Why are we burning the candle at both ends by allowing for a tax environment that creates such a friction that 22 cents of every dollar spent is wasted on drag? This makes home ownership harder for Americans to achieve. And then we let government interfere in our economy by creating government secured enterprises (GSEs) like Fannie Mae and Freddie Mac where they created a housing bubble by backing ridiculously cheap or easy home loans on a wider and wider scale which eventually helped collapse parts of the mortgage and banking sector. So now after using your tax dollars to help build up Fannie Mae and Freddie Mac in an effort to make housing more affordable under that 22% drag on your spending dollar, the politicians have crafted a reckless plan to take 700 billion more taxpayer dollars to bail out the bankruptcy mess they invoked with your previous tax dollars. This is like turning up the central heat in your house because your freezer door is open.
Herein lies a much better plan. It may not be totally complete or perfect, but it should work as an approach that leads to a sensible solution. This plan will allow America's economy itself to compensate for the current mess. It is based upon common sense and more traditionalist American economic practice (inspired by tenets of Austrian economics) and promotes economic efficiency, efficiency and more efficiency towards those ends. Because of these qualities, it attempts to nip the problem in the bud which will mitigate or hopefully negate the need for a massive taxpayer bailout.
The plan so far consists of four sections:
(1.) SWITCH TO THE FAIRTAX.
That 22% drag is eliminated and replaced with a national retail sales tax which replaces witholding on your paycheck and other taxes (capital gains, corporate taxes, payroll taxes, estate taxes, etc.) which means everyone's cost of living is about the same but there is more money available on your paycheck. Foreign capital floods into the American tax haven and economic activity increases. Wages and salaries increase while overseas jobs return home that left to avoid the insane corporate tax levels we have today. As economics vastly improve, there is less need for welfare while private charity increases. The tax rate can then more easily go lower and lower as people witness en masse the benefits of lower and more efficient taxation which will engender a return to the constitutional taxation methods and levels which were based solely on traditional excises, duties and imposts.
As a near term result, defaults on mortgages ease and the financials stabilize. Bailout needs then abate or fade completely. The effects of this tax method will trump the supposed tax cut for 95% of Americans or the lowering of the corporate tax rate or any proposed reform of the income tax or even the flat tax proposition. Why do any of that when we can go much further and solve many economic problems once and for all while not having to combat over the current federal revenue levels? The FairTax has been well researched and endorsed by economists plus there is already a national grassroots effort embracing it. So there is no acceptable excuse by the politicians in not knowing about it or in the 'risks' it may entail. RISKS?! What about a $700 billion bailout concocted via the weekend political bong and rushed to passage without ample debate or consideration of alternatives? That's $700 billion for a plan where some initial version of it had 20% of any possible profits going to government slush funds that disperse money towards various campaign and advocacy front groups who pushed for imposing those ridiculously cheap housing loan practices on our financial system! Come on people, wake up!!!
(2.) STABILIZE THE DOLLAR.
With all that has been going on with failing banks, foreclosing homes and ever present trade and government deficit and debt, the future of the dollar is threatened. Easy credit and low reserve requirements via the world currency Federal Reserve Note dissolves the US dollar's value. High leverage of the same creates a financial collapse scenario.
Let's sure up the dollar with a commodity backing of some sort based on our national resources using various commodity types to prevent strain on any certain asset class. The yield can be increased slightly over time to prevent a sudden repatriation of dollars should that be a problem. We may also consider allowing for a set proportion of overseas dollars to be redeemed after certain intervals of time have passed (futures?). We can also include services and national accesses as currency backing. We will use the methodology of a historic example as our model, assuming that even with the incredible amounts of world dollars that this approach has feasibility.
As Sir Isaac Newton (also a mintmaster) did in 1699 we mimic here in our time. The Bank of England issued too many paper pounds against the bank's stored gold and caused the paper money to effectively debase and thus a run on the notes to ensue. So, Sir Isaac Newton averaged the bank's gold to a per note weight to floor their value. It didn't cure the previous devaluation, but it did stop it from going further. We won't attempt this with gold today (not yet), but we can use instead a precise weight or mass of other commodities to anchor the current dollar's market value long term. We can use allocations like a measured lump of coal to a dollar or a measure of wheat, then oil or lumber, fresh water, cotton, hemp, fertilizer, tobacco, salt, medicine, chocolate, beer and pizza, etc. Now we can also use measured services and accesses such as agricultural land leases, offshore fishing rights, mineral and prospecting access, server space and bandwidth, satellite telemetry access, electric power, movie tickets, etc. For friendly nations that hold a certain proportion of dollars we will allow for greater resident alien or emigration status (with proper background checks of course) where there is a return benefit for them from the greater economic activity achieved by attaining higher educated populaces and from the earned money sent back home by resident nationals working in the U.S. We can also return value on their dollars by allowing for further tax cuts, deferments or breaks on foreign companies locating business in the U.S.
