Expansion of Government - The first problem with the stimulus bill is that it appears primarily designed to grow government. As this is one of the issues I have taken the GOP to task for, I'm not about to give the Democrats a pass. In essence, the expansion of government's role and powers requires a limitation pf personal freedom and liberty. And while there may be times it is necessary to do so to protect the country (war measures), any abridging of the rights of one individual for the benefit of another (wealth transfers) must be fought.
Expansion of Debt - A large part of this current crisis (as it was in 1929) was the excessive buildup and use of credit. To combat the Great Depression, a host of deficit spending was deployed. The same was done for WWII. But we still knew we had to pay these things off. Another facet of the problem is that programs from the Depression that are still with us today (Medicare, Social Security) are now major parts of the mounting debt. And unbridled spending over (I can't believe I'm going to say this) the last 8 years (shit), with no effort to achieve a balanced budget (last achieved under Clinton and the GOP congress) has proven to weaken the government's ability to deal with the crises we are facing. Unless we spend more: $750 billion for the Wall St (Dastardly Bastardly) Bailout, $2 trillion (with a "T" folks) for the FED's bailout attempts, another $1 trillion for Porkulus. The rationale that continuing to increase debt to save the country is beginning to look endless. It risks completely devaluing the dollar, nationalizing whole industries, and perpetuating further spending to maintain. In other words, it's a dead end.
Desperate times call for radical plans. Nothing is not an option, as politicians can't do nothing and get reelected. My preferred method (the FairTax) will take years to bring online. And while I don't have too many firm numbers (do to my lack of desire to look them up), a principle-based approach to creating the conditions needed to recover the economy is our best hope. Here we go:
The Patrick M Economic Restabilization Plan
(*applause*)
1. Across-the-board Tax Cuts: To inject money into the economy, we need to reduce all tax rates. That is both corporate tax rates, personal tax rates, and immediate suspension of Medicare and Social Security deductions, for both the individual and business contributions. The distribution of the tax cuts would be this: 50% decrease for the bottom two brackets, 25% for the middle bracket, 20% for the upper bracket, and the top bracket is reduced by 15%. Corporate taxes are also cut by 25%. (note: these numbers may require adjustment after 6 months depending on the size of the deficit). The Medicare ad SS deduction suspension will be a 6-month temporary measure. All others will be permanent.
2. A Freeze on Government Spending: As I indicated, debt is our enemy in this recession. To combat this and to enable the tax cuts, all federal spending will be immediately frozen at 2008 levels. All government wages will be frozen at current levels. Non-essential hiring will be put on hold. And while cutting the numbers of people on the employment roles of government is a long-term goal, adding government people to unemployment would exacerbate the problem. Also, transfers of monies from Washington to other countries or states will be reduced by a minimum of 25%, or suspended entirely (as I don't want this post to take a week and become a book, haggling over those numbers would be part of the minutia of the plan). The only exception is unemployment. And regular hours for all employees (except critical services) will be reduced to 35 hours, with no overtime.
3. Military Spending: We need to cut a minimum of 10%. Yes, I said cut the military. What that means is closing bases around the world that were set up during the Cold War unless the countries that we are located in will cover at least half of the cost for maintaining those bases. Surpluses, especially those that are outdated technology, can be sold off. The only exception to this are active combat areas. And in the case of Iraq, they are now in the position of being able to cover our costs in their country. We now have the capability of maintaining and deploying worldwide with carriers and aircraft. So lessening our worldwide footprint will save us money and maybe avert some of the popular sentiment against us (although we'll still have to kill terrorists by the bushel).
4. Social Security and Medicare - The fastest way to cut a large chunk of cash out would be to kill these programs. But the chaos that would ensue would be nightmarish. So there's two short-term things that would help immediately. First, for Social Security, add one year to the retirement age, effective immediately. Add some others in there as well for us younger folk. But if you cut out all the people who are going to hit the roles this year, the savings would be spectacular, and buy us some time to catch up. As for Medicare, I had to do some quick reading, and as a result I have no clue where and how to trim this beast (any suggestions would be nice). But I'd say a 5% cut would go a long way.
5. Unemployment Spending - Because we are dealing with a large number of people unemployed at this time, and the number will grow, this will be the one thing government will continue to fund at whatever levels are necessary, for the next 18 months.
