Posts Tagged ‘federal government’

Had I stayed away from the news websites, I wouldn’t have even noticed the federal government shutdown. Funny part about that is that I have a family member who works for the federal government, but she didn’t get furloughed since she works in a government agency that actually turns a profit with its services. Naturally, when an organization makes a profit it doesn’t have to furlough people when the rest of the federal government does.

I’m not going to debate whether one side is right or wrong or worse than the other in this blog. I’m just going to post a solution to the one problem that I saw most in the news and on social media: shutting down our national parks. I’m not going to debate if a 1000 square mile range of the ocean in Florida needs our federal government to stay open to fishermen or whether Mt. Rushmore needs federal employees to be open. This solution solves the debate. Here it is…

Have the National Park service issue multiple denomination certificates for the full amount of its annual budget that are a tax credit for those who purchase them and never have to be paid back. In essence, it’s a donation to our National Parks, but rather than just being a tax deduction like a charity, this is a tax credit because our federal government is using tax dollars to pay for the National Parks. It’s a $ for $ in tax money.

Obviously, the National Park service would incur some minor overhead for building and maintaining this system, so it can just add it to its budget. I’m betting that if you put it into an open bidding process you could easily find thousands of companies capable of building this platform.

This would help ensure that our National Parks remain open regardless of federal government wrangling. It would also serve as a model for other government entities for how they can become self sufficient and immune to federal government budgetary gridlock. There are numerous other benefits to this model such as helping to keep spending inline with revenue for the government as a whole and providing citizens with a greater say in how our tax dollars are spent. This idea isn’t just about avoiding shutdown furloughs that are back paid anyway. It’s a solution to an ongoing budget (or lack thereof) with our federal government.

Here are added incentives for our National Parks:

  1. Want that budget increase you could never get? Increase your budget and see if taxpayers are willing to pay for it
  2. If Congress acts now, there will be a flood of taxpayers willing to cover your entire fiscal calendar budget since there are just 2.5 months left in the tax year

Edit: Why not make a petition out of it? https://petitions.whitehouse.gov/petition/taxpayer-direct-funding-national-parks/csP0c6Bh

Today’s article in “Wired” regarding the automobiles you may want but can’t have is a clear example of our tax dollars put to good use. No need to be reducing Federal government spending or cutting the budget on things like blocking a car from entering the United States until it is 25 years old, if ever…

In my blog explaining to another blogger that tax cuts are not the same thing as tax incentives, I mentioned the idea of making the purchase of Federal Bonds 100% tax-deductible. I’m going to suggest an even greater modification to that idea: Give individual federal agencies the ability to offer their own tax-deductible bonds to raise additional funds (if approved by Congress, of course).

It’s a pretty simple addition to the original idea, and will make it really easy for Congress to find funding for new measures. Rather than Congress trying to find some way to steal tax dollars from one project to pay for another project, it just allows the issuance of additional bonds (which, of course, would be tax-deductible)! Want additional funding for the National Parks? Issue more Federal Bonds specifically for National Parks. Want funding for bailing out GM? Issue more bonds for bailing out GM. Want more funds for bailing out the banks? Issue more funds for bailing out the banks. Although, I doubt those last two would get see much action.

This will also help keep Congress within budget and reduce the risk of deficit spending. If we the taxpaying citizens of America don’t want to pay for something, then those deals won’t fly. Of course, outside investors may be willing to purchase the bonds. They won’t get the same tax incentives, but if they are willing to make the investments, so be it. This could be a huge boon for more popular programs. For instance, if NASA wanted a couple billion dollars more, they probably wouldn’t have much trouble getting people to invest in NASA government bonds.

The bonds would be incredibly attractive to all taxpayers! Some might be thinking, wait… the logic doesn’t make sense. The government has to pay the money back for the bonds. Yes, the government has to pay the money back. However, change the rule so that the interest is taxable income. Plus, I’d say, it should be on a 10-year note instead of a 1-year note. Loan the government money for 10 years. You get all of it back tax-free and only have to pay the taxes on the additional money you received from the government (aka interest). This provides a greater incentive for America’s debt to be owned by Americans.

