How Congress Can Solve the Recession, Outsourcing and Social Security

No national security crisis is too big for our Congress! When the gavel comes down in the Capitol for the 111^th time on Tuesday, elected officials will take a swing at some of the biggest and most complicated problems ever to face our nation.

Today’s problems to tackle: recession, outsourcing and Social Security. Here are some simple answers to make the American Way better and to make it last.

Abolish corporate income taxes. According to usgovernmentrevenue.com, in 2009 we only will take in $339.2 billion in 2009 here. Why waste the effort? Big corporations already ditch the tab by hiring accountants, hitting the K Street pavement, or relocating to Bermuda. Let’s simplify the tax code, attract business and manufacturing back home, and paint some big smiles in boardrooms across America.

Phase out the universal pension program, “Social Security.” This is social insurance, right? Okay, don’t rob workers of money they’ve kicked into the system through 2009, but rededicate the program to its original purpose. Eliminate payroll taxes in 2010. Allow only the disabled and the poor to claim new benefits. Workers under age 40 aren’t expecting benefits anyhow – give the money to those who need it,

Let everyone into tax-advantaged retirement plans. Double contribution limits. Eliminate upper income limits to participate. For that matter, require all employers to offer all wage employees a 401(k) with a minimum match contribution. Automatically enroll all employees and make them sign a form if they want to opt out (instead of in, as tax law is now).

Wow, what happened to the blue-blooded Democrat I thought I always was? Read on.

Raise taxes on capital gains and dividends. This won’t make up the shortfall on other tax cuts, trust me. But it’s a start, and it’s also an incentive for business to better capitalize itself and invest more heavily in R&D. And it’s incentive for more Americans to shelter their equities in tax-advantaged accounts.

Raise income taxes on the wealthiest Americans. Okay, you guys have heard this line too often to howl in protest – you’re only rolling your eyes. But the rest of this package will make businesses healthier and equities more attractive. And somebody’s got keep the OASDI trust funds solvent. You’ll be paying more taxes, but your net worth will skyrocket.

Tax pollutants and emissions. It might be easier for the IRS or EPA or whoever to tax states and not corporations. That way, EPA can tax carbon emissions like the threat they are without letting politics get in the way. If Delaware and Nebraska disagree on the toxicity of livestock, that’s okay – so long as the money makes it to the Treasury.

Eliminate income taxes on all Americans living below double poverty level. We’ve already eliminated the regressive payroll taxes. The sooner that the lower and middle classes participate in the economy, the better off we’ll all be. Let the Wal-Mart crowd keep their cash, and strange things might start happening – as more workers can afford health care, some procedures might actually grow cheaper. Why let boardroom porkers jack up the price of open-heart surgery when a hospital can do twice the operations for less cost?

Most of these items are political non-starters by themselves. But given the times, and given the public’s desire to see bipartisan effort, this is a politically possible package. And there’s no better time to tackle unpopular legislation than two years before the next election.

Until we pass monumental legislation such as this, I am avoiding equities and keeping my savings as unpegged from the dollar as possible.

Even if you don’t agree with me that hyperinflation is inevitable within four years, you cannot discount the threat. In a hyperinflationary scenario, Social Security outflows would exceed receipts far earlier than the now-projected 2017. And the trust funds would dry up decades earlier. Keep in mind 1980, when COLA rose 14% while wages rose only 9%.

If we fully funded Social Security while reducing the scope of benefits, confidence in our national solvency would increase. What better time to float, say, $8 trillion of long-term debt than when interest rates are near zero? As business and manufacturing relocates back within our borders, trade surpluses should slowly deleverage foreign ownership of U.S. assets and sovereign debt.

As for the near-term consequences of a stronger dollar – what, a stronger dollar? How is that possible? We’ve just pledged nearly one year’s GDP as collateral against the credit crisis. For most taxpayers, we just cut long-term capital gains taxes to zero. The Fed is printing money faster than the Treasury is floating debt.

I’m no economist. (To quote The Blues Brothers: No ma’am, I’m a musician.) My ideas might be way-off or impossible. The pollutants and emissions taxes might be especially tough to administer. But we require bold action by Congress now.

That’s why I’m calling on all of you for your comments and discussion.

Disclosure: no positions

Comments

[Paul Price:]

Absolute liberal hogwash.