That's it. Other than the unemployment insurance (a necessary evil) and the number of government employees (which means they can do something other than live off unemployment), nothing is sacred. And desperate times call for hard measures.
The Principle - For 80 years, we've been increasing the amount government invests in the private sector, to the point that every other person and/or business is looking to Washington for a bailout. The inherent danger is that we will continue to become dependent on the largess of government. And eventually, there will be no private sector.
This crisis is the result of irresponsible debt accumulation (supported by government), continued adjustment (by government) to avoid the effects of a down economy in order to keep growing, and a fundamental shift in the American population toward a more socialist model of government. However, to maintain some semblance of freedom and pull the economy out of the sewer, we must empower the private sector to get back on its feet and grow, and we must free government from its inappropriate level of involvement in our economy. Then they can serve as the regulator rather than the command structure.
One other thing jumps to mind. Private industry is about getting the most bang for the buck. Government, on the other hand, is among the most inefficient manager of money there is, because when they need money, they take it (or make it). The secret to this crisis is to increase spending in the private sector, not the government sector. And it's not in government injections of money. The TARP bailout showed how quickly government doling of money can go wrong. So that's to be avoided.
Now, I don't guarantee that this plan will magically stimulate the economy. Only a complete idiot would say that. But this plan is the best hope we could have, and the best thing I could come up with between work, kids, and playing my shiny new bass. So if you have any additions of numbers on which I can adjust the few numbers above, I would appreciate it.
29 comments:
Not a bad plan, Patrick. I think the Pentagon could indeed cut ten percent out of the operating budget without too much difficulty. Streamlining procurement would accomplish a lot of this. Yes, we'd get the occasional $400 hammer. But right now we're spending $1000 to avoid that hammer, and we still get them.
In my suggestion I included one-time grants to food shelves. Right now there's enormous pressure on the lower end of the scale. Exending unemployment and lowering food costs will help those folks a lot, until the economy naturally improves.
Patrick - 1 thru 4 have merit in the long term but the real problem today is:
"5. Unemployment Spending - Because we are dealing with a large number of people unemployed at this time, and the number will grow, this will be the one thing government will continue to fund at whatever levels are necessary, for the next 18 months."
And this is kind of weak. Admit it, you have no better idea how to put America back to work than anyone else.
And this should be #1 as the lines get ever longer for food, basic healthcare and housing. MILLIONS are out of work and that number grows daily - without consumers, there can be no economic recovery.
We can't depend on exporting to save the day; as I pointed out to you over at the Swash Zone,as goes the US economy, so goes the global economy.
Pick any news source and look what has happened globally - we are in deep sh*t; we don't have 18 months to toss this around.
For better or worse we now have a stimulus package and although I'm not thrilled with it either, we must stop talking and start doing.
Just one thing really quick as you know where I stand on the Fair Tax but tax cuts only benefit people who already have jobs, only benefits companies who have sales, etc. The bottom line is that we need jobs. Most of our jobs have gone to China and Mexico. I agree that the bailout will do little (although it will do more than the last one). What we need to do is cancel almost all of our trade agreements. There are only about 3 things Americans can't make: Oil, Rubber and Olive Oil. These are really the only things we need to import and for all I know we do produce olive oil though I have never had or seen american olive oil. Everything else we can either grow or make ourselves but in efforts to make rich people richer, not making the cost of our products cheaper, we have outsourced all of our jobs once held by middle class people.
Can you tell me how we benefit from allowing Kia export thousands of cars into the US but not import even a fraction of the same amount of American cars?
Toad, isn't that a huge exaggeration? We haven't sent most of our jobs overseas, and actually most middle-class people are still employed (as opposed to having all the jobs gone, which you said). Small percentages of something are not "most" or "all" of something.
"There are only about 3 things Americans can't make: Oil, Rubber and Olive Oil"
There's a difference between "can't make at all" and "we can make it, but we do a crappy job at it compared to those who are the best at it".
"in efforts to make rich people richer, not making the cost of our products cheaper"
It's all about better products, opening up the US market to more options, and opening more markets to US products, not making the rich richer.
There are things we make better than others, and things others make better. To be honest, we just don't need trade restrictions. It would result in a trade war and massive loss of export jobs HERE, and it would in many cases force Americans to buy shoddy overpriced products. And sorry, about your Kia question, it is hard to force Koreans to buy shoddy overpriced cars from the US when there are better cars to be had.