It also provides an opportunity for Americans to invest in our government and our government services. It allows liberals and conservatives alike to put their money where their mouth is. If you think greater federal funds are needed for socialized healthcare, buy Federal Healthcare Bonds. If you think greater funds are needed for border patrol and immigration control, buy INS Bonds.

Of course, the obvious question is, “Where does the Federal Government come up with the money to pay back the Bonds”? The simple answer is obvious: taxes, programs that make money, or sell more bonds. That reality is that this is how the government operates right now anyway. Plus, the government is going to know exactly how much it will have to repay every 10 years, so it will need to play accordingly.

This is about giving American taxpayers a massive incentive to purchase bonds and a greater say in what programs the government should and shouldn’t fund! This about a greater exercise of democracy. This is about a greater level of accountability by government.

It’s also about the middle class taxpayer!

All one needs to do is look at the tax brackets to see that our taxes are skewed to screw the middle class. There is a 10 point jump between those with $34K of taxable income and less and those between $34K and $82K (aka the “middle class”). Here is how a current taxation scenario pans out for the middle class:

$30,000 taxable @ 15% (*** Not really the middle class ***)
pay the government $4,500 in taxes
have $35,500 to spend
government receives $4,500
$40,000 taxable @ 25% (***This is the middle class ***)
pay the government $10,000 in taxes
have $30,000 to spend
government receives $10,000 ONLY
*** Yes, you are reading that correctly! You make more than someone else, but you actually take home less! ***

Now… Under my idea of 100% Federal Bond cost deductions…
For the middle Class…
$40,000 but loan the government $7K to get into the 15% tax bracket
$33,000 taxable @ 15%
pay the government $4,950 in taxes
have $28,050 to spend
government receives $11,950

You might be thinking, “WAIT!!! Jared is a complete moron! I’m paying $1,950 more to the government!!!” For the current tax year, that is correct. However, unlike taxes that you never get back, you are going to get back the $7K in 10 years. Let’s say that your income doesn’t change during that 10 year period…

$40,000 and don’t loan the government $7K
pay the government $10,000 in taxes (@25%)
have $30,000 to spend… But wait!!! There’s more! The government has to pay you back the $7K it borrowed, along with interest. Now, I’m proposing the interest is taxable (roughly $1,500 and change at 2%), but the $7K is not! That means you actually have $37K + the remaining interest after taxes paid on the interest (roughly $1,125).
government receives $10,000 + taxes on the interest paid out as income to us middle class folks (roughly $375)!

And how do things look after 10 years under the existing model???
$40,000 taxable 25%
pay the government $10,000 in taxes
have $30,000 to spend
government receives only $10,000

You have more money under the deductible bonds model *AND* the government has more money! How does that happen? It’s magic! 🙂 Really what is boils down to is having a government that is actually going to pay back it’s debt. Maybe the interest paid would be less than 2% Everyone is going to want bonds, right? However, all bonds will be limited (we hope). But taxpayers will have a greater level of interest in what Congress does with our money. They need to pay us back, and we aren’t going to be too keen on guys like Bernanke just printing more money! We’re going to want to keep the interest rates at a reasonable rate. We’re going to not want government deficit spending because that puts our money at significant risk.

All of the last bit is true today. However, when people are really invested in something, it means a lot more to them when the government decides that it’s just going to start spending more money or expand federally supported medical services, or spend billions of dollars on drug wars, or spend billions of dollars on body scanners and pat downs at airports, or spend billions of dollars flying a human to Mars!

Now, obviously this doesn’t take into account tax bracket changes, rises in income, wars, inflation, deflation, etc. Those are all variables that greatly have an impact on finances, government spending, etc. It also doesn’t take into account the impact of the Agency Federal Bonds. There will likely be some agencies that received a greater level of investment than others.

