exempli gratia

Bloomberg’s Awful Comment; What Can We Say For Certain Regarding the GSEs? | Rortybomb.

Rule of Thumb: Whenever a politician opens their mouth – verify what they are lying about. And whose lie are they repeating?

OWS’s Beef: Wall Street Isn’t Winning It’s Cheating | Matt Taibbi | Rolling Stone.

Matt Taibbi has an excellent rant on a big why behind Wall Street.

…we hate the rich? Come on. Success is the national religion, and almost everyone is a believer. Americans love winners.  But that’s just the problem. These guys on Wall Street are not winning – they’re cheating. And as much as we love the self-made success story, we hate the cheater that much more.

We cheer for people who hit their own home runs in this country– not shortcut-chasing juicers like Bonds and McGwire, Blankfein and Dimon.

I would like to propose a few taxing proposals.

First is to take federal social insurance (Social Security, Medicare and Medicaid) off the books and let them be funded by a straight 20% payroll tax. Those payroll taxes go straight through to the trust funds and don’t go through the Congress. Congress can oversee the Trustees. I would also suggest that Medicare/Medicaid will provide universal coverage.

Let’s get rid of the itemized deductions, give every household a flat deduction of $75,000, calculate the non-social insurance expenses for the government and figure out how much revenue we need to collect to cover the difference.  Then calculate what we need to tax everyone to meet our goals.

As an example: We have $13T income in the US. With the 20% payroll tax the Social Insurance Funds are collecting $5.2T (employer matching). That should cover the annual medical costs and retirement funding with no problem.We have ~$9T in flat deductions, leaving about $4T to cover the federal budget. Taking the Social Insurance costs out of the picture we have about $2T to cover. So a 50% tax on everyone’s income over $75,000 will cover the budget with no deficit. And the Corporations don’t have to pay any taxes!

Or we could arrange for the personal income tax to cover 3/4 of the budget and Corporations to cover 1/4 of the budget. Then we have $0.5T coming from Corps and $1.5T coming from the people with a 37.5% tax rate.

I am sure there are some tweaks that need to be accounted for. What about folks whose income doesn’t come from payrolls? They need to contribute to the Social Insurance funds. And what about 1 person households and 2 person households and 10 person households, etc? Do they all get the same $75,00 deduction? Some more pondering is needed.

I heard an interview of Roger Martin the other day on Business Daily and he pointed out that the idea that companies are in business in maximize the shareholders short-term profit is just because someone said so. There is no reason that this should be the driving goal of capitalistic businesses.

I suppose that over the years the idea of short-term profits has become the loudest voice in the room.What if we changed that to reward 10-year growth? A company’s executives and board put together long-term goals and drive the company in that direction  and they are rewarded for reaching those goals – in 10 years. Bonuses will be paid to you or your estate whether you are still with the company. And if the 10-years goals are set every year, potential investors can see how well the management is doing and decide if they want to invest or invest more. There are no extraordinary bonuses based on past year’s performance or non-performance.  Profits/dividends can still be distributed annually, but the focus on performance is long-term.

It will require a paradigm shift to get away from immediate gratification ( I hate using that term but I think it actually works here.) I can’t imagine the current crop of business managers will move willingly in this direction. So much easier to game the system in the short-term. I don’t know how we could go about introducing this as a common business practice. Possibly use the SEC to reward the long-term planners? Disincorporate companies that don’t line up? Talk to the states that  incorporate companies and get them to change their rules?

Whatever, let’s put it on the table. I’m sure there are a lot of considerations to include. Maybe 7-year planning rather than ten (let’s not go to 5-year planning).

I heard someone ask the other ” What was fair?”. They were referring to the ‘tax cuts’  and the idea of letting the high income folks move back to the pre-Bush rates while the lower income folks stayed at the Bush rates. Was this ‘Fair’?

In my view, letting higher income earners pay taxes at a higher rate commensurate with the higher income is more than fair.  One of the primary reasons these people have such a high income is because the government has built an infrastructure that provides for them. We have regulatory agencies that provide a a safe and stable commercial environment.  We have troops stationed around the world, fighting in foreign countries, trying to maintain a safe and stable political environment.  Our government manages to maintain a safe and stable personal environment for most of its citizens, allowing them to direct their energies to personal growth and achievement rather than to day-to-day survival (I said most.) This all requires an infrastructure paid for by our taxes.