So basically, we allocate measured resources (yet to be produced in various cases) to the dollar in order to extinguish our debt. Allowing for a little appreciation in the dollar indexed weights and measures as time progresses will encourage utility of our dollar and help prevent a run on goods and services we have yet to produce. At times when a certain commodity is under strain, we allow substitution of other tangibles or services until the goods in question return to the market. Quotas may be set to keep overseas dollar proportions manageable. This currency backing approach in tandem with the economic growth and opportunity of the FairTax should allow us to repay our debts and stabilize the dollar long term.
And in order to stop the root cause of the problem, we need to wean ourselves off of fiat dollars. The Federal Reserve is the source of this problem and should be dissolved in not too distant time. Note that the Federal Reserve distorts our money supply and causes misallocation of capital in similar manner to how Fannnie Mae and Freddie Mac distorted the housing and mortgage sectors. So, the Federal Reserve should be dismantled using the provisions of H.R. 1148 introduced by Ron Paul back in 2002.
(3.) ELIMINATE WASTEFUL SPENDING.
We have heard this before, but we must become truly diligent to this end. Along with the battle against earmarks, a concentrated effort to drum up all those 'Fleecing of America' type reports should be undertaken and those programs eliminated. Such an effort will have mainstream and broad appeal. By presenting the programs to be eliminated on straightforward bills in a very non-earmarked way with fanfare will emphasize the battle as a whole and cast light on the deviousness of excessive or inappropriate earmarking. Perhaps such an effort will build a base towards a taxpayer bill of rights law (TABOR).
The politicians who resist the cutting of these nonsense programs should be strongly chided and exposed at every opportunity. Take the fight loud and hard to the public stage and repeat, repeat, repeat until results are achieved. It is going to take true representatives of the people to remove this bridge-to-nowhere system of funding. Voters must be drawn into the conflict by highlighting examples of ridiculous and wasteful spending and inefficient government programs. Efficiency, efficiency, efficiency -- We need efficiency!!!!
(4.) INVOKE THE BROWNE PLAN.
Financial author Harry Browne had a well summarized plan to take care of economic ills we suffer. This was done as part of his presidential campaign platform in 2000. You can access those topics from our main page. Various aspects of his plan should be enacted to preserve our economy from the current crisis.
RESIST THE COLLAPSE
We welcome further alternatives and options to the $700 billion bailout that are more free market and representative government oriented. We should resist the reckless effort of late to Nazify our mortgage and banking industries. If anything short of the above passes that does not address the current root causes of our economic woes and is not stepping-stone oriented back towards constitutional government and free-market economics, then we will face economic and politcal collapse down the road.
At the collapse, there will be revolution. If the wrong faction takes hold then there will be selective political and economic scapegoating. There will also be public 'trials'. If you are one of the unfortunates, you may find yourself the recipient of an everlasting membership into 'Club Anastasia'. Do you really want to risk that resulting from an unstable bailout plan?
It's time for the state legislatures to coalesce and speak out against this federal imposition of reckless power. Legislatures should now fulfill their role as a fourth branch and promote this economic reconfiguration as a check against the D.C. power grab. To these ends by Article V of the U.S. Constitution, at least 2/3 of the state legislatures should now consider calling a Convention solely focused on proposing amendments to abolish Amendments XVI & XVII in order to satisfy provision for the FairTax and to reassert the check and balance of state legislatures determining the U.S. Senate...... Be relevant, not redundant!
Market participants should also promote this approach which focuses on solving the causes of the crisis as opposed to a $700 billion bailout which pits Wall Street against Main Street at the behest of errant, scheming politicians.
Any taxpayer funded bailout if it comes to pass should not be portrayed as a clever plan that concerned politicians have come to our rescue with. NO!!! It should be seen instead as a punitive fine on the voters for trusting and allowing politicians such as these to mismanage and interfere in the economy. Voters -- you are now paying the price for your poor choices over the years in selecting representatives to govern us!
Now don't you wish people like us had been in power all these years?