Dec 042012

Just about a month ago the worst President in the history of the United States was re-elected by the dumbest electorate in history.

It is official, the Looters and Moochers now outnumber the Makers and Creators. The question, then, becomes “What happens now?”

When the people find that
they can vote themselves money,
that will herald the end
of the republic.

~ Benjamin Franklin

I can tell you that I do not know for certain what will happen in the end, but I can predict some things:

  • The Federal deficit is going to continue to grow out of control. The entrenched bureaucracy will not let go of the purse-strings and the economy will crater. Some principle members of congress will oppose it, creating many opportunities for each party to blame the other for “obstructing” their plan to save the country. In truth, the Republicans have more to lose when things do go down the drain, because the Democrats and their allies in the media will be able to spin the news that the Democrat plan would have worked but the Republicans “broke it” somehow. The Republicans are just not smart enough to see that they need to get out of the way, to stand up and go on record saying, “I disagree with this Democrat plan, but I will not oppose it. You think you have the answer? Then prove it. Pass your legislation, put forward and enact your proposals, the economy belongs to you now.” Only by taking the “let it burn” approach can the Republicans prove to the low-information voters that the Democrats’ ideas are wrong.
  • President Peace Prize is going to get involved in more wars. And kill more people in undeclared war actions, like drone strikes, than that Cowboy George W. Bush ever did. Of course, we’ll see just as many anti-war protests in the next four years as we saw in the past four (that is to say, zero).
  • The rich will get richer, the poor will get poorer, and so will the middle class. If the middle class doesn’t disappear altogether. The coming economic disaster will hit the middle class hard, and they will only have one chance to save the old order – the 2016 elections – before the US becomes a nation of cronies lording it over the welfare class. Once all of the jobs are gone the unemployment rate will drop to historic lows, as no one will actually be looking for work. The Federal government will create more and more incentives for the unemployed to stay on the dole.
  • The best and brightest are going to take an economic sabbatical. The scorched-earth policy the Democrats call “paying their fair share” is a powerful incentive for those with money to reduce the government’s power to tax them. Until the government actually starts to go after wealth the “rich” will reduce their “income” and live on interest and savings until the storm passes or the bottom drops out. Since many in the middle class and most small businesses won’t be able to afford to do so, they will continue to struggle until all options are taken away. Then they will simply quit.

Those are my predictions. It is going to get worse before it gets better. A lot worse.

I do not want to sound as if I am hopeless about the future of America, far from it. It’s just that we have an important lesson to learn, and it looks like millions of Americans are going to have to learn it the hard way.

God bless us all.

Oct 072011

Social Justice! Smaller Government! Power to the People! More Power to the States! Less Taxes!  So are these at odds?  Maybe, maybe not.

I’m just a little too practical and weary of folks that want stuff for free, but I think this OCCUPY effort which is underway is just a little too aggressive and all over the place.  That being said, there is a little inequality.   In general, I would offer that much like the Tea Party movement, these are a bunch of individuals which believe the country has gone awry.

Fundamentally most agree that things have swung way away from an America which was originally founded to provide opportunity to people seeking such, but as a society we have abandoned many in our population based on limited education offerings, reduction in support for families which NEED it and in general ignored many of the common items most countries see as a right and as such fund – college, healthcare, supplemental support for the aged and support for the family unit.

So what could the OCCUPY effort do to help align the goals of the effort to activities which are reasonable and fair for those that would fund it.

There are only 4 areas where I believe we need to focus – national security, social justice/welfare, economic foundational support and liberty.

National Security

I certainly appreciate the efforts to open borders, but in principle what does that solve?  We could live in Mexico and work in the US? Live in the US and work in Canada?  Shouldn’t we actually protect our borders, liberty and foundational realities of a healthy economy and society?  Open borders does NONE of that.  So what should we do?

  • End Occupation of Foreign countries:  This can’t happen over night, but over 5 years we should be able to reduce our foreign presence by 50%. BENEFIT: Reduced spend and Increased Goodwill globally
  • Shift Military resources to Border Protection:  Immigration is an issue and we need to make sure people safely enter our country and under our rules.    With long range defense tools, satellites and alike we don’t need a physical presences everywhere, that is so 1965. Benefit: Keeps military resources in place, provides protection and career opportunities and economic stimulus for base communities and border towns.
  • Allow a Buy-in for Undocumented Aliens:  Determine a window of time where illegals can pay for amnesty, let’s say $5000 per person.  After a given date, radically enforce deportations which the help of the reallocated military resources. Benefit: represents a do-over,  reduces deportation costs and provides a legal avenue for those which took the opportunity illegally to help their families and our economy, since many of the jobs WILL NOT be pursued by natural born citizens.   Once a timeline is set – ruthless/swift enforcement to reduce $10B in annual illegal costs.


