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Thomas Sowell
Thomas Sowell
22 Apr 2014
The High Cost of Liberalism: Part III

Income inequality has long been one of the liberals' favorite issues. So there is nothing surprising about … Read More.

22 Apr 2014
The High Cost of Liberalism: Part II

Liberals can be disarming. In fact, they are for disarming anybody who can be disarmed, whether domestically … Read More.

22 Apr 2014
The High Cost of Liberalism

Liberals advocate many wonderful things. In fact, I suspect that most conservatives would prefer to live in … Read More.

The Moral Infrastructure

Comment

The "Occupy" movement, which the Obama administration and much of the media have embraced, has implications that reach far beyond the passing sensation it has created.

The unwillingness of authorities to put a stop to their organized disruptions of other people's lives, their trespassing, vandalism and violence is a de facto suspension, if not repeal, of the 14th Amendment's requirement that the government provide "equal protection of the laws" to all its citizens.

How did the "Occupy" movement acquire such immunity from the laws that the rest of us are expected to obey? Simply by shouting politically correct slogans and calling themselves representatives of the 99 percent against the 1 percent.

But just when did the 99 percent elect them as their representatives? If in fact 99 percent of the people in the country were like these "Occupy" mobs, we would not have a country. We would have anarchy.

Democracy does not mean mob rule. It means majority rule. If the "Occupy" movement, or any other mob, actually represents a majority, then they already have the votes to accomplish legally whatever they are trying to accomplish by illegal means.

Mob rule means imposing what the mob wants, regardless of what the majority of voters want. It is the antithesis of democracy.

In San Francisco, when the mob smashed the plate-glass window of a small business shop, the owner put up some plywood to replace the glass, and the mob wrote graffiti on his plywood. The consequences? None for the mob, but a citation for the shop owner for not removing the graffiti.

When trespassers blocking other people at the University of California, Davis refused to disperse, and locked their arms with one another to prevent the police from being able to physically remove them, the police finally resorted to pepper spray to break up this human logjam.

The result? The police have been strongly criticized for enforcing the law. Apparently pepper spray is unpleasant, and people who break the law are not supposed to have unpleasant things done to them.

Which is to say, we need to take the "enforcement" out of "law enforcement."

Everybody is not given these exemptions from paying the consequences of their own illegal acts. Only people who are currently in vogue with the elites of the left — in the media, in politics and in academia.

The 14th Amendment? What is the Constitution or the laws when it comes to ideological soul mates, especially young soul mates who remind the aging 1960s radicals of their youth?

Neither in this or any other issue can the Constitution protect us if we don't protect the Constitution. When all is said and done, the Constitution is a document, a piece of paper.

If we don't vote out of office, or impeach, those who violate the Constitution, or who refuse to enforce the law, the steady erosion of Constitutional protections will ultimately render it meaningless. Everything will just become a question of whose ox is gored and what is the political expediency of the moment.

There has been much concern, rightly expressed, about the rusting of bridges around the country, and the crumbling and corrosion of other parts of the physical infrastructure. But the crumbling of the moral infrastructure is no less deadly.

The police cannot maintain law and order, even if the political authorities do not tie their hands in advance or undermine them with second-guessing after the fact.

The police are the last line of defense against barbarism, but they are equipped only to handle that minority who are not stopped by the first lines of defense, beginning with the moral principles taught at home and upheld by families, schools, and communities.

But if everyone takes the path of least resistance — if politicians pander to particular constituencies and judges give only wrist slaps to particular groups or mobs who are currently in vogue, and educators indoctrinate their students with "non-judgmental" attitudes — then the moral infrastructure corrodes and crumbles.

The moral infrastructure is one of the intangibles, without which the tangibles don't work. Like the physical infrastructure, its neglect in the short run invites disaster in the long run.

Thomas Sowell is a senior fellow at the Hoover Institution, Stanford University, Stanford, CA 94305. His website is www.tsowell.com. To find out more about Thomas Sowell and read features by other Creators Syndicate columnists and cartoonists, visit the Creators Syndicate Web page at www.creators.com.