My friend Jim brings up an excellent point about the redistribution of wealth and communism in his reply to my post about Flat Tax being communism. First, I’ll cover his question of why governments levy taxes. Then I’ll get back onto the topic of the flat tax and communism.

Jim is suggesting that income tax is communism but property tax is possibly justifiable if the purpose of government is the protect and to serve. There are a few problems with this, the most important being that the federal government should have absolutely nothing to do with property taxes. Second, the majority of Americans (and this hold true for most of the world) don’t own real property. Now, perhaps Jim is saying that you should pay taxes on all property you own so that you are paying your fair burden of the police and fire services in your area. Again, does this then mean that people who do not own a house are not deserving of police protection? They may be productive members of society that generate income, purchase cars, gasoline, clothing, rent an apartment from a property owner. They too are deserving of protection under the law.

Now, let’s get back to the purpose of government. There are several levels of government, but the purpose of all governments (at least in America) is the protection of life, liberty, and property. Jim is probably thinking to himself that I just proved his point about the property tax. However, life and liberty still come before property. The protection of these three equalities of all Americans takes place in several different ways via several different government agencies: Military, Police, Fire Departments, Department of Homeland Security, Commerce Department, Transportation Authority, FDA, EPA, FBI, CIA, etc.

All American’s are deserving of the services of all of the above, and all Americans should pay into those services. Now, there may be programs that an individual doesn’t support, but I’m not going to tackle that topic in this blog. Instead, I’m going to ask the next logical questions: Who stands to lose the most if our country in invaded, attacked, or bombed? Who stands to lose the most if there is a fire, earthquake, or other natural disaster? Who stands to lose the most if there is a severe disruption in the availability of natural resources, energy, or foreign services and labor? Not the guy making minimum wage, and not the guy paying 15% taxes (unless you implement a flat tax – communism).

The people who stand to lose the most in any of the above events are the business owners, investors, and wealthy Americans who utilize a great deal more of the protective and political power of or governments. Those who make more money stand to lose more money if something disastrous happens in this country. Therefore, they should pay a greater portion of the taxes. Some (like Jim) might say that wreaks of communism as it is a clear redistribution of wealth. Well, while there are certain programs that do redistribute wealth, most of them do not. Also, one need only look at history to know that a growing and increasingly upset lower-class is the demise of any ruling party.

Take any of the above departments and you will find a disproportionate amount of services being provided to those with greater wealth and income. Sure, there is some money redistributed to lower-income citizens, but again… History.

So this brings us back to the flat tax, which is ultimately the greatest form and supporter of capitalism. Yes, you read that right. A progressive taxation system is capitalism at its finest. How many of our Founding Fathers were in what we’d call the lower class? Was Washington? I think not. Jefferson? HA! Hamilton? Perhaps the closest. Franklin? You’ve got to be kidding me!

How many patent, copyright, and trademark lawsuits are there for the little guy? Barely any, but the giants are in the courtroom all the time. The wealthy utilize our legal system far more than the poor. The law, our government is supported and swayed by the wealthy far more than the the poor. Our governments have been created for the protection of all, but those who are wealthy have far more at stake and are easily responsible for a greater tax burden. In fact, it would be foolish to think otherwise because it would put at risk so much of what business owners and investors have works so hard to gain.

There are plenty of things to be passionate about. Firing people is usually not something that I am passionate about. However, when there is someone whose ideas are so detrimental to the stability of the American economy, we need to get rid of him. If you’ve been buried under a rock, Henry Paulson is the communist Treasury Secretary who was calling for the bank “bailout” months ago. Unfortunately, he got what he wanted. After having fumbled the ball on US economic policy so far, our Congress somehow believed him that we needed this.