Trade restrictions? Leave them to the people to enforce by personal preference. Nothing is stopping anyone from choosing a Buick instead of a Kia. Pat Buchanan has a strong idea about what we should buy and from where. But I don't want the government to enforce his or anyone else's personal preferences. The most fair trade is trade where the people decide, not the government.
I respect your views on trade. I would not take them from you, but I do not want the government to enforce them either.
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Toad, you have a great point on tax cuts. I had not thought of that before.
According to the United States Department of Commerce
http://74.125.95.132/search?q=cache:rvWLZlDM6dMJ:www.commerce.gov/NewsRoom/PressReleases_FactSheets/PROD01_007686+united+states+export+jobs&hl=en&ct=clnk&cd=8&gl=us
In 2008:
- Exports from the US totalted $1.7 trillion.
- Exports were more than 13% of the GDP.
- Exports supported 6 million jobs, of which 2.6 million were manufacturing jobs.
A trade war (the likely result of cutting off imports) would likely take these figures most of the way to 0. That would be a major hit to the economy and US workers.
Yes but but our trade deficit is 677 Billion dollars which would have paid for the last bailout even though we wouldn't have needed to bail anyone out if we still had those jobs.
I agree that some countries are more effecient and produce a better product and America does a lot of things well that other countries like to export. I am not saying cut all trade, I am saying cap and match. And we most certianly shouldn't allow such lopsided trade with a country which manipulates its currency in order to fuck Americans. I export a ton of shit to China and actually benefit from trade with China but I have a feeling that I could do more business if all the companies I did business with in the past still had operations in the US. A lot of closed down either due to competition from China (sometimes illegal trademark infringement)or their company opened a facilty in China to replace the American facility.
How do you know the Koreans don't want Buicks? If they aren't on the showroom floor, they can't buy one even if they wanted to. Were we all dying to have a Kia?? No, not until someone allowed them to import them.
NAFTA has resulted in the loss of almost 900,000 US jobs.
And you wonder why states are going broke? It's hard for them to tax goods made overseas. See, jobs here kill 2 birds with one stone. In fact, that's exactly what California should do to balance their budgets, simply tax the hell out of all imports coming into their ports. Assuming Washington and Oregon do the same, that could level the playing field and perhaps encourage china to rethink their currency.
Remember, a pair of Levis now cost more since they have been made in Mexico and Converse are more expensive now than when they were made in NC.
Toad, with "Oil, Rubber and Olive Oil. These are really the only things we need to import" it sounded like you did want to cust off most importing. But what you say in the most recent post sounds a lot more reasonable.
"And you wonder why states are going broke? It's hard for them to tax goods made overseas"
Do you have any idea if tax revenues in states like California are going up? Or going down?
"How do you know the Koreans don't want Buicks?"
Americans don't want Buicks, so why would you expect Koreans to want them???
Gordon: That would be an easy thing to work in and would be a definite temporary measure. And temporary relief (especially cheap relief) is what we need.
Rocky: The unemployment is a stopgap. it's designed to keep people somewhat functional while the jobs get going. And I think I forgot to clarify how jobs would be created, so here you go:
There are two ways to create jobs. That's either with government jobs or private sector jobs. As government is too big and that will only add to the debt, we have to get them in the private sector. Now, if you want to decrease the supply of something (in this case, the unemployed), you lower the price. And without lowering the minimum wage (which would be a bitch of a sell), you're only going to do that by reducing the burden on hiring people. That means decreasing regulations, temporarily eliminating the burden of hiring (in the form of matching on SS and Medicare), and giving companies more tax cuts.
BTW, you don't have to star out the word shit here. We like shit. Sometimes, I'm full of shit when writing things (like this shitty paragraph). Then I go shit out my shit. And speaking of shit.... :)
Toad: I agree we need jobs. If you've read my comment to Rocky above, it should clarify how I expect jobs to be created.
And I know tax cuts only benefit those with money. But the point is to stimulate the economy. For the unemployed, there's unemployment and Gordon's food bank suggestion to tide people over while we get the country running again.
As for protectionism (killing those trade agreements), Hoover tried something like that with the Smoot-Hawley Tariff Act (thank you Ben Stein). Put bluntly, it didn't work, and may have worsened the Depression.