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Comments

3 Comments | Post Comment
Thomas J. Kraus
599 Ralph Avenue
Brooklyn, NY 11233
(347) 326-3380
tjk271@yahoo.com
May 3, 2012
Dr. Thomas Sowell - Rose and Milton Friedman
Senior Fellow, on Public Policy.
Hoover Institution
434 Galvez Mall
Stanford University
Stanford, CA 94305-6010
650-723-1754
Dear Dr. Sowell:
Saving Our Economy and The Nation's
Healthcare, Insurance, & Investment Industries
As you may know, the actuaries of Medicare forecast that the program will be depleted of funds by 2024 if nothing is done and that the actuaries for Social Security forecast that program will go broke by 2033 and Social Security disability, which I am on, is expected run dry of funds in as short a period as the next four years or 2016.
We cannot raise taxes high enough fast enough to pay off the debt, nor can we cut government services severely enough quickly enough without destroying the economy of our nation in the process without structural reforms in how government services are delivered and as well fiscal reforms in how government is financed. Our nation's economic problems cannot be addressed by taking a meat cleaver to the nation's budget without doing great harm to the Economy of Our Nation, The Healthcare Industry, and The Social Cohesiveness of The American People.
Our country was founded on the ideal that ours is a nation for the people by the people. Professional money managers advise their clients when making a budget they should start with savings, deciding in advance to save a fixed percentage of income regularly, paying themselves, before paying any of their other bills. With the above facts in mind, our government leaders need to plan the nation's, states' and local government budgets by deciding to allow the American people to save more of their income. We need to raise the savings rate of our nation from a measly 3-7%-5.1% of disposable income to 20% of Gross National Product. If this policy is adopted, 3 Trillion more dollars would enter into the nation's equity markets to provide economic stimulus for our economy to create real jobs.
To achieve this objective government must grant every working person two tax exemptions of 10% of income each from both income and payroll taxes for the purchase of Health Insurance and Personal Retirement Accumulated Yield Accounts (PRAYAS) a new kind of I.R.A.s that will allow workers to save 10% of their income tax free with no tax bracket being excluded and no ceiling on income that is subject to the tax exemption. When planning the nation's budget we need to use a Laser Scalpel and not a meat cleaver to cut spending so as to cauterize the wounds as we cut so that there is not excessive bleeding on the body politic of our nation's economy.
In the last 50 years our nation has made great strides towards moving closer to living the ideals found in our nation's founding documents, The Declaration of Independence, and The United States Constitution. Race relations have improved greatly in the last 50 years allowing us to elect our first African American President and the crime rate has fallen to historic lows from what it was only 20 years ago. But if we do not use foresight in cutting the budget both of these great achievements could be placed in jeopardy.
By midcentury the nation will be majority nonwhite with whites being still the single largest demographic group with only 49% of the electorate. The remaining 51% percent will be made up of Hispanics, African Americans, Asians, and Native Americans. If the electorate of our nation evolves to where whites are represented by one party (The Republican Party) and nonwhites are represented by another party (The Democratic Party) every political issue would be seen through a racial lens, and problems that are merely difficult to resolve now will be nearly impossible to resolve then. Each year of delay of getting our financial house in order leads our nation one year closer to our nation's second civil war.
Social scientists marvel at the fact that despite the bad economy of the last decade, we have managed to make additional strides toward bringing down the rate of crime and they do not know how to account for that amazing fact. I theorize, that people who lost their jobs in the last two decades who could not find themselves new work were fortunate enough to find their way onto the Social Security Disability Trusts roll's providing those individuals a meager income, though not great, was sufficient enough to help spare them the temptation to resort to crime to meet their basic economic needs. If I am in fact correct about that, and Social Security Disability goes broke in the next four years forcing people off the Social Security Disability's rolls before those individuals can secure employment then we might see a spike in the crime rate especially if other Americans who lost jobs and neither found employment nor their way onto the Social Security Disability Trust rolls become desperate and resort to crime as their last option to meet their economic needs.
I believe we need prudent tax policy reforms coupled with structural reforms in how government services are delivered to the American people to bring down the cost of government to the tax payer and pay down government debt. I believe at the Federal, State and Local levels of government we need to eliminate all forms of sales taxes on consumer merchandise and services now subject to sales taxes. Whatever is lost in sales tax could be made up for in increased income taxes being collected as eliminating the sales tax will make goods and services less expensive to the consumer allowing consumers to purchase more with less increasing sales for merchants, hiring of new workers and paying existing workers higher incomes.
Taxes on energy and telecommunications should also be eliminated because employers freed of these producer costs would be better able to hire more workers and their elimination also would resort in increased income taxes being collected as those services come into greater demand. Removing taxes on energy will allow the energy industry to explore for more mineral resources to fuel our energy needs and to put more money into research and development to create alternative means to generate electrical power.
Reforming The Home Energy Assistance Program
The Federal government supports a program called HEAP (Home Energy Assistance Program) to provide financial assistance to low income families to meet their energy bills so those families will not have to choose between heating their home or putting food on their table. If the above taxes were eliminated not only would the Federal, State and Local governments generate more income taxes to offset the elimination of the above taxes the cost of energy would fall with the removal of the above taxes so the money now spent on the HEAP program would be able to help a greater number of Americans with their energy bills with the same resources provided by the Federal government without raising taxes.(To be clear, The Federal, State, and Local governments need to remove taxes from energy and telecommunications)
Removing taxes on telecommunications would lower the cost of transmitting data over the internet, phone and cabal lines making our nation more attractive for high technology companies to invest, which will provide our citizens the means of being employed in high wage professions that generate more tax revenue to pay for government services.
I also believe all sales taxes on Real Estate should also be eliminated. If sales taxes on Real Estate are eliminated the money that would have gone to the sales tax could then be added to the down payment on the mortgage, on commercial or residential Real Estate loans. If more money is paid in a down payment on Real Estate the monthly mortgage payments could be much smaller allowing the property owner to save more money which could reduce the likelihood of that property owner defaulting on their loan. So that with the elimination of sales taxes on Real Estate local governments would actually generate more income taxes to offset the loss of sales taxes on Real Estate and with fewer properties falling into default because more money is contributed to the down payment on a mortgage, government would also generate more Real Estate taxes. Property that falls into foreclosure generates no Real Estate Taxes until it emerges from foreclosure and is returned to the Real Estate Tax rolls, so policies that serve to reduce the incidence of foreclosure will allow government to collect more in Real Estate Taxes.
It should be needless for me to state that eliminating the sales tax on Real Estate would lower the cost of developing Real Estate and lead to more Real Estate being developed which is how local governments will make up for the loss of sales taxes on Real Estate and increase both the amount of income taxes collected and Real Estate taxes collected.
How Eliminating Sales Taxes On Real Estate Can Serve To Allow American Citizens To Affordably Obtain Quality Health Insurance and Quality Healthcare As A Result
Commercial Insurance companies are some of the largest institutional investors in both residential and commercial Real Estate. If sales taxes on Real Estate were eliminated along with the sales tax on consumer merchandise and services, sales taxes on energy, and telecommunications, the insurance industry's Real Estate development costs would fall significantly enough allowing them to enjoy a greater return on their Real Estate Investments, which means the unit cost of obtaining Healthcare insurance would fall making it available affordably to a greater number of Americans.
Additionally, costs on suppliers of medical devices and services to the Healthcare Industry such as diagnostic testing and pharmaceuticals would also fall allowing the Healthcare Industry to pass those savings along to their patients or clients serving to lower the medical bills whose exploding costs in recent decades have contributed to the bankrupting of government entitlements and the closing of medical institutions.