Over the past few years,  the national infrastructure has become suspect. Debts and deficits have risen because no one seems to think they should pay for all this infrastructure, and so, the infrastructure is weakening.

TAANSTAAFL.

What is fair is that the folks whom benefit the most from this infrastructure pay the most for it. And it isn’t like anyone who makes more than another should  take home less than someone who makes less. Additional taxes are applied to the the monies earned over and above the threshold level. Someone making $1,000,001 pretax is still taking home more after tax than someone making $1,000,000 pretax.  Until the infrastructure is repaired, those that have reaped the benefits of the past should continue to make it right for the future.

The ones trampled by the infrastructure shouldn’t be expected to pay for it. Effectively, they can’t pay for it.  The infrastructure should provide the all of society the opportunity to grow and prosper and it doesn’t always catch everyone equally. I am sure that most people would rather make $1,000,000 a year and pay some taxes than make $10,000 a year and not have to pay taxes.

So let the ones who profit from our society pay for it.  Not only is this fair;  it is equitable.

I read Paul Krugman’s column on our future prosperity, and then found that Avedon had also read and commented on it along with some links to other commentors. One of the best I saw was about cheap-labor conservatives.

Work cheap or starve, a motto to live by.

These cheap-labor conservatives should read the mission statement for the United States sometime. It’s right there in the first paragraph of the Constitution -  after “We the People of the United States, in Order to”.

• form a more perfect Union,
• establish Justice,
• insure domestic Tranquility,
• provide for the common defence,
• promote the general Welfare, and
• secure the Blessings of Liberty to ourselves and our Posterity

and ends “do ordain and establish this Constitution for the United States of America.”

About the only mission they seem to care for is to provide for the common defence, because there is money to be made there.

I guess I would have to put myself in the single payer camp on health care. I would like to see an expanded Medicare system be the primary basic health care insurer/provider. Everyone will get a Medicare account at birth and keep it until they die, and beyond. We will pay for it with a payroll tax such that Medicare and FICA will be 15% of a pay-check. That should provide enough income to both systems to grow flourish as the baby boomers hit their retirement age.

A condition for this payroll tax is that the monies go into the Medicare and FICA trust funds and not into the general fund.  As away to ameliorate the impact on household incomes, I would also suggest that every household get a deduction equal to the median household income.  (I believe that is somewhere about $50K today). No other deductions, just one flat deduction and then tax everyone above the average household income what is needed to balance the rest of the budget.

I don’t like where some economic advisers are wanting to take us.

Why don’t we, the people, take this TARP bailout money and start our own bank(s) to provide the short-term credit for corporate entities – this appears to be where the credit logjam is occurring – and let the current financial institutions die? This will provide the capital needed for the economy to run for the near-term and if the new bank(s) is set up right it may be able to address the long-term funding growing corporations need.

We might even be able to get into some consumer credit business as well, but why not leave that to the banks and credit unions that didn’t run themselves into the ground. Once all the current banks that have dug this economic sinkhole  have buried themselves, we can sell our young vibrant bank(s) to investors and recoup our investment.

We don’t need to nationalize the existing banks and get stuck with their toxic wastes. We can start anew and try to do it right.I’m not sure that this approach will help any for the mortgage market, but realistically, people with no income and with a $500K mortgage should default and give the house back to the bank that financed them.

As the commenters in the linked article note, don’t give any money to the folks who created the crisis. Don’t reward bad behaviour.

Just heard that 2007 Healthcare costs were 2.2 Trillion $. Let’s see. 300 Million People. That’s $2200000/300 = $22000/3 = $7,333.33 per person.

You know, I think this is a manageable amount to provide a national HMO-type health plan.

I found this link at Boing-Boing and it is impressive to see how accurately Peter Schiff, Euro Pacific Capital president,  was explaining – two years ago – the underlying financial problems we face today. And it is being polite to say the fellow economic pundits to whom he was trying to explain things only went as far as ridicule.