An Economic Model and Foundation for the Future

Taxes, the growth of government and the fragile nature of our economy is a clear issue.  Much of it can be attributed to the realities of Globalization, which the US reaped the rewards of well into the mid-1990’s, but now with emerging markets having buying power, infrastructure and skills the playing field has levels and at some levels we have lost ground.  Why have we lost ground?  Skills, education, an entitlement apathy and general anti-business constraints which means a factory in Canada, Malaysia or Mexico is a better option.

Building an Operational and Economic Model for Business, People and the Environment

I have to say this 999 concept is attractive from Herman Cain, but it doesn’t scale well and is not well documented and leaves gaps.  While I get the math, buying behaviors will change and people who are looking forward to benefits and alike could get shorted.  Why do we need to reduce the taxes so much?  I mean today we have on average a 40% tax burden and it’s not like we are in a top tax bracket, even for leading economies.

So if we could get the average tax rate down to say 25% for individuals, then that’s a win.  It’s an even bigger win, if say 9% of it is optional.  The 9% I’m referencing isn’t Herman Cain’s, it’s Social Security – back to that later.

We also need to manage exemptions in a tax overhaul and make it straight forward and easy to administer/enforce. What exemptions should one have? What is taxed and what isn’t?  It isn’t reasonable to think that congress wouldn’t work in some modest exemptions like food or clothing, so let’s put some ground rules in place which lowers the administrated cost of taxes and is fair:

  • Personal Exemptions for Dependents as in place today – NO CHANGES
  • Existing Healthcare Expenses, but allowing 100% pre-tax buy-in for insurance
  • Mortgage interest deductions
  • Organic Food – Brings back Agricultural markets locally and improve the quality of the food supply
  • US Manufactured Clothing – Brings back lower skill manufacturing to the US.
  • Personal Educational Expenses – Homeschooling materials, Private School fees K-12, College to Masters (Max 8 years)
  • Limited contributions to charity – outline below.

That’s it!  Simple.      So I did a survey of personal taxes elsewhere in the Top 5 economies ranked by Forbe’s this week.

Personal Federal Tax

  1. Canada Maximum – 50%, but let’s assume the average $200,000 yer person pays 50% with healthcare and PST/GST
  2. New Zealand – 33% plus a 14% GST
  3. Hong Kong – 20%
  4. #4- Ireland – 50% with all the taxes sales tax… Max income tax is 41%
  5. #5 – Denmark – 55%, max income alone is 67%! Sales tax is 25%!

So what are taxes like right now in the US?   With the US, the taxation is in the 40% range with state taxes (income/sales tax/exercise taxes).  So we have a little room here to play with, without stifling the benefits of 9/9/9.

So How should we augment 999?   In principle, we have to address a shortfall in revenue in the most simple model looks to be $200B per year for the Federal Government.  So maybe here is an approach to taxation changes which reduces taxes and empowers those with the desire and ability to give back to the community to do so:

  • Over $300,000 – 9.5
  • Over $500,000 – 10%, but 50% over 9.5 get a dollar for dollar tax relieve for charity
  • Over $1M – 11%, but 50% over 9.5 get a dollar for dollar tax relieve for charity
  • Over $5M – 12%, but 75% over 9.5 gets a dollar for dollar tax relief for charity
  • Over $10M – 13%, but 75% over 9.5% gets a dollar for dollar tax relief for charity
  • Over $15M – 14%, but 75% over 9.5% gets a dollar for dollar tax relief for charity
  • Over $25M – 15%, but 75% over 9.5% gets a dollar for dollar tax relief for charity
  • Over $30M – 16%, but 75% over 9.5% gets a dollar for dollar tax relief for charity

That’s simple, allows for choice in ones community and is at least a net decrease in effective taxes of 6% for most people – not including social security which can be as much as 15%.

