"The only thing that one really knows about human nature is that it changes. Change is the one quality we can predicate of it. The systems that fail are those that rely on the permanency of human nature, and not on its growth and development. The error of Louis XIV was that he thought human nature would always be the same. The result of his error was the French Revolution. It was an admirable result." Oscar Wilde
Some time back I wrote about the possibility of a repeat of the French Revolution in the US. The US under the Bush Administration had pushed the limits of greed and corruption while veiling their actions in secrecy. Society has always existed in a semi stable stage of class warfare. Since the Reagan Revolution government policies have favored the wealthy and large corporate interests over that of the middle class to determent of all.
The wealth of the US and the world is built on the backs of the middle class. Yes, innovation comes from the very few and creates wealth beyond belief. Yet without a broad market all the innovation in the world will not find a sales outlet. The proper feedback from the creation to the consumption of product is what builds wealth of a society. This is a fact lost on Japan and China. Repressed domestic markets create instability in the emerging manufacturing economies. It is easy to copy what others produced but difficult to bridge the social gaps necessary for sustainability.
This brings us to the new Obama budget. Maybe there is something wrong with my accounting, but the last Clinton budget was balanced with a surplus at $1.6 trillion. The last Bush deficit budget was $3.1 trillion and now Obama comes in with the $3.6 trillion budget after putting the stimulus and the bank bailout on the previous budget! Perhaps the Obama budget is a discount on the last year of the Bush Administration when you add in off the budget costs of the stimulus, the bailout and the Iraq War, which probably puts Bush's last year in the $5.6 Trillion region.
No matter how one does the math Obama is taking over a country that has not grown much since Clinton while more than doubling the last balanced budget. In a case of mone-terrorists gone no one asks what the average US citizen really needs. For without asking this question we cannot begin to address the policy changes necessary to end the spiraling down of the financial system. Let's look at ten simple things that would greatly improve the average person's life.
o A balanced budget. You do not cure alcoholism by continuing to drink into a dysfunctional state. An unbalanced budget depreciates the value of the dollar contributing to the deflation that is undermining the financial system. Such policy transfers debt to our children and grandchildren causing far more harm than all the failed socialist policies of the last 40 years. It should be a crime for any governmental agency to incur debt other than revenue bonds for infrastructure projects. All such development bonds should have a revenue resource to retire them outside of the general fund.
o Lower Energy Costs. A larger and larger portion of middle class income has been transferred to external energy costs while conservation in the name of environmentalism has prevented infrastructure development. Such policies have actually led to greater pollution. Instead of speculative Cap and Trade, impose an import tariff on all imported energy sources outside of NAFTA. Use the import tariff to develop internal energy infrastructure. Such a premium would over time reverse dependence on foreign sources while boosting the internal economies of the US and its closest neighbors.
o Raise the Minimum Wage. The minimum wage has stagnated. In the 1960s a person working for minimum wage could pay rent, own a car, buy groceries and have a few dollars left over at the end of the week. As we learned from the 1930s depression nothing stalls the economy faster than lowering wages below subsistence. Such creates a cycle of destruction of the working class, increasing crime and contributes to a lack of pricing power for producers.
o Reduce Income Taxes on Median Income to Zero. Such will substantially shift the income tax burden to upper incomes as occurred in the 1950-60s. However, eliminate the Alternative Minimum Tax and allow investment deductions against ordinary income as long as those investments are made in the US. Thus those consuming, pay higher taxes, while those saving for the future do not. Tax capital gains as ordinary income only when the money is removed from the investment markets. This would in effect provide 401K protection from taxes for all investment gains until the money is consumed.
o Fight Corruption at All Levels. The history of the decline of all societies is one of ever increasing and tolerated corruption. Those in positions of power must be held doubly responsible for corrupt activity from taking bribes, ignoring laws and nepotism. Unless those at the upper level are held accountable to a very high standard then those at the lower level will never respect and cooperate with government. Put a one year moratorium on passing any new laws. Use this period to eliminate and consolidate existing laws with the goal of streamlining and expediting the legal process making it accessible to the average citizen. Eliminate all victimless crimes and replace those necessary for regulation with taxes on "sin". The 'all governments' goal must be to make every street in the US safe for anyone to walk down any time, day or night. This is the only way to fight terrorism.
o Tax Private Education. It is shameful that the government has so deteriorated the quality of public schools that the president and virtually all upper income people use private schools. Schools are a cooperative effort with the smarter and better prepared students pushing those of less academic ability. When the top tier of students are removed from a school system the average quality of education declines. By taxing private education there would be more money and higher qualified students for public schools. The more involved parents become the better the public education raising the bar for every one.
o Pass Usury Laws. Cap credit card, all consumer loans and mortgage interest rates at 10%. The current structure of the US credit system penalizes the least capable forcing them into a continued high level of debt. If loan companies cannot make money at 10% then they will not make the loans. This will require the lower level of society to rely on pay as you go debit cards. It also will prevent speculation in times of high inflation. Outlaw negative amortization on all loans.
o Eliminate the Deduction for Charitable Contributions. It is fundamentally unfair for me to be taxed higher for subsidizing your charity no matter how noble the cause. Outlaw corporate contributions to all charities. Too often they are used as bribes. The more a corporation concentrates on its primary purpose of delivering the highest quality product to the individual the more jobs it will create.
o Birth Right. It depreciates the value of citizenship when anyone one can sneak into country, give birth to a new US citizen and then applies for public assistance. Births from US citizens from 1970 have remained flat reflecting an affluent society, while all the growth in population since has been from immigration and much of that from illegal immigration. Change the definition of a natural born citizen to one born of at least one US citizen.
o Health Insurance. Provide a $300 / month universal major medical insurance policy to all families and citizens with a $2,500 deductible and requirements for periodic examines. Outlaw all governmental agencies - local, state and federal from providing more coverage with elected officials. The heart break of the uninsured or working poor is in not the day to day costs, but the costs that can bankrupt ones savings in an emergency. Eliminate pre-existing conditions. If the commercial health insurance system can provide such coverage to a family of four then it can be universal to everyone in the nation - even Wal-Mart workers. Convert Medicare and the VA to the same system and eliminate health insurance from liability for all other types of insurance such as auto and home owners.
Until the nation as a whole abandons the current monetary thinking that has created the current financial crisis and concentrates on creating and encouraging the protection of wealth, then there will continue to be spasms that effect and destabilize all hard working people.
Eric Von Baranov is the Founder & CEO of the Kondratyev Theory Letter (The Letter). Started in 1974, The Letter follows the 50+ year economic long wave theory as originally developed by the 1920s Russian economist Nicolai Kondratieff. Adherence to this cycle provides Eric with insight on a wide range of topics, including economics, politics, culture and technology. Eric has been published by Minyanville.com and the Psychic Investigator. He sponsors an online conference at http://www.kondratyev.com Please note that a new and improved web site is currently under development.
