Making America More Economically Competitive
I originally wrote this in March of 2010, while sitting in the Atlanta airport waiting to go back to Afghanistan after mid-tour leave. IIRC, that was before Pelosi, Reid, and The One managed to ram through the still smoldering pile of shit known as ObamaCare, so the health care section had to be updated a bit - namely, by adding "Repeal ObamaCare"
OK, here we go - Radical, Painful, and Necessary Steps to Fix the Economy
I. STOP TRYING TO REINFLATE THE BUBBLE AND LET PRICES BOTTOM OUT
The real way to get the housing market moving again is to let prices settle at a level which works the inventory surplus through the system by letting prices settle at levels people can afford.
a. Terminate the homebuyer tax credit – at this point, it’s just a handout for people who were going to buy anyway. (Note - this has already expired, and prices have continued to fall.)
b. End FHA mortgage guarantees. If borrowers are judged to be too high risk to loan money to without a guarantee by Uncle Sam, they’re too high risk to loan money to, period. We don’t need to be putting the taxpayers on the hook for any more stupid private borrowing/lending decisions.
c. End the government’s involvement in Fannie and Freddie, and make it explicitly clear that under no circumstances will their loan portfolio be guaranteed by taxpayer money.
d. Repeal the Community Reinvestment Act, and remove the government’s power to coerce and/or pressure lenders to make loans based on political considerations (i.e. to ‘underserved’ –(read ‘minority’) constituencies) that they wouldn’t lend to based on considerations of risk
e. (I’ll be ending the mortgage interest tax deduction later, under Tax Reform.)
II. FORCE STATES AND MUNICIPALITIES TO FACE FISCAL REALITY, AND HELP THEM OUT WITHOUT GIVING THEM MONEY
a. Make it clearly understood to state and local governments that there will be no more bailouts. They dug their holes for themselves, and they will have to get themselves out of it. (Note: with the GOP takeover of the House, this looks unlikely to happen prior to the 2012 elections. One point for the good, at least.)
b. Repeal Davis-Bacon, to make it easier for states and localities to reduce expenditures by contracting out without ‘prevailing wage’ floors.
c. Repeal all minimum wage laws. In conjunction with repealing Davis-Bacon, this will help reduce expenditures, and will help reduce unemployment by allowing labor costs to fall further. The Law of Supply & Demand works in the labor market, too. Right now we have a surplus of available labor (aka, high unemployment and underemployment), but the .gov is keeping the price from dropping to encourage demand.
III. STOP REINFORCING FAILURE.
There is no such thing as ‘Too Big to Fail.’ In the long run, it is better to let unsuccessful businesses fail and reallocate their resources to those who can use them more productively.
a. Liquidate Uncle Sam’s interest in GM, Chrysler and any other bailed-out companies. Admit the money they were given is a sunk cost, and recover whatever we can. If the businesses are viable without government money, there will be buyers. If not, let them go bankrupt and better run companies can buy whatever is worth anything.
b. End TARP and return whatever money is still sloshing around to the Treasury. There’s too much temptation to use this as a slush fund. And as above, if companies can’t survive without government help, let them be cannibalized.
IV. INCREASE AMERICA’S COMPETITIVENESS RELATIVE TO THE REST OF THE WORLD
a. Tax Reform
i. Eliminate the Corporate Income Tax. Businesses don't pay taxes, they just collect them for the .gov. Taxes are just another expense to them. Therefore, the ideal corporate tax rate is Zero. Without the tax requirement, corporations will do one or more of the following four things:
1) Give the extra profit to shareholders (which becomes income for the shareholders, and thus taxed);
2) Increase pay to employees (which again increases tax receipts);
3) Expand their business (which means buying stuff and hiring more people, and thus, more taxes); or
4) Reducing the prices of their goods/services, which gives consumers more money to spend on other things, which expands the economy.
Furthermore, this will end, or at least reduce, the so-called ‘Benedict Arnold Corporations’ moving parts of their operations overseas for tax reasons, as well as ending the practice of keeping overseas earnings out of the country to avoid having them taxed a second time.
ii. Scrap the current income tax and replace it with a flat tax. The trigger for American independence was taxes, and historically, America’s low tax rates have attracted a disproportionate share of the world’s most productive people to our shores. Furthermore, tax compliance costs impose an estimated $200 billion drag on our economy – money that could be put to more productive uses than paying tax attorneys and H&R Block. We should regain that low-tax crown and eliminate that drag with a flat tax set at least 1% below the current lowest country.
iii. Repeal the inheritance tax entirely. It’s a class-warfare relic enacted to fund World War I, which ended over 90 years ago. Furthermore, it causes inefficiency as people make economic decisions based on avoiding the tax, rather than on maximizing utility.
b. Health Insurance Reform. The kind that won’t cost the government anything.
i. Repeal ObamaCare. It's a giant flaming pile of shit that is sure to cost far, far more than the Troika of Assholes told us.
ii. Eliminate state barriers to buying insurance across state lines. These barriers are blatantly unconstitutional, given that the Constitution reserves to Congress the power to “regulate commerce among the several states.” Furthermore, increasing the size and thus competitiveness of the market will reduce in lower prices for insurance.
iii. Eliminate mandatory policy coverages, and allow consumers to choose what coverage they want. Again, this will reduce the cost of insurance to individual consumers.
iv. Level the tax playing field between employer-purchased and privately purchased insurance. More consumer control and choice, once again, means more competition and lower prices. Ideally, this would be done by IV.a.i and .ii, above. (No corporate income tax means no employer deduction/credit, as would a flat tax with no deductions or a single standard deduction in the case of personally owned businesses.)
v. (Note that these health insurance reforms are designed only to reduce costs. They are not designed nor intended to address issues such as increasing access to/cost of coverage for people with pre-existing conditions or tort reform.)
c. Regulatory Reform
i. Reassert the sole authority of Congress to promulgate laws. The vast bulk of the impenetrable thicket of red tape which threatens to strangle America is generated by Executive Branch agencies which have no authority to make laws, but which still carry penalties for violating said rules, regulations, etc. Congress should re-assert its authority by passing a law stating that all rules, regulations, etc, promulgated by executive agencies, which carry any penalty whatsoever for non-compliance, are repealed, and that executive branch agencies have no authority under the Constitution to generate any such rules, regulations, etc, and that any authority that may have been granted under previous statute law was in error and is thus revoked and reserved exclusively to Congress.
Some will complain that Congress lacks the expertise and the time to pass laws to regulate all the things that needs controlling, and thus won't be able to do enough, but I see that as a feature rather than a bug.