As for imports in general, it means that prices become more competitive and we weed out the crappy monoliths (in cars, that would be the Bad Three automakers).
As for states going broke, it's because they spend like Washington.
Dmarks: Thanks for the import/export info. You could give us a nice, pretty, clickable link though. Even if looking up all the details of the site entertains me.
I tried adding the actual link several times, but it kept erroring out.
13% of GDP is derived from exports....that is really one of the sorriest numbers I have ever seen!
Nobody is as big of a fan of Made in the USA as I am. Over the last 30 days I found out that two competitors are biting the dust and that creates opportunity for me.
But next week I am going to Las Vegas to meet with folks who manufacture in Latin America. I can't make the goods myself without incurring a tremendous overhead cost and capital outlay. I cannot find any subcontractors that have anything resembling quality work and it is just an absolute waste of time to deal with American businesses...
I can more than double my sales this year by exploiting the holes that have developed in the marketplace...and I will not even mention the obscene profit margins I will enjoy.
But I am tired of listening to a bunch of American Businessmen bitch about how hard, how tough, and what a mess the world is.....
I don't need any tax cuts nor do I need free money to see an opportunity to get off my butt and make a killing...
Not real sure what all the economic mess is about but from my perspective it was all caused by a bunch of fatass businesses who got lazy and comfortable and when reality changed they couldn't adapt.
They were not interested in opportunities but rather in tax breaks...
So Patrick, get your plan out there and maybe the corporate welfare system will come to an end....
Everyone loves selling to the government...its easy money!
Puts me in the mood for a BLT, a pulled pork sandwich and some babyback ribs. Then I can throw up on the stimulus plan.
@tao: "They were not interested in opportunities but rather in tax breaks...So Patrick, get your plan out there and maybe the corporate welfare system will come to an end...."
As long as we know that tax breaks are not welfare.
Patrick - the flaw in your plan is the idea that MORE deregulation and MORE tax breaks will create jobs.
We are losing thousands of jobs a day, businesses aren't hiring, they are firing. The market for goods worldwide is dropping like a rock - the private sector is NOT creating jobs at the moment and I don't think your plan will create jobs in sufficient numbers to stop the bleeding and turn the economy around.
Dmarks:
Everyones tax revenues are on the decline because people arent spending money because their 401ks are half what they used to be, their house is worth half of what it used to be or they have lost or fear losing their jobs. If people aren't buying anything the local governments can't tax them.
Buicks are old people cars but they aren't actually bad cars, my parents have one and love it. These people haven't owned an American car since the 1973 Dodge Dart. That was why they started buying Toyotas but now American quality is back up again. Sure they have some problems with marketing and what not but it isn't impossible for them to be successful. Cheap shit like Kia imports certainly don't help.
Patrick:
Wow, one Tarrif during a depression. Great example. you are forgetting there was no money in the Depression how could have someone open a new factory here? If we had more car factories, more show factories more textile factories that would mean more jobs period. Only importing from China the amount we export to them, would mean someone else would have to make those products. Nike would have to bite the bullet and build a shoe factory in the United States which means jobs.Jobs=Income, income=spending, spending means more jobs, higher tax revenues, etc. How can you even argue against that?
Toad: "That was why they started buying Toyotas but now American quality is back up again"
Ford has just caught up very recently. GM and Chrysler have not. The problem is with the product, not marketing.
"Cheap shit like Kia imports certainly don't help."
The Korean companies have caught up with or surpassed the average Big 3. Cheap sh*t is a lot better than overpriced sh*t. It helps a lot, really. It gives Americans alternatives to overpriced shoddy cars, and the competition keeps the Big 3 on their toes.
Back to the tax decline question, do you have actual figures for states like California to show that the tax revenues are going down from year to year?
Uh, in case you haven't noticed, Kia is the company who first came put with the 100K mile warranty and is currently putting forth that if you lose your job anytime during the FIRST YEAR you own your new car, they'll take it back.
They'll TAKE IT BACK?!?!?
The reason American companies fail is because they have this belief that they can produce shit quality products and sell them high, and people will still buy them because they're American.
Most major foreign companies do have plants here and Toyota, for instance, employs 36K workers in the US. Which proves that it's not some kind of special Asian talent to build a car, it's the company behind it.
