A Different Approach

Sep. 29, 2012

RETURNING THE ECONOMY

 

        The current economic mess is multi-faceted and falls at the feet of both parties.  Instead of "finding fault" we should be looking at repair actions that will correct the basic flaws and not kicking the can down the road.  Unfortunately, we are so focused on partisan issues that we are not looking for the potential symbiotic relations between solutions.

 

        This blog is designed to present a representative blueprint of the types of proposals we need to examine instead of addressing singular issues.  It is not to be viewed as an "only choice" or even as a "recommendation".  It is merely to show that multiple steps can lead to solutions we haven't examined.

 

        Let's begin by establishing a ceiling on government spending but link it to the government's ability to grow the economy.  Limit Government spending to 20% of the GDP. That figure is debatable but it presents a benchmark to control the national debt. If the government can stimulate growth then more and more money will become available to be spent on partisan interests. If it cannot stimulate growth the it will have to limit and even cut spending until it can get its finances straightened out.

 

        Having set the first criteria we are faced with a situation where, if we can develop a comprehensive growth plan, we will see more and more capital available for infrastructure and social equity programs.

 

        Our second step is to address the National Debt itself. Currently we are borrowing from other nations and then paying them interest on that debt.  This places us in debt and drains our treasure to pay the interest.  That means that while we get further and further in debt we are leaving ourselves less and less disposable income to use for those programs we wish to fund.  I previously blogged a potential solution to this but will restate it here as it is to become a central pin in our overall solution. 

 

        We need to internalize our debt.  Develop a  bond system that is available only to U.S. citizens or U.S. corporations and is voided if transferred to any other person or agency that isn't an American entity. Define the use of this bond for only debt reduction and not to be placed in the general fund, with an interest rate 1% over the going rate to be paid back to the holder.  The bonds would be issued at a series of maturity dates to widen the payback periods. These bonds would be tax free. This would make them highly attractive to large corporations and families saving for college or retirement. The interest payments currently going overseas would be slowly returned to the U.S. injecting money into the economic system and encouraging growth which will lead to higher tax revenues.

 

        Next, address Social Security. Allow American citizens to elect to have their Social Security contributions, up to 20%, to purchase the above established "debt bonds".  Because these are U.S. Government bonds there is no chance of them failing unless the entire government defaults. It will yield a far greater return over the years than the current social security fund.  This will provide a larger pool of funds for social security while augmenting the debt reduction issue. However, this cannot be the only action to stabilize social security.  The program must be "means tested". Even though every American pays into the system it is designed for "Social Security". It should be a program for those who are in need of government assistance or unable to face their old age financially secure.  There is no logic in someone like Bill Gates with 53 Billion dollars being eligible to draw from social security.  A level has to be established where you are no longer eligible to draw a social security check.  Let us say, for discussion sake, a level of 3,000,000 in assets.  Everyone above that level would not receive a check unless their financial situation changed making them eligible.  This would reduce the social security obligation, mean that any bonds they had in the system would not have to be paid, and the debt interest would be eliminated by that amount.

 

        Next, Medicare. This program should also be "means tested" and the states should be allowed a formulated amount based upon their population and flexible by extreme need.  If the states have a defined Medicare amount they will then have to develop programs that serve their particular needs and will have a vested interest in controlling fraud and waste.

 

        Tax deductions, subsidies, etc. These should be designed to reflect the achievement of an objective.  e.g.: tell automobile manufacturers that they can get a subsidy or rebate WHEN they have developed an automobile that delivers 50 mpg and it will be based upon sales.  Simply saying you will have or now have a 50 mpg automobile if it isn't attractive enough to develop demand will not be subsidized. Tell power providers that they can garner a lucrative subsidy IF they can deliver a, wind, solar, biofuel, product that is cost efficient, profitable, and accepted by the public. Make the subsidy or rebate sufficiently attractive to encourage private equity investment to meet the requirement and embark upon the marketing development to sell it to the public.  This program will prevent spending money "wishing" that a demand will be developed and "betting" upon the final product. As I have said before marketing is not the business of government it is the business of business. If they do it in a manner which earns them a subsidy or rebate then they are successful and the entire economy benefits.

 

        As my final building block I would include education. We need to reevaluate our goals for American Education. Instead of funding education from the federal level based upon the number of children in school or the number of graduates, or any other number we need to reexamine the effect this has.  We have gone from a nation where a H.S. diploma was treasured to one the expects all students to earn that diploma. We have defined a dropout as a failure of the system. Today our diplomas, at all levels, are losing their significance.  We are spending more money each year to receive a poorer product. the following is a suggestion that might well lead to less expenditures, more effective expenditures, and a growing economy.

 

        First, provide federal funds based upon the number of children of education age regardless of attendance.  Second, establish the standard that all students must remain in school through their 16th year. (after that if they aren't performing you are just giving them a diploma) Require all districts to establish a vocational learning and apprenticeship curriculum focused upon local need and availability of opportunities.  Any child failing or dropping out after their freshman year will be entered into a vocational path of education.

 

        This would mean that the only children in the final three years of high school are, at minimum, concerned enough to pursue vigorous studies. At the same time those who are more interested in the labor arts would be given a truly robust education and earn a license or certification to perform at the highest level.  This excellence in education would lead to a more dynamic and growing economy. This program should also lead to a reduction in areas such as Pell grants as fewer students will be entering college because it is viewed as the only path to success.

 

        I am not going to make this a formal examination. I hope it has shown that addressing a series of issues and trying to link them together can lead to  a more rational and effective solution to our problems as we gain from the synergy of the various issues.

 

GRUMPY