How Eliminating Excessive Taxes Contributes
To Overall Wage and Salary Increases And Therefore
Greater Income Taxes Being Collected
The state legislature wants to raise the minimum wage by 17%, a noble goal but it will cost the jobs of the people who could least afford it unless producer operating costs are brought down at the same time via tax policy. If the state and local portion of the sales tax, nearly 9% in New York City, were eliminated, without imposing a minimum wage increase it would be like giving everyone in New York City, not just minimum wage workers, a nine percent wage increase, which is a little more than half the amount the state legislature wishes to raise the minimum wage. If taxes on energy, at the gas pump and on utility bills, along with taxes on telecommunications were also eliminated at the Federal State and Local levels of government producers would likely find it more agreeable to accept a minimum wage increase. If Democrats wish to index the minimum wage to the consumer price index they should also inversely index tax rates to fall as the minimum wage rises so that tax cuts on producers would fuel wage increases for all workers, not just minimum wage workers.
A Growing Economic Pie And Tax Policy
Liberals have along believed that having multiple kinds of taxes and as well multiple rates of taxation would bring in more tax revenue but in reality having many varied taxes and tax rates only divide the available taxable income into smaller slices of the tax pie. Liberals have also seen the economy of the nation as a fixed size economic pie and that tax and fiscal policy as a zero sum game where some win at the expense of others losing.
Conservatives believe that the economy need not be seen as a fixed size pie which is constantly being cut into smaller and smaller slices, but as a pie that could be growing continuously larger provided there is a enough sugar, eggs, milk, flower, yeast and a small amount of salt, yeast being investment capital and the salt being taxes and government regulation while the other ingredients in the recipe are the American work force.
Earlier, I recommended giving all workers two tax exemptions of 10% each from Federal, State and Local income taxes and payroll taxes for the purchase of Health Insurance and Personal Retirement Accumulated Yield Accounts (PRAYAS). I would recommend that individuals between the ages of 16-26 who are covered on their parents Health Insurance Policy who do not have to worry for a long time concerning retirement be permitted to use their two tax exemptions to save for college instead. If monies put aside for college are not utilized for that purpose by the time the individuals age out of their parents Health Insurance (by 26) than those monies should be returned to their original purpose for the benefit of the individuals themselves and the larger society of our nation, or be taxed for back taxes if the individuals chose not to use the monies for their intended purposes. The logic is, going to college and graduating will allow the individual to earn more over the rest of their lives so that the short delay in saving for Health Insurance and Personal Retirement Accumulated Yield Accounts would be made up for by the higher salaries the college graduates would earn. But if they do not go to college they will likely earn less over their career and it would be in their interest to begin saving for their Health Insurance and Retirement or be taxed for back taxes if they refuse to do so. Nobody would be forced to purchase Health Insurance if they do not wish to but they also would not receive the two tax exemptions if they do not utilize them to purchase Health Insurance and a Retirement Plan with pretax dollars. The tax exemptions would be offered on a use it or lose it basis.
Fair Flat Tax System To Both
TheWelthiest And Poorest Americans
I believe the fairest flat tax system would be one which I would call a weighted flat tax system but before I explain what that would entail allow me to talk about the current tax system, I call the graduated income tax system, because as you earn more you gradually pay a larger share of your income to taxes. Liberals call this form of tax system a progressive tax system because they believe those who have the greater ability to pay taxes should pay more, but there is nothing progressive about being able to keep fewer of the fruits of one's own labor. What Liberals call a progressive tax system is actually regressive. Their defense of the current tax system, in their minds, is justified by the following one hundred percent correct fact. The people at the lowest end of the economic ladder pay a disproportionally larger share of their disposable income after taxes to obtain the basic necessities of life such as, food, clothing, and shelter; utilities, transportation, healthcare, and last but not least, entertainment. A Millionaire or Billionaire has more price options than do the poorest workers in the economy. If a Millionaire of Billionaire wish to live frugally they can choose to rent a one room apartment for $500 a month and save a fortune on housing expenses while a minimum wage worker or someone earning just above the minimum wage don't have that option unless they have wealthy relatives or friends. Someone earning $20,000 a year cannot afford to pay $2000 (two thousand dollars) a month in rent.
While liberals are correct that people at the lowest rung on the economic ladder have a narrower range of price options for obtaining the basic commodities of daily life the answer is not to tax the wealthy more but to tax the poor less, which is not a semantic trick with words under a weighted flat tax system. Under a weighted flat tax system there would be three tax exemptions two of which I have already described, for 10% of income from Federal< State, and Local income taxes and payroll taxes. The third tax exemption would be called the minimum wage exclusion tax exemption and would be pegged to 50% of the value of the prevailing minimum wage.
For example, imagining a not too distant future where the minimum wage would be $20,000 a year. Under the minimum wage exclusion tax exemption all workers in the economy from the minimum wage workers to chief executive officers of multinational corporations or nonprofits would receive a tax exemption from Federal State and Local income taxes and payroll taxes equal to 50% of the value of the minimum wage or $10,000 of their first $20,000 of earned income. The reason for creating the minimum wage exclusion tax is to address the above complaint regarding the current tax system that would be beneficial to the lowest rung workers in the economy without punishing everyone else in the process. This tax system would truly be progressive because everyone would receive the same three tax exemptions of the same value. They will pay the same share of their income in taxes no matter what wages and salary they earned throughout their lives, but because the minimum wage exclusion tax will make up a larger share of the minimum wage workers total income it would disproportionally favor the minimum wage workers income and people not far above the minimum wage. While the minimum exclusion tax makes up 50% of the minimum wage workers income it would make up a far lesser share of the income of higher wage and salary earners. For example the minimum wage exclusion tax of someone earning $100,000 would be $10,000 (Ten Thousand dollars) or only ten percent of that workers total income. On a million dollar salary it would only make up 1% of a workers income.
The second reason for creating the minimum wage exclusion tax is because without the exclusion the people at the bottom of the ladder could see a significant increase in taxes under a more simplified version of a flat tax.
The third reason for suggesting the three above tax exemptions especially the minimum wage exclusion tax exemption is to build into the tax system just enough complexity to require people who are average Joe's to need someone to help them prepare their taxes so the accounting industry will not oppose this version of a flat tax system.
I have no desire to put anyone out of work unnecessarily. A too simplified flat tax would be fought tooth and nail while this tax system may be found acceptable to the accounting industry.
Suggestings For Reforms To Current I.R.A. Retirement Accounts And Personal Retirement Accumulated Yield Accounts
Or P.R.A.Y.A.S.
I believe American workers should be permitted to withdraw funds from their Personal Retirement Fund without tax penalty for the Three (3) following reasons. (1) To fund continuing education, (2) to make a down payment on a primary residence and to (3) pay off significant medical bills not covered by their Health Insurance so as to prevent Healthcare Institutions economic health being placed in jeopardy which might lead to their closure and a lack of competition that serves to drive up the cost of Healthcare unreasonably, the stated reason Obamacare was supposed to address
If personal retirement savings could be utilized to return to school without suffering a tax penalty, more of America's displaced workers could acquire the skills sets necessary to return to work and the tax rolls increasing the amount of taxes government would collect in the long run.
Allowing workers to make a down payment on a home with retirement savings would jump start the Real Estate market especially if all sales taxes on Real Estate are eliminated which would spark a wave of Real Estate Development in both the residential and commercial Real Estate markets nationwide. Home ownership can help provide retirees a reliable source of steady income during their retirement years if the home they buy came with a second apartment rental for the home owner to be able rent to a tenant, or the home owner could use the equity in a paid off mortgage to obtain a reverse mortgage that would provide them an income until they die in exchange for the home becoming the property of the lender when the home owner dies.
