shizer. Sowell. Free to Choose Part V; Debate Portion. T.Sowell stole that segment.
Something was ringing a bell. Was bored and re-watching M.Friedman youtubes – the debates portions of his PBS series. And recognized, was like that guy. I didn’t realize he joked Frances Fox Piven. I didn’t realize that was her until tonight – her talking points still get recycled.
Milton Friedman
Thomas Sowell schools FFP (at the 42M market. Worth it. Just fast forward to 42m. Let play, 2 minutes on the dot).
A bad angle and a taut cord shorted my laptop and I lost any editing ^^^ sorry not so clean.
But I wanted to end with this Ayn Rand interview with Mike Wallace:
Take away: “State compulsion and force” … “Regulations making Rubber Barons”