Now on to corporate taxes.  So how should we deal with companies?   Well we tax less aggressively and reduce loop holes to create a sustainable and predicable revenue stream, but 9% doesn’t really work across the board.  Using the same tax rate logic for the Top 5 economies from Forbes, the tax rate is as low as 11%, but as high as 18% and the 11% is the “low end” for a range up to 25%, so how about we do something cool here too.  Since companies would be paying the 9% too on sales tax, how about we do this which encourages small businesses and meets the low bar set by the other Forbe’s top 10:

  • <1M in Revenue 9%
  • <2.5M in revenue 10%
  • <5M in Revenue 11%
  • <10M in Revenue 12%
  • <15M in Revenue 13%
  • <20M in Revenue 14%
  • <25M in Revenue 15%
  • <50M in Revenue 16%, but 50% of the amount over 15.5 is available for charity tax credits
  • <75M in Revenue 18%, but 50% of the amount over 15.5 is available for charity tax credits
  • <100M in Revenue 19%, but 50% of the amount over 15.5 is available for charity tax credits
  • <500M in Revenue 20%, but 50% of the amount over 15.5 is available for charity tax credits
  • <750M in Revenue 21%, but 50% of the amount over 15.5 is available for charity tax credits
  • >1B in revenue 22%, but 50% of the amount over 15.5 is available for charity tax credits

This addresses the potential shortfall of $200B in revenue which is addressed by Cain’s plan, as asserted by Bloomberg, provides tax relief and flexibility for putting your “tax dollars” to work against your own ideology with charitable contributions.  It actually makes BIG BUSINESS put programs in place to influence/improve communities.

Jobs, Jobs, Jobs! A living Wage!

I get it – you need jobs OCCUPY folks, but you also need skills, experiences and a willingness to contribute to society and the economy, so $20/hr even for the those not working is not an option.   Do that math, oh yeah that whole skills and education thing.

Don’t get me wrong,  I like this concept and I’ve even marched for such with the Workers World Party in the 90’s, it requires that we actually live and work for the wage.  So I’d restructure things a little and I’d grant $20/hour per person who participates in workfare, for a maximum of 15 hours a week from the government.  No free rides kids and there has to be some upside to working.

So what would you do to get this revenue?

  • Clean the streets
  • Remove Graffiti
  • Community policing – no guns, only cell phones people on the streets
  • Go to College full time for a bachelors or 50% for an advanced degree
  • Babysit/Day Care for working mothers/single mothers in school
  • Volunteer at a school
  • Volunteer at a charity

So that’s the working part of the wage and the only people who are exempt are those that are classified as disabled and being disabled, only qualifies you for not being able to do a subset of work. For example – physically impaired?

You still need to answer phones or respond to emails…  Very few people would be actually exempt, sorry no free rides, only a fair wage for a fair contribution to the community and the economy.

Now here is where I get over the top a little, but we need to have a more solid set of skills and capabilities throughout our economy from the Human Capital resources we have available.

Additional Guidelines for receiving assistance:

  • We need some guidelines on education, must have a high school diploma or GED to qualify at all.
  • The recipient and his/her dependents can’t be classified as obese – medical waivers available and 24 month grace period to address.  Reduction in payments start at 18 months once obesity is identified in a qualifying dependent.
  • Maximum number of dependents/children 3, after 3 a reduction of 50% of funds received today and at 5, the total gets reduced by 25%.  (Poverty is a function of population, it’s just math)
  • Must be a US citizen or Paid Taxes the Previous Year As a Documented/legal worker.

The other item from a workforce perspective is to provide pre-tax healthcare options for all and limit the maximum number of hours a person can work a week to 48 hours.

Why? Well it would create a bunch of jobs since the work still needs to get done, it will reduce stress and allow families to spend more time together, which I think is a big driver to a bunch of the craziness in our culture today.

Social Security? Now That’s a Conundrum

Inbound revenue is north of $850B/year and the outlay is north of $700B.  So it’s not working, but a bunch of people are looking forward to it…  So let’s make it 9% to receive 100%  of available benefit.

We need to make this optional and have a tiered approach.  If someone would like to opt out they can do so, but forfeit all contributions or they can choose to get a lower benefit, providing they pay at least 4.5% of their income they can get 50%.

If they don’t want to opt out or go to a lower tier, there is a means test that reduces your benefits by 25% if your income is greater than $150,000 or some number while retired or some other number.  So while I can’t figure out the adoption of this, but let’s make a forecast. 10% opt out, 30% take a lower tier and there is a 10-20% benefit on the means test.  So net impact is – rough numbers, say 5 years out based on tiers and opting out:

Inbound Revenue going Forward:   $750B

Outbound Spend going Forward: $575B

So the net impact of a restructured Social Security is material and represents $750B in incremental revenue beyond the modified 9/9/9.

Cutting Costs, Re-Aligning Resources Towards High Value Activities and Protecting Freedom

How do we drive costs out of the Federal Government? Well requirements for entitlements is the start above, reduction in complexity of managing and enforcing the tax code and allowing individuals and corporations to not be encumbered by federal, state or local intrusion on personal property, actions and legal proceedings which do not impact another persons freedom or cause physical harm.  Government agencies should only enforce activities which impair freedom of others.