Now that I discussed tax policy changes that should be made allow me to address the structural changes in the way government delivers services that need to be changed. First we must recognize all government "Insurance Programs" such as Social Security, SSI, SSD, Medicare, Medicaid, Workmen's Compensation, Unemployment Insurance, Federal Flood Insurance and Federal Deposit Insurance on the savings in Insured Bank Accounts are Insurance in name only because none of these revenues get invested into the equity markets and earn a return on investment. They lack the benefit of compound interest that commercial insurance policies benefit from which allows Insurance companies to pay off policy claims while still being able to generate a profit and to pay shareholders a dividend. All these government "Insurance Programs" revenues are simply added to the general funds accounts of the Federal, State, and Local governments from which all government services are paid. They are all essentially legalized Ponzi schemes which are why they are constantly on the verge of insolvency or collapse. The Social Security Trust Fund and all these other insurance programs generated surpluses in their earlier years without the need for investment into the equity markets because substantially more people paid into these programs in their earlier years than withdrew funds from those accounts which is no longer the case and why these programs face insolvency unless converted into legitimate insurance programs through investment into the equity markets. They do not necessarily need to be privatized to be converted into legitimate insurance programs. The Federal Reserve Bank's job is to Regulate The Growth of The Money Supply. What better way to accomplish that goal but for the Federal Reserve Bank to Invest in The Worlds Equity Markets and utilize those returns on investments to pay for the services government insurance programs were created to provide in the form of entitlements, in the first place?
Counteracting The Negative Effects Of The
Compounding Interest On The National Debt
The best way for our nation to be able to counteract the negative effects of compounding interest on the national debt so that we can pay off our liabilities with the least amount of pain is to generate greater positive compound interest on savings which is why I began this letter by suggesting the savings rate of our country needs to be raised to 20% of Gross National Product which we can call Gross National Savings or GNS. As I see it, Gross National Savings needs to be at least as large as The Federal Government's Budget which usually falls between 18%-21% of Gross National Product.
Restructuring How Government Delivers Services
The Federal, States, and Local governments perform a lot of duplicative functions needlessly which they could save money working together more intelligently in delivering services to the American People. For example, our nation has three separate and distinct systems for delivering social services to the American people.
Why can't we merge these separate systems into a single nationwide system for delivering all government social services with the same worker who processes local applications for social services also processing state and federal social services utilizing a universal application for social services where the appropriate boxes would be checked off as needed?
Combining the three separate social service delivery systems into a single system could allow for shrinking of the total social service bureaucracy through attrition by a third or more if early retirement incentives are utilized to encourage workers to retire early. Two percent of the government workforce at each level of government retires from government service every year. Simply replacing only half of retiring workers with new hires will allow government to shrink the entire social service delivery system by a third over eleven years, painlessly without layoffs.
2% (of each government social service work force) x three levels x &#189; of exiting workers x 11 years =1/3 of the total social service work force, roughly because each level of government might not apportion the number or workers processing social services with the same ratio of workers per hundred thousand or so of population being served.
Those administrative cost savings would allow the three levels of government to cut cost without eliminating services. The three levels of government could pool their resources to pay for the social service bureaucracy of all social services as they now do for the delivery of Medicaid.
As the social service bureaucracy is consolidated and shrunk, social service offices could be closed beginning with offices located in private sector landlord owned Real Estate. The savings on rent could then be put toward paying down the debt of the three levels of government apportioned according to which level of governments offices are closed as other offices are consolidated together. Starting with offices in private sector buildings makes sense because money spent by government in other people's buildings provides the government no equity for what they are spending on office space.
Shrinking of the workforce in government owned buildings would make it possible to lease or sell space condominium style converting government office buildings into commercial condominiums. If the majority of the space in government office buildings in smaller governments could be occupied by commercial business and fully cover the operating budget of each building then it would be possible to cut taxes without cutting services and without running a deficit. Government should strive to sell or lease no less than 51% of space and as much as 70% of space over time to commercial business. Converting government owned buildings into commercial condominiums would allow buildings that were historically exempt from real estate taxes due to government's sovereign immunity to be added to the Real Estate Tax rolls because in condominium ownership, the tenants and not the Real Estate management company pays the taxes on each condo unit while the Real Estate management company pays taxes only on the common elements of the property. Such an arrangement would allow local governments to expand the Real Estate Tax base without raising taxes on everyone else. A larger Tax base would make it possible to lower taxes on each individual tax payer without necessarily losing taxes in the process and make a particular city more attractive place to develop Real Estate.
The three levels of government each have their own Environmental Protection Agencies and they might more efficiently protect the environment if they divided the labor between themselves in a different manner. The local governments would investigate environmental complaints in their own territories' and hand over to the state the information for the state to prosecute the case and the states would provide the federal government the statistical data where there is environmental damage and the federal government would take charge of making sure those responsible for the damage clean up the mess when the state wins a judgment.
Similarly, the three levels of government have their own separate courts located in separate buildings, they could work together to locate their separate courts on the same parcel of land or even the same office building dividing the court building in thirds This would help lower some of the infrastructure costs of the three levels of government. While they would each still have their own judges, law clerks and secretaries to process legal work they could share facilities management staff and utilize the same people to clean and maintain the buildings. Having government share resources in this way will mean more of the available land for Real Estate Development might be developed by for commercial business and generate Real Estate Taxes for local governments.
To sum up, this is just a potential road map forward to solving our nation's economic problems. It calls for the three levels of government to work more closely together to address their mutual structural deficits because I believe they would achieve greater economies of scale in savings in government operations while preserving core government services that the majority of the nation desires be preserved as the three levels of government pay down their respective debts in the quickest most efficient and painless manner possible.
Almost forgot, as I told you at the opening of this letter, I worked in the Engineering Department of A major hospital during the years of 1987-1994. In those years the hospital installed its own cogeneration electrical power plant and began, at that time, to produce 50% of its own electrical demand on site and was able to reduce its dependence on Con Edison for electrical power. This project was undertaken because during the summer months of July and August when the temperature rose above 90 degrees, Con Edison could no longer guarantee an uninterrupted supply of electrical power and often requested that the hospital cut back on unessential power usage to help Con Edison avoid a system wide black or brown out in the Bronx. If government buildings on the drawing board now were designed to cogenerate and to produce not only one hundred percent of their own demand but also surplus demand than those buildings could sell surplus electrical power to the power grid authority and use the revenue to pay for governments operational cost independent of taxes. If government operational costs are covered with revenues from sources independent of taxes, then taxes could go directly to covering entitlement programs and be treated like insurance premiums and invested in the equity markets which I alluded to earlier and finance the services they were intended to provide.