Once upon a time American cars were the best. Then they went to shit. They lost a lot of business to foreign car makers who saw an opportunity to come in, make a better product and sell it cheaper, thus beating out the US companies in volume and creating converts for life. How many people do you know who say "I'll never own anything but a VW, or a Honda, or a Toyota"? In the motorcycle world it's an undisputed fact that the Honda Goldwing is the king of all touring bikes, and that Harley, despite the image, the merchandising, and the reputation, will never, ever come close to the quality you'll get with the Goldwing.
If Detroit has issues it's their own fault for sitting on their 1950's laurels and thinking that people will buy their cars just because they're American. Bullshit. They've had decades to catch up; Toyota's been around for 70 years and in this country for 30+. Nobody was pulling the wool over anyone's eyes.
The reason I go on about this is that it's a microcosm of the American arrogance and conceit in believing that we are just inherently better, we do things better, we build better, we basically ARE better than anyone else. This extends further than industry. Following Katrina, the Dutch came forward and volunteered to share their technologies and new developments for safely living below sea level. These people have been intimate with the high tide for centuries. They currently build houses that rise and fall with water levels to protect them from flooding, among other things. But would we accept their help? Fuck no. Because we, obviously, must know better.
Arrogant fucking pricks. This is the same mentality that continues to believe that an at least partially socialist economy cannot work and will inevitably lead to decline. I don't know. Ask the Dutch, maybe. Ask any number of countries that continue to plug along quite steadily and happily, albeit now suffering from the global repercussions of our fuckups. They're not repressive empires, they're not backwards, they're not uncivilized. Don't mistake socialism for communism.
And 'invented' socialism? Socialism was the first system there is... prior even to the onset of formalized government. It's a group of people living together and working to benefit the community as a whole; what benefits the group benefits all.
And I'll think more about your comment before I get to it, Beth.
SDD: You nailed it right on the head about the auto companies, with the US ones putting out a significantly inferior product for decades.
Kia is also hiring American workers in the US and paying them high wages, at the same time that GM and the others are firing workers. Trade policies that punish Kia and reward GM/etc don't make a lot of sense.
As for socialism, it was not invented really until the last half of the 19th century. You can't just take every strong central government with totalitarian tendencies in all of history and call it socialism. Generally, in the past, giving control of our lives over the rulers was justified by "the king is a God" and stuff like that. Socialism tends to justify giving more power to the powerful by using "scientific" justifications instead.
In discussion of the history of socialism, in fact, the earliest reference can be found to Plato's "Republic", but that was all on paper.
Lost in any view of socialism is the healthy skepticism of "Question Authority", since socialism is ready to trust the rulers to take over our personal affairs for any number of reasons.
"Don't mistake socialism for communism."
Communism tends to be socialism with a lot of killing. It is much more a case of the first being a subset of the second, not "something different". But it is not entirely a subset relationship: both Hitler and Stalin were socialists, but only one was a communist. Both of them held the regressive view that the government should be very strong and run our lives for us.
How can you stand that Communist manifesto blog known as Conservative Convictions it's a liberal cesspool.
D:
American cars are cheap compared with VW, Toyota and Honda. It is marketing. VW doesn't make all that great of a car and niether does Kia but they have marketed them anyway. In fact, VWs were originally marketed in America as lemons. SOmehow, it worked and has continued to work.
Cadillac CTS recently beat out all the foreign competitors in its class and guess what is one of the only American cars (excluding trucks and SUVs) that you see a commercial for? CTS: good marketing. That's not all you need but it can't hurt to try.
Toad,
I think you haven't thought your protectionist argument through. Cutting off imports of cars would benefit the Big 3, but the retaliation would kill farmers and companies like Caterpillar, who export much of their products.
What's more, it's more efficient overall for us to buy certain products from other countries, while they buy certain ones from us. Those efficiencies benefit everyone, and improve living standards worldwide.
Protectionism results in shoddy and overpriced goods. Have you ever looked at radio receivers from the 30's and 40's? They're works af art, and they work well, too (assuming you can still find the vacuum tubes). Then go look at sets made in Ireland from that time (I have). Ireland had laws banning imported radios, to protect domestic production. The Irish sets are simply crap. They look cheaply made, and they didn't work well.