Cost Reductions from the Federal Government

  • Elimination of earmarks: Honor all currently funded earmarks and provide notification of funding ending.  Benefits: requires research to be economically viable, community agencies to deliver services valued by people and corporations and reduces spend by minimally $15B year.
  • Moratorium Hiring: Specifically on back filling retirees from the Federal Government, limit the back fill of retirees to 50%.  Estimate savings $30B/year
  • Labor Negotiations: Require renegotiation of wages, pensions and alike for all Federal government agreements to align with average private sector wages – should apply for state and local agreements too.
  • Efficiency Goals: Improve efficiencies and reduce federal employment rolls by 10% by 2020 through automation and implication of processes around enforcement, in addition to the attrition benefits.  This is in addition to attrition and renegotiated rates of collective bargaining agreements.
  • Must be a US Citizen/Documented Worker for ANY Govt benefit: The cost of illegals is at $10B/year
  • Eliminate Illicit Drug Enforcement: It only harms the person, sure there is collateral damage to families, but we enforce that through endangerment laws for children and the community, like driving under the influence.

So why legalize drugs?  It’s just math the federal government conservatively spends $15B and the cost to society is multiples of this – prison and legal system impact is at least 2B annually, but if you let people out of prison who ONLY have drug offenses we could have an immediate benefit for states, localities and the federal government of at least another $10B for operating prisons, courts and alike.  Plus – are we really ever going to stop it?  Plus do we really care if someone dies who isn’t contributing to society?

Plus there is the added benefit of freedom and additional taxes to fund other actions like “the living wage” program.

Tax Freeze, Anomalies and Strategic Use of Taxes

No raising of taxes for localities or states for X years (5-7 should be the minimum) and after that any tax increase needs to be approved through a public vote, same for the Fed.  That would encourage managing a budget and putting in place rules/regulations/laws which encourage growth of the economy.  Think re-haul of regulation, the EPA and internal processes efficiencies to drive out cost continuously like the private sector.

Anomalies in the 9% Sales Tax

  • $10 tax per pack of cigarettes: We need a healthy US citizenry.
  • 12% tax on Fossil Fuels: Encourages innovation and investment in greener tech/transportation offerings
  • 20% tax on current illicit drugs – $16B in new revenue

Debt Relief?

That’s just stupid – no really.  I bought an house in 2004 and it’s under water and I can’t sell it.  So what did I do?  I put it to work and it is now a rental.  Credit Card debt? Live within your means.  College Debt? Get a job and learn math.  Now I know that it harsh, so the Fed should provide some long term debt restructuring through low cost mortgages for refinancing and some type of low cost loan for restructuring unsecured debt, since I agree the financial institutions have gotten greedy and aren’t improving the market through their predatory rates which mean the good payers get punished for the deadbeats.

So any program to address this should focus on contributors to the pot, not takers.  The only problem we need to manage is the credit worthiness of such loans, so you are only eligible if you current credit score is above 700 from a FICO perspective.  I know it doesn’t fix it for all, but it fixes it for those that have built the economy and they need a little love, not just those who want stuff for free and aren’t willing to accept you need experience and contribution, not just a diploma.


So quick math indicates we have a revenue neutral model, which embraces capitalism and provides a spring board for the under represented people who need a little help.

Reduced Spend

  • Attrition/Retirement Backfill: $30B
  • 10% efficiency Improvements: $300B
  • Defense Spending/Non-Global Presence/No Longer Protector of the World Approach: $100B
  • War on Drugs Elimination: $15B in hard federal spend, plus local and state benefits.
  • Labor Agreements: $30B in Fed alone
  • Welfare/Workfare Eligibility/Rule Enforcement @ 10% reduction: $79B
  • Earmark Elimination: $10B (may be some items which go to other programs, assuming $5B to other programs)

Increased Revenue

So if I bake in Social Security expense, the adds and deletes and alike here is what the 10 year plan looks like with additional spend over time due to population and alike.


This plan conservatively with interest knocks out $5 trillion of the budget deficit, provides more access for many who are under represented and encourages economic growth.  Upside in the plan is growth over 4% in GNP and additional improvements to costs, plus it is easy to implement.  While I know this isn’t as thought out as the Fair Tax from Neal Boortz, but it is clearly more detail than 9/9/9 and that from our folks in the #OCCUPY movement.

This also doesn’t represent the estimated $50B in benefits minimally for the states and localities get from streamlined administration, reduced policing, improved labor agreements, additional support at the borders and improved benefit management for citizens.  …and that might be small, I’ve actually created a model which indicates it could be as much as $70B annually down to the localities.

My $.02 to making things better.