A Potential Means In The Future To Keep Residential
Real Estate Taxes As Low AS Possible
On Thirty Third Street and Park Avenue is an interesting office building most people make no notice of when they walk past this building. Like many such office buildings on the ground floors of this office building there is space leased out as commercial space for stores, but that is not what makes the building interesting to me. What is unique about this building is that above the ground level stores is The Norman Thomas High School organically incorporated as part of the office building occupying about 10 floors of the office building with the school having its own entrance on Thirty Third Street and a separate entrance for the commercial office tenants on the Park avenue side of the building. If all future public High Schools and Junior High Schools were incorporated into mixed use buildings the space they occupy could generate Real Estate Taxes for the local government and if the buildings were owned by government they could provide the operating revenue of the public school system so that residential Real Estate could remain as low as possible.
Locating future public High Schools and Junior High Schools in mixed use buildings owned by government could provide communities desiring to attract young families the two most important things people desire when shopping for a home to raise a family, quality public schools and low Real Estate Taxes which in many communities are objectives that are often in conflict with one another. In most well to do communities with good public schools, Real Estate Taxes are very high. In big cities who have built out their Real Estate to occupy most of the available land like New York City, this kind of idea might be the wave of the future only because those cities will have no choice because there will be nowhere else to locate the needed public schools, but this could also be done in rural and suburban communities who still have a lot of land to build out.
Since 2007 $488 billion has been taken out of Americas mutual funds by main street investors because middle America is not happy with the direction our economy is heading, while the expects theorize that Americans are removing money from mutual funds because they fear loss of those funds in our unstable equity markets and desire to flee to the safety of government bonds or bank accounts, I believe something else may also be driving people to move money out of mutual funds, might people feel if corporate America is going to sit on their huge profits the last few years and not hire new workers that those dissatisfied Americans might be trying to punish corporate America by removing their money from mutual funds?
Reforming Federal Deposit Insurance
I believe Federal Deposit Insurance should also cover Investment Banks, Hedge Funds and Insurance companies. My reasoning is as follows; if the Federal Government from time to time is going to bail out financial service industry firms then those firms should share with the tax payers the costs of those bail outs via the purchase of Federal Deposit Insurance. The governments collected proceeds from such insurance like real insurance should be invested in the equity markets by The Federal Reserve Bank and the returns on such investments would be utilized by the government to cover any future bail outs of the financial services industry so as not to over burden the tax payers with excessive tax increases to cover the bailout costs. Like other: commercial insurance companies who raise fees on policy holders after the policy holder receives a payout on a claim The Federal Deposit Insurance Corporation could do the same on financial service companies that are bailed out by the government. That way the
Corporate interests that most benefit from government bailouts will bare the costs of those bailouts along with the tax payers.
In the case of Insurance Companies, they should be required to pay a small insurance fee on every policy they insure and those fees would also be invested in the equity markets as described above, and in providing insurance to insurance companies the Federal Reserve Bank would become the ultimate Reinsurer serving to dilute risk by diversifying it across the world's equity markets lessoning the downside risk and maximizing the upside return on investment to the benefit of America's tax payers.
Sincerely
Thomas J. Kraus tjk271@yahoo.com P. O. Box 24802
599 Ralph Avenue Brooklyn NY 11202-4802
Brooklyn, NY 11233 (Preferred Contact Address)
(347) 326-3380
Comment: #1
Posted by: Thomas J. Kraus
Tue May 8, 2012 9:43 AM
Thomas J. Kraus
599 Ralph Avenue
Brooklyn, NY 11233
(347) 326-3380
tjk271@yahoo.com
May 3, 2012
Dr. Thomas Sowell - Rose and Milton Friedman
Senior Fellow, on Public Policy.
Hoover Institution
434 Galvez Mall
Stanford University
Stanford, CA 94305-6010
650-723-1754
Dear Dr. Sowell:
Saving Our Economy and The Nation's
Healthcare, Insurance, & Investment Industries
As you may know, the actuaries of Medicare forecast that the program will be depleted of funds by 2024 if nothing is done and that the actuaries for Social Security forecast that program will go broke by 2033 and Social Security disability, which I am on, is expected run dry of funds in as short a period as the next four years or 2016.
We cannot raise taxes high enough fast enough to pay off the debt, nor can we cut government services severely enough quickly enough without destroying the economy of our nation in the process without structural reforms in how government services are delivered and as well fiscal reforms in how government is financed. Our nation's economic problems cannot be addressed by taking a meat cleaver to the nation's budget without doing great harm to the Economy of Our Nation, The Healthcare Industry, and The Social Cohesiveness of The American People.
Our country was founded on the ideal that ours is a nation for the people by the people. Professional money managers advise their clients when making a budget they should start with savings, deciding in advance to save a fixed percentage of income regularly, paying themselves, before paying any of their other bills. With the above facts in mind, our government leaders need to plan the nation's, states' and local government budgets by deciding to allow the American people to save more of their income. We need to raise the savings rate of our nation from a measly 3-7%-5.1% of disposable income to 20% of Gross National Product. If this policy is adopted, 3 Trillion more dollars would enter into the nation's equity markets to provide economic stimulus for our economy to create real jobs.
To achieve this objective government must grant every working person two tax exemptions of 10% of income each from both income and payroll taxes for the purchase of Health Insurance and Personal Retirement Accumulated Yield Accounts (PRAYAS) a new kind of I.R.A.s that will allow workers to save 10% of their income tax free with no tax bracket being excluded and no ceiling on income that is subject to the tax exemption. When planning the nation's budget we need to use a Laser Scalpel and not a meat cleaver to cut spending so as to cauterize the wounds as we cut so that there is not excessive bleeding on the body politic of our nation's economy.
In the last 50 years our nation has made great strides towards moving closer to living the ideals found in our nation's founding documents, The Declaration of Independence, and The United States Constitution. Race relations have improved greatly in the last 50 years allowing us to elect our first African American President and the crime rate has fallen to historic lows from what it was only 20 years ago. But if we do not use foresight in cutting the budget both of these great achievements could be placed in jeopardy.
By midcentury the nation will be majority nonwhite with whites being still the single largest demographic group with only 49% of the electorate. The remaining 51% percent will be made up of Hispanics, African Americans, Asians, and Native Americans. If the electorate of our nation evolves to where whites are represented by one party (The Republican Party) and nonwhites are represented by another party (The Democratic Party) every political issue would be seen through a racial lens, and problems that are merely difficult to resolve now will be nearly impossible to resolve then. Each year of delay of getting our financial house in order leads our nation one year closer to our nation's second civil war.
Social scientists marvel at the fact that despite the bad economy of the last decade, we have managed to make additional strides toward bringing down the rate of crime and they do not know how to account for that amazing fact. I theorize, that people who lost their jobs in the last two decades who could not find themselves new work were fortunate enough to find their way onto the Social Security Disability Trusts roll's providing those individuals a meager income, though not great, was sufficient enough to help spare them the temptation to resort to crime to meet their basic economic needs. If I am in fact correct about that, and Social Security Disability goes broke in the next four years forcing people off the Social Security Disability's rolls before those individuals can secure employment then we might see a spike in the crime rate especially if other Americans who lost jobs and neither found employment nor their way onto the Social Security Disability Trust rolls become desperate and resort to crime as their last option to meet their economic needs.