RevRight: I can answer your question. First, it's not a liberal cesspool, although we do have liberal visitors that come to argue against common sense. And second, they had the sense to add me to their lineup of authors.
To Patrick,
Happy Valentine's Day, cupcake.
Cadillacs fall apart quickly compared to the Lexus.
Gordon:
How many employees does Caterpillar employ vs the big 3?? And Catipillar has been around for a long time, even when we weren't importing Kias and Accuras. They did fine then, they would do fine now. We know for sure Detroit doesn't do well with all this competition.
So if Caterpillar is doing so well, with trade policies as they are, why did they layoff 800 employees in December? Why aren't they hiring ex auto workers?
And good example of American made radios that were manufactured well before Japanese imports and were still high quality. The Irish suck and electronics and in that time period they were a third world country with virtually no resources. Another point in that is Russian vaccum tubes from the same era were great. People still want to get their hands on these things and they were made under Communist rule which was very protectionist.
I agree that we need some imports but we shouldn't import cars from Korea when Korea doesn't import our cars.
And look at European countries such as Italy, France and Britain. Ford sells tons of cars in those countries but when was the last time you saw a French or British car driving down an American street? Apparently even when we don't import their cars, they still buy ours.
These examples don't lend much weight to your argument.
DMarks:
Everything falls apart quickly compared to a Lexus. Lexus and Infinity's are 2 of the best cars you can buy. I clearly want a car that will last but a shitty car which requires a lot of maintenance keeps Mechanics and auto parts makers working. So there is a benefit to the economy with shitty cars not to mention they are generally cheap.
toad said: "I agree that we need some imports but we shouldn't import cars from Korea when Korea doesn't import our cars."
This is one where each person should decide. That is, each person gets to make up their mind of whether or not they like Korean cars.
And again, why should Koreans want cars that are overpriced and poorly built/designed when even Americans are rejecting such cars.
Our cars aren't overpriced and they are better than the Korean cars.
And on the last point I was trying to say the Irish suck at making electronics. We do however know they are good at making beer and whiskey. And when it comes to beer and whiskey those are another example of things we still want to import. And to use Ireland as an example, I think the most popular beer there is Budweiser. So they send us Guinness, Jameson, Harp, Beamish, Bushmills, ets and we send them Jack Daniels and Budweiser. Thats the type of trade agreements we need.
Hyundai's quality is now above that of the average American car.
"Once known best as the maker of cheap, entry-level cars with nagging manufacturing flaws, the South Korean automaker [Hyundai] outperformed its Japanese, European and U.S. rivals in this year's survey, based on interviews with 27,780 people who bought 2007 models in September-November 2006.
" from MSNBC. They also top the Consumer Reports upscale car list.
If you pay the same price or more for a car that is inferior, then that car is overpriced.
Hyundai started out worse. Much worse. But over the years, they decided to steadily improve. Unlike the US car companies, they were serious about it.
And remember, Hyundai hires US workers. The Big 3 fire US workers. Which company do you want to support, if such matters are important to you?
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The type of trade agreement we need is where if someone wants a product, it can be shipped over. That's the most fair to all. That is, each person makes the "agreement" or decision according to their needs. Instead of the government forcing "one size fits few" trade preferences on everyone. It's really not the government's business.
Actually Ford's quality is right on par with Honda and Toyota now based on Consumer Reports and JD Power. GM and Chrysler still need improvements and I would rather rely on a Ford before a Hyundai or Kia any day of the week.
It is the governments business if everyone in this country looses their job. then the government has no tax revenues and they can no longer make stealth bombers to bomb Arabs hiding in caves or to send lopsided amounts of aid to Israel, a rich nation, and these things seem to be what you conservatives love to spend money on. So think about that when you buy a Hyundai.
"So think about that when you buy a Hyundai."
Hyundai is a company that hires more and more American workers. The opposite of what the Big 3 do. So they have a positive effect on the problem of "everyone in this country loses their job"
As for Ford, the cars have been crappy until recently. But so have the South Korean companies' products. I'd want to check to find out how long this recent quality spell has been for them, and maybe decide based on that.
If it is trucks, the decision goes to Ford, easily. South Korea does not compete in this segment. If it is luxury cars, the decision goes to Hyundai (Genesis) which beats any similar offerings from Ford's "Is that still around?" Lincoln division.
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