As you know, if you are a reader of my commentaries, I like to demonstrate the working of the real economy by how a Monopoly Game works. So the title of this commentary of "Game Over" is significant.
In Monopoly, the game is over when every player but one is bankrupt. In the real economy we don't really want to go to that extreme before we call the game over. But, it is certainly over. So, do we really want to restart the economy by starting a new game of Monopoly or are we more interested in providing a new stable framework for providing a long term sustainable economy?
Let's take a step back and review where we are. The liquidity in the market dried up. It dried up primarily because the average person has no cash left and no borrowing capacity left either. There are many reasons for this, but I believe that one of the most important underlining symptoms is lack of sufficient income for the majority of Americans.
The $700 billion bailout for financial institutions did nothing to help the overall economy although I would admit that since the economy had been neglected for such a long time it became necessary to do something to stem the tide of financial collapse at the top. I think that $700 billion was excessive.
It is clear that now that the financial markets have been temporarily stabilized we now need to address the underlying economy on an emergency basis also.
Second, all of the infrastructure building and rebuilding now ready to implement should be funded as soon as possible.
Third, money for implementing green energy should be considered on a high priority basis.
Fourth, Medicare should immediately cover all Americans. This would not only free up corporate funds, but would also solve our impending Medicare crisis by changing the demographic from 65 and older to all.
Fifth, adequate funds should be made available for the revitalization of our educational system.
I believe that it is vital that all spending measures should be implemented for two reasons.
One, because they are long term investments in the stability, security and well being of our country, and
two, because the funds are needed right now to revitalize our economy.
Our tax policy needs to be overhauled in order to recoup some of the money that will be pouring into the economy from these government expenditures. To maximize the revenue income, maximize the stimulus affect and to minimize the effect on long-term debt of these expenditures we must reform our income tax system as follows:
First, all income should be taxed the same regardless of where it comes from, be it wages, interest, dividends, capital gains or inheritance.
Second, tax rate brackets should be readjusted to be much more progressive than they are now. The highest tax bracket should probably be in the area of 50% for the highest income levels on a sliding scale to 0% for the lowest income levels and a negative income tax for the poor.
Third, I believe that all corporate income taxes should be abolished. Corporate income taxes reduce the ability of a corporation to grow and reinvest its profits into plant, equipment and employment. Obviously, the taxes on the amount of money passed out as dividends will be taxed as ordinary income when individuals receive it.
There are other considerations that should be discussed.
No corporation nor individual holder of more than 5% of the stock in any corporation should be allowed to contribute money to any political party or campaign.
Strict limits need to be placed on all lobbying.
For many years we have seen good paying manufacturing jobs going to other countries where there is cheap labor. While I believe in a global economy, I also believe in fair trade. Some of our largest trading partners have virtually no labor standards, no pollution standards and no labor movement other than a state (employer) sponsored ones. On our side we have reasonable pollution standards, labor standards, employer-paid unemployment insurance premiums and workman's compensation, some labor unions and a minimum wage, albeit low but nevertheless a minimum wage. On top of this we have higher expected living standards than do some of these cheap labor countries.
As a result, I favor a field-leveling tariff on all imported manufactured goods. To do otherwise would be to commit economic suicide.
Another dicussion that should be taking place is the way we calculate the gross national product or GNP. Serious discussion needs to take place regarding the following items:
Should the funds spent for health care add to the GNP. At the present time, the more people who get AIDS or Cancer the higher the GNP. Since we have to spend money for AIDS and Cancer patients this adds to the GNP.
When we harm the environment by cutting trees, burn fossel fuels or over fish the oceans we are adding to the GNP even though the environment may be harmed or our resources reduced.
I am sure that if you start thinking about it, there are all kinds of human activities that do not add to the wealth of the nation or of the world but do add to the GNP. This is a topic that I will expand upon in the future. My next planned commentary will be comparing the McCain vs. Obama economic plans.