I believe we need prudent tax policy reforms coupled with structural reforms in how government services are delivered to the American people to bring down the cost of government to the tax payer and pay down government debt. I believe at the Federal, State and Local levels of government we need to eliminate all forms of sales taxes on consumer merchandise and services now subject to sales taxes. Whatever is lost in sales tax could be made up for in increased income taxes being collected as eliminating the sales tax will make goods and services less expensive to the consumer allowing consumers to purchase more with less increasing sales for merchants, hiring of new workers and paying existing workers higher incomes.
Taxes on energy and telecommunications should also be eliminated because employers freed of these producer costs would be better able to hire more workers and their elimination also would resort in increased income taxes being collected as those services come into greater demand. Removing taxes on energy will allow the energy industry to explore for more mineral resources to fuel our energy needs and to put more money into research and development to create alternative means to generate electrical power.
Reforming The Home Energy Assistance Program
The Federal government supports a program called HEAP (Home Energy Assistance Program) to provide financial assistance to low income families to meet their energy bills so those families will not have to choose between heating their home or putting food on their table. If the above taxes were eliminated not only would the Federal, State and Local governments generate more income taxes to offset the elimination of the above taxes the cost of energy would fall with the removal of the above taxes so the money now spent on the HEAP program would be able to help a greater number of Americans with their energy bills with the same resources provided by the Federal government without raising taxes.(To be clear, The Federal, State, and Local governments need to remove taxes from energy and telecommunications)
Removing taxes on telecommunications would lower the cost of transmitting data over the internet, phone and cabal lines making our nation more attractive for high technology companies to invest, which will provide our citizens the means of being employed in high wage professions that generate more tax revenue to pay for government services.
I also believe all sales taxes on Real Estate should also be eliminated. If sales taxes on Real Estate are eliminated the money that would have gone to the sales tax could then be added to the down payment on the mortgage, on commercial or residential Real Estate loans. If more money is paid in a down payment on Real Estate the monthly mortgage payments could be much smaller allowing the property owner to save more money which could reduce the likelihood of that property owner defaulting on their loan. So that with the elimination of sales taxes on Real Estate local governments would actually generate more income taxes to offset the loss of sales taxes on Real Estate and with fewer properties falling into default because more money is contributed to the down payment on a mortgage, government would also generate more Real Estate taxes. Property that falls into foreclosure generates no Real Estate Taxes until it emerges from foreclosure and is returned to the Real Estate Tax rolls, so policies that serve to reduce the incidence of foreclosure will allow government to collect more in Real Estate Taxes.
It should be needless for me to state that eliminating the sales tax on Real Estate would lower the cost of developing Real Estate and lead to more Real Estate being developed which is how local governments will make up for the loss of sales taxes on Real Estate and increase both the amount of income taxes collected and Real Estate taxes collected.
How Eliminating Sales Taxes On Real Estate Can Serve To Allow American Citizens To Affordably Obtain Quality Health Insurance and Quality Healthcare As A Result
Commercial Insurance companies are some of the largest institutional investors in both residential and commercial Real Estate. If sales taxes on Real Estate were eliminated along with the sales tax on consumer merchandise and services, sales taxes on energy, and telecommunications, the insurance industry's Real Estate development costs would fall significantly enough allowing them to enjoy a greater return on their Real Estate Investments, which means the unit cost of obtaining Healthcare insurance would fall making it available affordably to a greater number of Americans.
Additionally, costs on suppliers of medical devices and services to the Healthcare Industry such as diagnostic testing and pharmaceuticals would also fall allowing the Healthcare Industry to pass those savings along to their patients or clients serving to lower the medical bills whose exploding costs in recent decades have contributed to the bankrupting of government entitlements and the closing of medical institutions.
How Eliminating Excessive Taxes Contributes
To Overall Wage and Salary Increases And Therefore
Greater Income Taxes Being Collected
The state legislature wants to raise the minimum wage by 17%, a noble goal but it will cost the jobs of the people who could least afford it unless producer operating costs are brought down at the same time via tax policy. If the state and local portion of the sales tax, nearly 9% in New York City, were eliminated, without imposing a minimum wage increase it would be like giving everyone in New York City, not just minimum wage workers, a nine percent wage increase, which is a little more than half the amount the state legislature wishes to raise the minimum wage. If taxes on energy, at the gas pump and on utility bills, along with taxes on telecommunications were also eliminated at the Federal State and Local levels of government producers would likely find it more agreeable to accept a minimum wage increase. If Democrats wish to index the minimum wage to the consumer price index they should also inversely index tax rates to fall as the minimum wage rises so that tax cuts on producers would fuel wage increases for all workers, not just minimum wage workers.
A Growing Economic Pie And Tax Policy
Liberals have along believed that having multiple kinds of taxes and as well multiple rates of taxation would bring in more tax revenue but in reality having many varied taxes and tax rates only divide the available taxable income into smaller slices of the tax pie. Liberals have also seen the economy of the nation as a fixed size economic pie and that tax and fiscal policy as a zero sum game where some win at the expense of others losing.
Conservatives believe that the economy need not be seen as a fixed size pie which is constantly being cut into smaller and smaller slices, but as a pie that could be growing continuously larger provided there is a enough sugar, eggs, milk, flower, yeast and a small amount of salt, yeast being investment capital and the salt being taxes and government regulation while the other ingredients in the recipe are the American work force.
Earlier, I recommended giving all workers two tax exemptions of 10% each from Federal, State and Local income taxes and payroll taxes for the purchase of Health Insurance and Personal Retirement Accumulated Yield Accounts (PRAYAS). I would recommend that individuals between the ages of 16-26 who are covered on their parents Health Insurance Policy who do not have to worry for a long time concerning retirement be permitted to use their two tax exemptions to save for college instead. If monies put aside for college are not utilized for that purpose by the time the individuals age out of their parents Health Insurance (by 26) than those monies should be returned to their original purpose for the benefit of the individuals themselves and the larger society of our nation, or be taxed for back taxes if the individuals chose not to use the monies for their intended purposes. The logic is, going to college and graduating will allow the individual to earn more over the rest of their lives so that the short delay in saving for Health Insurance and Personal Retirement Accumulated Yield Accounts would be made up for by the higher salaries the college graduates would earn. But if they do not go to college they will likely earn less over their career and it would be in their interest to begin saving for their Health Insurance and Retirement or be taxed for back taxes if they refuse to do so. Nobody would be forced to purchase Health Insurance if they do not wish to but they also would not receive the two tax exemptions if they do not utilize them to purchase Health Insurance and a Retirement Plan with pretax dollars. The tax exemptions would be offered on a use it or lose it basis.
Fair Flat Tax System To Both
TheWelthiest And Poorest Americans
I believe the fairest flat tax system would be one which I would call a weighted flat tax system but before I explain what that would entail allow me to talk about the current tax system, I call the graduated income tax system, because as you earn more you gradually pay a larger share of your income to taxes. Liberals call this form of tax system a progressive tax system because they believe those who have the greater ability to pay taxes should pay more, but there is nothing progressive about being able to keep fewer of the fruits of one's own labor. What Liberals call a progressive tax system is actually regressive. Their defense of the current tax system, in their minds, is justified by the following one hundred percent correct fact. The people at the lowest end of the economic ladder pay a disproportionally larger share of their disposable income after taxes to obtain the basic necessities of life such as, food, clothing, and shelter; utilities, transportation, healthcare, and last but not least, entertainment. A Millionaire or Billionaire has more price options than do the poorest workers in the economy. If a Millionaire of Billionaire wish to live frugally they can choose to rent a one room apartment for $500 a month and save a fortune on housing expenses while a minimum wage worker or someone earning just above the minimum wage don't have that option unless they have wealthy relatives or friends. Someone earning $20,000 a year cannot afford to pay $2000 (two thousand dollars) a month in rent.
