Archive for October, 2008

What makes America great?   Free Enterprise, Rule of Law and Meritocracy

So we must understand how an economy works.  Can we make tax cuts, spend on energy, healthcare, social security and heal the wounds of a global credit crisis in the current environment?    Can we pull out of the crisis and solve all these issues?

We need a revolutionary way to look at our future.   A new way to tax, a new way to manage our government.   Let’s create an annual report and run it like a company with oversight and so that we can actually congress can vote directly on the issues.   Beyond this, we could even sell shares in the US as a revenue source and use all the financial instruments available to companies today.   This is a radical thought and definitely needs to be challenges, yet the efficiency of taking the US public would create lots of revolutionary opportunities and in a time of change, we can do it.  

Issues like Immigration (aren’t we all immigrants), Education (isn’t this fundamental the way to advance an economy?) and Social Programs (what do we need and we should have abundance with a new structure like this?) have fallen to the wayside.   Free trade is fundamental to global growth, we cannot hide from globalization and creating the most efficient economy is best for all. We are the world economy, part of it and mixed in with it.  So I encourage thinking about and challenging these thoughts.  I do not think I have the answers, yet by thinking about these things in a new way, we might be able to spring some new thoughts together and make some smart decisions.

Tax Cuts for the middle class and rich = Flat Sales Tax, 25% of $13.8 Trillion Known GDP although more to be considered when foreign monies in the US economy = $3.45 Trillion in Tax Revenues compared to $2.1 when we had outlays of $2.7 Billion.   The float of government revenues would be monthly instead of every April.   Also, for the benefit of the people, luxury and other socially negative items will have extra taxes like tobacco, alcohol, drugs and gas which should yield another $1 Trillion dollars.   In the meantime, all subsidies, tariff’s and other taxes would be eliminated.   So the IRS could be eliminated, $10 Billion savings there. 

The other political issues have really fallen by the wayside including abortion, gay marriage and religion in the White House (shouldn’t the government stay out of the bedroom).  These are all really non-issues or should be politically.  Then there is gun rights (NRA should protect peoples right, yet not for Uzzi’s), then there is the environment, energy, foreign policy and homeland security.   All can be solved with a good economy and as Al Gore puts it, the economy, energy, climate change and national security all become part of the solution with focus on sustainability and eliminating our reliance of foreign oil.  Lots of money needs to be invested in green energy, green jobs, green economies and a new green way of life.  Along with a green initiative, we need investment in healthcare as the biotech and healthcare is fundamentally changing from proactive from reactive.   It is an interesting way forward as I see incomes shrinking and people living within their means more, yet I see quality of life rising and rising fast.  

To take a close look at how we spend our money now (2007 dollars), here is some information from the Treasury department.   All this information and more can be found on the Treasury’s site: http://www.fms.treas.gov/annualreport/

• National defense—This function includes those activities directly related to the defense and security of the United States.  This amount encompasses Government spending for conventional forces, strategic forces, atomic energy defense activities and other defense related activities.  National defense outlays for fiscal 2007 increased by $38.2 billion, to $560.1 billion. 

• Education, training, employment and social services—These programs assist citizens in developing and learning skills to expand their potential opportunities and job placement possibilities.  Outlays for this function were $89.7 billion for fiscal 2007, a decrease of 24.2 percent or $28.6 billion from fiscal 2006 outlays. 

• Health—The Federal Government helps meet the nation’s health care needs by financing and providing health care services, aiding disease prevention, and supporting research and training.  Outlays for this function were $266.3 billion in fiscal 2007.  This represents an increase of $13.6 billion over the prior fiscal year. 

• Medicare—Through Medicare, the Federal Government contributes to the health and well being of aged and disabled Americans.  Outlays for this function were $375.4 billion in fiscal 2007.  That is an increase of 13.8 percent or $45.5 billion over fiscal 2006 outlays. 

• Income security—Income security benefits are paid to the aged, the disabled, and the unemployed and low-income families.  Included within this classification are programs such as general retirement and disability, public assistance and unemployment compensation.  Outlays for these benefits were $367.4 billion in fiscal 2007, an increase of 4.2 percent or $14.9 billion over the fiscal 2006 level. 

• Social security—Through social security, the Federal Government contributes to the income security of aged and disabled Americans.  This function’s outlays were $586.2 billion for fiscal 2007.  That represents an increase of 6.9 percent or $37.6 billion over fiscal 2006 outlays. 

• Interest—This function includes interest paid by the Federal Government offset by interest collections from the public and interest received by Government trust funds.  Net interest outlays are very sensitive to both interest rates and the amount of debt outstanding.  Net interest outlays increased in fiscal 2007 to $237.9 billion.  This is a 5.0 percent increase from the prior fiscal year. 

All of these issues and the buyout plan (not bailout plan) can be afforded with a fiscal responsibility.  Government needs to get healthy and the US Hegemony can remain in tact.

1. Money market desk – are banks starting to lend?   Capital has to be increased in companies and banks so that banks will lend to companies and banks will lend to banks and companies can survive on the cash at hand or get credit from banks. 

2. LIBOR - is a daily reference rate based on the interest rates at which banks offer to lendunsecured funds to other banks in the London wholesale money market (or interbank market).

3. TED Spread -  the TED spread was the difference between the interest rates for three-month U.S. Treasuries contracts and the three-month Eurodollars contract as represented by the London Interbank Offered Rate (LIBOR).