Now, his team has come up with the most absurd idea in the history of idiotic economic ideas: purchase stock in banks to help their balance sheets. Where does he come up with such idiotic ideas!?! While buying up bad debt from failed loans would certainly create a mess, this communistic thinking is the most absurd idea I’ve ever heard! What will happen *when* (not if) the stock goes down? Who really reaps the reward of the US government going in a buying stock? The investors. The banks are not going to benefit at all because investors are going to watch their stocks go up and then jump ship because Paulson was stupid enough to buy their stock. The stock will come back down, and the US loses money.

For conspiracy theorists, this is just the beginning of the evil plan by the smoking gunman to turn America into a communist state. While I can’t agree with the over all conspiracy, the thoughts of Federal government ownership to the tune of $700 billion is VERY disturbing.

When I was a kid, my grandparents would always send me and the rest of my family members checks for Christmas (as well as some presents like underwear and socks). There are eight kids total in my family, making a $20 check/child a considerable investment on their part. They were grandparents… retired. Their monthly income consisted of a pension plan and social security. But a $160/year investment into their grandchildren’s futures was well worth it. Also, $160 was about equal to $500 in today’s money.

Interestingly enough that is about the same amount of money that the Federal government is going to be sending 130,000,000 people in less than two months. Each check from my grandparents was enclosed in a card that said something along the lines of “Don’t spend it all in one place.” Just a thought for those Federal checks.

What would happen if everyone in America watches The Big Idea with Donny Deutsch on CNBC? First, there would be a run on the cable companies because you can only get CNBC on cable. Second, fellow blogger Tony Iovino would take his $600 check he’ll receive from the Federal government in May and actually cash it to invest it into a new invention (and he would start using the vastly superior WordPress blogging system). Third, the US economy would flourish.

Today, Bush signed his stimulus package, creating checks for millions of people in our economy. Lots of people love to complain about the symantics of the deal. Call it welfare. Call it a rebate. Call it what you want, it is our Federal government giving money to people that live in America.

Using some of the people I’ve seen on The Big Idea as an example, what those $600 checks have the potential to do is generate billions (yes, you read that correctly, BILLIONS) of dollars in revenue/income for Americans. How? Well, you should watch The Big Idea. The show has featured scores of people who have started their business for little more (sometimes even less) than $600. These people has created jobs, used resources that support other businesses, and made people a lot of money.

Sure, if everyone who receives a check goes a spends it on a toy at Walmart, it won’t do much for boosting the economy. However, let’s have a little fun with the math here. 130,000,000 Americans are going to receive a check. If even 0.1% of the people who receive checks become Donny Deutsch success stories, we are talking about generating $130,000,000,000 of revenue for the US economy over the next year! That’s correct, just one-tenth of one percent of the people who receive the checks need to become Donny Deutsch success stories for the checks to pay for themselves in just two year. One-tenth of one percent. That is about the same as a run-of-network banner advertisement on ValueClick!

Bernanke’s rookie year was a bit rough for the nation. His second year hasn’t had much success either. However, it appears that he is coming out of the textbook world of economics and into the real world. Yes, the world where living, breathing humans with names actually lose their jobs and houses rather than his previous world where there is a % increase in unemployment.

My favorite quote from Bernanke was the following:

To be useful, a fiscal stimulus package should be implemented quickly and structured so that its effects on aggregate spending are felt as much as possible within the next 12 months or so.

Clearly, this is in stark contrast to his molasses monetary policy, which consists of waiting. And waiting. And waiting some more. Essentially paralyzed by inflationary fears.

What is interesting about Bernanke’s leadership in the FED is that it puts much more control of the economy into the hands of the Federal government as opposed to our central bank. This is a scary notion. Political winds change, shift, dwindle in a relatively short period. The result is much more sporadic economic conditions and less economic stability. If not offset by consistent Federal Reserve Policy, the US Economy will be severely upset by fiscal policy.

Bernanke has recently indicated that the FED is looking to take aggressive action, indicating to many that a half point cut in interest rates should be expected at the end of this month. Provided that the FED does indeed shift from the monetary drip policy to at least a trickle as indicated, the US economy might be able to shed off some of the damage we can anticipate from the recent change in China’s labor law.