While liberals are correct that people at the lowest rung on the economic ladder have a narrower range of price options for obtaining the basic commodities of daily life the answer is not to tax the wealthy more but to tax the poor less, which is not a semantic trick with words under a weighted flat tax system. Under a weighted flat tax system there would be three tax exemptions two of which I have already described, for 10% of income from Federal< State, and Local income taxes and payroll taxes. The third tax exemption would be called the minimum wage exclusion tax exemption and would be pegged to 50% of the value of the prevailing minimum wage.
For example, imagining a not too distant future where the minimum wage would be $20,000 a year. Under the minimum wage exclusion tax exemption all workers in the economy from the minimum wage workers to chief executive officers of multinational corporations or nonprofits would receive a tax exemption from Federal State and Local income taxes and payroll taxes equal to 50% of the value of the minimum wage or $10,000 of their first $20,000 of earned income. The reason for creating the minimum wage exclusion tax is to address the above complaint regarding the current tax system that would be beneficial to the lowest rung workers in the economy without punishing everyone else in the process. This tax system would truly be progressive because everyone would receive the same three tax exemptions of the same value. They will pay the same share of their income in taxes no matter what wages and salary they earned throughout their lives, but because the minimum wage exclusion tax will make up a larger share of the minimum wage workers total income it would disproportionally favor the minimum wage workers income and people not far above the minimum wage. While the minimum exclusion tax makes up 50% of the minimum wage workers income it would make up a far lesser share of the income of higher wage and salary earners. For example the minimum wage exclusion tax of someone earning $100,000 would be $10,000 (Ten Thousand dollars) or only ten percent of that workers total income. On a million dollar salary it would only make up 1% of a workers income.
The second reason for creating the minimum wage exclusion tax is because without the exclusion the people at the bottom of the ladder could see a significant increase in taxes under a more simplified version of a flat tax.
The third reason for suggesting the three above tax exemptions especially the minimum wage exclusion tax exemption is to build into the tax system just enough complexity to require people who are average Joe's to need someone to help them prepare their taxes so the accounting industry will not oppose this version of a flat tax system.
I have no desire to put anyone out of work unnecessarily. A too simplified flat tax would be fought tooth and nail while this tax system may be found acceptable to the accounting industry.
Suggestings For Reforms To Current I.R.A. Retirement Accounts And Personal Retirement Accumulated Yield Accounts
Or P.R.A.Y.A.S.
I believe American workers should be permitted to withdraw funds from their Personal Retirement Fund without tax penalty for the Three (3) following reasons. (1) To fund continuing education, (2) to make a down payment on a primary residence and to (3) pay off significant medical bills not covered by their Health Insurance so as to prevent Healthcare Institutions economic health being placed in jeopardy which might lead to their closure and a lack of competition that serves to drive up the cost of Healthcare unreasonably, the stated reason Obamacare was supposed to address
If personal retirement savings could be utilized to return to school without suffering a tax penalty, more of America's displaced workers could acquire the skills sets necessary to return to work and the tax rolls increasing the amount of taxes government would collect in the long run.
Allowing workers to make a down payment on a home with retirement savings would jump start the Real Estate market especially if all sales taxes on Real Estate are eliminated which would spark a wave of Real Estate Development in both the residential and commercial Real Estate markets nationwide. Home ownership can help provide retirees a reliable source of steady income during their retirement years if the home they buy came with a second apartment rental for the home owner to be able rent to a tenant, or the home owner could use the equity in a paid off mortgage to obtain a reverse mortgage that would provide them an income until they die in exchange for the home becoming the property of the lender when the home owner dies.
Now that I discussed tax policy changes that should be made allow me to address the structural changes in the way government delivers services that need to be changed. First we must recognize all government "Insurance Programs" such as Social Security, SSI, SSD, Medicare, Medicaid, Workmen's Compensation, Unemployment Insurance, Federal Flood Insurance and Federal Deposit Insurance on the savings in Insured Bank Accounts are Insurance in name only because none of these revenues get invested into the equity markets and earn a return on investment. They lack the benefit of compound interest that commercial insurance policies benefit from which allows Insurance companies to pay off policy claims while still being able to generate a profit and to pay shareholders a dividend. All these government "Insurance Programs" revenues are simply added to the general funds accounts of the Federal, State, and Local governments from which all government services are paid. They are all essentially legalized Ponzi schemes which are why they are constantly on the verge of insolvency or collapse. The Social Security Trust Fund and all these other insurance programs generated surpluses in their earlier years without the need for investment into the equity markets because substantially more people paid into these programs in their earlier years than withdrew funds from those accounts which is no longer the case and why these programs face insolvency unless converted into legitimate insurance programs through investment into the equity markets. They do not necessarily need to be privatized to be converted into legitimate insurance programs. The Federal Reserve Bank's job is to Regulate The Growth of The Money Supply. What better way to accomplish that goal but for the Federal Reserve Bank to Invest in The Worlds Equity Markets and utilize those returns on investments to pay for the services government insurance programs were created to provide in the form of entitlements, in the first place?
Counteracting The Negative Effects Of The
Compounding Interest On The National Debt
The best way for our nation to be able to counteract the negative effects of compounding interest on the national debt so that we can pay off our liabilities with the least amount of pain is to generate greater positive compound interest on savings which is why I began this letter by suggesting the savings rate of our country needs to be raised to 20% of Gross National Product which we can call Gross National Savings or GNS. As I see it, Gross National Savings needs to be at least as large as The Federal Government's Budget which usually falls between 18%-21% of Gross National Product.
Restructuring How Government Delivers Services
The Federal, States, and Local governments perform a lot of duplicative functions needlessly which they could save money working together more intelligently in delivering services to the American People. For example, our nation has three separate and distinct systems for delivering social services to the American people.
Why can't we merge these separate systems into a single nationwide system for delivering all government social services with the same worker who processes local applications for social services also processing state and federal social services utilizing a universal application for social services where the appropriate boxes would be checked off as needed?
Combining the three separate social service delivery systems into a single system could allow for shrinking of the total social service bureaucracy through attrition by a third or more if early retirement incentives are utilized to encourage workers to retire early. Two percent of the government workforce at each level of government retires from government service every year. Simply replacing only half of retiring workers with new hires will allow government to shrink the entire social service delivery system by a third over eleven years, painlessly without layoffs.
2% (of each government social service work force) x three levels x &#189; of exiting workers x 11 years =1/3 of the total social service work force, roughly because each level of government might not apportion the number or workers processing social services with the same ratio of workers per hundred thousand or so of population being served.
Those administrative cost savings would allow the three levels of government to cut cost without eliminating services. The three levels of government could pool their resources to pay for the social service bureaucracy of all social services as they now do for the delivery of Medicaid.
As the social service bureaucracy is consolidated and shrunk, social service offices could be closed beginning with offices located in private sector landlord owned Real Estate. The savings on rent could then be put toward paying down the debt of the three levels of government apportioned according to which level of governments offices are closed as other offices are consolidated together. Starting with offices in private sector buildings makes sense because money spent by government in other people's buildings provides the government no equity for what they are spending on office space.
Shrinking of the workforce in government owned buildings would make it possible to lease or sell space condominium style converting government office buildings into commercial condominiums. If the majority of the space in government office buildings in smaller governments could be occupied by commercial business and fully cover the operating budget of each building then it would be possible to cut taxes without cutting services and without running a deficit. Government should strive to sell or lease no less than 51% of space and as much as 70% of space over time to commercial business. Converting government owned buildings into commercial condominiums would allow buildings that were historically exempt from real estate taxes due to government's sovereign immunity to be added to the Real Estate Tax rolls because in condominium ownership, the tenants and not the Real Estate management company pays the taxes on each condo unit while the Real Estate management company pays taxes only on the common elements of the property. Such an arrangement would allow local governments to expand the Real Estate Tax base without raising taxes on everyone else. A larger Tax base would make it possible to lower taxes on each individual tax payer without necessarily losing taxes in the process and make a particular city more attractive place to develop Real Estate.
The three levels of government each have their own Environmental Protection Agencies and they might more efficiently protect the environment if they divided the labor between themselves in a different manner. The local governments would investigate environmental complaints in their own territories' and hand over to the state the information for the state to prosecute the case and the states would provide the federal government the statistical data where there is environmental damage and the federal government would take charge of making sure those responsible for the damage clean up the mess when the state wins a judgment.
Similarly, the three levels of government have their own separate courts located in separate buildings, they could work together to locate their separate courts on the same parcel of land or even the same office building dividing the court building in thirds This would help lower some of the infrastructure costs of the three levels of government. While they would each still have their own judges, law clerks and secretaries to process legal work they could share facilities management staff and utilize the same people to clean and maintain the buildings. Having government share resources in this way will mean more of the available land for Real Estate Development might be developed by for commercial business and generate Real Estate Taxes for local governments.
To sum up, this is just a potential road map forward to solving our nation's economic problems. It calls for the three levels of government to work more closely together to address their mutual structural deficits because I believe they would achieve greater economies of scale in savings in government operations while preserving core government services that the majority of the nation desires be preserved as the three levels of government pay down their respective debts in the quickest most efficient and painless manner possible.
Almost forgot, as I told you at the opening of this letter, I worked in the Engineering Department of A major hospital during the years of 1987-1994. In those years the hospital installed its own cogeneration electrical power plant and began, at that time, to produce 50% of its own electrical demand on site and was able to reduce its dependence on Con Edison for electrical power. This project was undertaken because during the summer months of July and August when the temperature rose above 90 degrees, Con Edison could no longer guarantee an uninterrupted supply of electrical power and often requested that the hospital cut back on unessential power usage to help Con Edison avoid a system wide black or brown out in the Bronx. If government buildings on the drawing board now were designed to cogenerate and to produce not only one hundred percent of their own demand but also surplus demand than those buildings could sell surplus electrical power to the power grid authority and use the revenue to pay for governments operational cost independent of taxes. If government operational costs are covered with revenues from sources independent of taxes, then taxes could go directly to covering entitlement programs and be treated like insurance premiums and invested in the equity markets which I alluded to earlier and finance the services they were intended to provide.
A Potential Means In The Future To Keep Residential
Real Estate Taxes As Low AS Possible
On Thirty Third Street and Park Avenue is an interesting office building most people make no notice of when they walk past this building. Like many such office buildings on the ground floors of this office building there is space leased out as commercial space for stores, but that is not what makes the building interesting to me. What is unique about this building is that above the ground level stores is The Norman Thomas High School organically incorporated as part of the office building occupying about 10 floors of the office building with the school having its own entrance on Thirty Third Street and a separate entrance for the commercial office tenants on the Park avenue side of the building. If all future public High Schools and Junior High Schools were incorporated into mixed use buildings the space they occupy could generate Real Estate Taxes for the local government and if the buildings were owned by government they could provide the operating revenue of the public school system so that residential Real Estate could remain as low as possible.
Locating future public High Schools and Junior High Schools in mixed use buildings owned by government could provide communities desiring to attract young families the two most important things people desire when shopping for a home to raise a family, quality public schools and low Real Estate Taxes which in many communities are objectives that are often in conflict with one another. In most well to do communities with good public schools, Real Estate Taxes are very high. In big cities who have built out their Real Estate to occupy most of the available land like New York City, this kind of idea might be the wave of the future only because those cities will have no choice because there will be nowhere else to locate the needed public schools, but this could also be done in rural and suburban communities who still have a lot of land to build out.
Since 2007 $488 billion has been taken out of Americas mutual funds by main street investors because middle America is not happy with the direction our economy is heading, while the expects theorize that Americans are removing money from mutual funds because they fear loss of those funds in our unstable equity markets and desire to flee to the safety of government bonds or bank accounts, I believe something else may also be driving people to move money out of mutual funds, might people feel if corporate America is going to sit on their huge profits the last few years and not hire new workers that those dissatisfied Americans might be trying to punish corporate America by removing their money from mutual funds?
Reforming Federal Deposit Insurance
I believe Federal Deposit Insurance should also cover Investment Banks, Hedge Funds and Insurance companies. My reasoning is as follows; if the Federal Government from time to time is going to bail out financial service industry firms then those firms should share with the tax payers the costs of those bail outs via the purchase of Federal Deposit Insurance. The governments collected proceeds from such insurance like real insurance should be invested in the equity markets by The Federal Reserve Bank and the returns on such investments would be utilized by the government to cover any future bail outs of the financial services industry so as not to over burden the tax payers with excessive tax increases to cover the bailout costs. Like other: commercial insurance companies who raise fees on policy holders after the policy holder receives a payout on a claim The Federal Deposit Insurance Corporation could do the same on financial service companies that are bailed out by the government. That way the
Corporate interests that most benefit from government bailouts will bare the costs of those bailouts along with the tax payers.
In the case of Insurance Companies, they should be required to pay a small insurance fee on every policy they insure and those fees would also be invested in the equity markets as described above, and in providing insurance to insurance companies the Federal Reserve Bank would become the ultimate Reinsurer serving to dilute risk by diversifying it across the world's equity markets lessoning the downside risk and maximizing the upside return on investment to the benefit of America's tax payers.
Sincerely
Thomas J. Kraus tjk271@yahoo.com P. O. Box 24802
599 Ralph Avenue Brooklyn NY 11202-4802
Brooklyn, NY 11233 (Preferred Contact Address)
(347) 326-3380
Comment: #2
Posted by: Thomas J. Kraus
Tue May 8, 2012 9:43 AM
Hey, Kraus, want to print that behemoth again so we can ignore it a third time?
Comment: #3
Posted by: Tom
Fri May 11, 2012 11:34 AM
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