Jan 05 08:03 AM

[epeon:]

What is amazing is how ignorant this is. For example, the poor already pay no federal income tax at all. So, there is not point in eliminating it since it doesn't exist in the first place. As far as eliminating social security which is what he is saying, cool. But, I am 56 and have paid in about $300,000. So, I get nothing? Hmmm, gives me a warm and fuzzy for any government program doesn't it. Raising taxes on capital gains and dividends; does that include pensions and retirment plans because that is where the bulk of the money is. Also, it will cause all sorts of tax avoidance behavior. Look at California, raising taxes doesn't work because everybody is doing tax behavior.

I don't even want to talk anymore, this man is just ignorant.

Jan 05 09:22 AM

[cocomurph:]

Thanks Paul! You saved me the trouble of typing a post!

Jan 05 10:35 AM

[secmaven:]

Requiring ALL employers to provide 401K matching plans would put the screws to the main job creating sector of the economy, small business. If the match came from the US Treasury as part of a "bottom up" stimulus package savings might increase. But small business would either cut jobs or simply operate even more under the table if required to increase wages through a 401K match.

Eliminating the corporate income tax would dramatically reduce the need for accounting and legal services. These are two high paying, job creating, domestic service industries with maximum representation in the US Congress and would pull out all the stops to block this proposal.

Jan 05 11:01 AM

[damonmcalli...:]

Here's an idea, lets cut the Federal budget (an economic lead weight) to 1910 levels (in remembrance of Mark Twain).

Jan 05 11:34 AM

[rrbatch:]

As an aged (73) red-blooded Republican, I can find a lot to like in what the blue-blooded Democrat proposes! Not so ignorant by my lights.

First, eliminate social security for youngsters (age 30 and below) and apply the savings in employer payroll tax contributions to the match in 401k's. Capital gains and dividend taxes won't be collected on the tax-deferred retirement accounts. Social Security is a Ponzi scam that won't be available to the youngsters anyway. Raising the limits on retirement contributions and taxing income outside these accounts will encourage long-term savings.

Eliminating corporate income taxes will eliminate a lot of unproductive busywork by lawyers and accountants, and will inevitably reduce costs to consumers (who wind up paying the tax anyway). Sure the lobbyists for these vultures will rebel, but that's what politics is for: compromise.

Raise taxes on the rich? Depends on how much. I keep in mind that "the rich" are not all businesspeople, but include fat-cat Democrats like lawyers, movie and music glitterati, and ball players. But the businesspeople are most likely to invest sensibly, and if they can shelter more of their income in tax-advantaged accounts, why not?

Tax carbon? Here's where I disagree, since the real cost will be spread across all consumers in proportion to their energy use - and I don't really believe the AlGore hype about imminent danger to civilization from CO2. Let economics determine how individuals and businesses reduce their "carbon footprints".

Encouraging more tax-free savings has the potential to reduce the tax burden and the resources available to the dummies in congress - all to the good.

Keep the debate rolling.

Jan 05 11:49 AM

[notsosmart:]

of course you can get 536 individuals to agree on all this.too big ,too complicated,too late.the ponzi of wall st & this govt have brought this once great country to its knees.we are running on empty.the scoundrel insiders have their stash in switzerland & lichtenstein etc.the trust is gone.anybody have a good word for wall st or the gov.?

Jan 05 01:01 PM

[axelrod608:]

>> "Absolute liberal hogwash" >> Abolishing corporate income taxes is LIBERAL ?? C'mon people, read the article and think it over before posting something stupid.

The US tax code is one of the most regressive "systems" on earth. Social Security in all its idiotic splendor is a bad joke just waiting to become a nightmare.

How retirees are to pay for their retirement is a conundrum with Soc Sec swirling in the bowl and interest and dividend rates being held at absurdly low levels by the feds.

WE NEED THIS DEBATE. Even more to the point, Congress needs this debate rather than 99% of their time being spent to get re-elected.

All these suggestions are at least somewhat feasible. I would like to see no income tax on cap gains in qualfied retirement plans, as is the case with Roth IRA's today.

The biggest lift we could give our economy is a release from excessive paper pushing to conform to IRS requirements. It is like a down anchor is to a ship underway.

National sales tax - 1% - collected daily from sales of new goods.

1% federal gas tax, collected daily.

And finally, when will the make-believe capitalists get on the bandwagon for universal healthcare - NOT health INSURANCE - so our health plans masquerading as companies can become competitive global companies ?

We have huge, serious problems. Doing everything the same way we have been doing it will only ensure that the problems will persist unsolved.

Jan 05 01:04 PM

[Jason Rines...:]

Some decent ideas as well. I will not excorciate Mr. Snyder for bringing up ideas to fix the U.S. economy, although I do not fully agree with many of his ideas. That is the forward thnking I applied in building Raging Debate in August, that the collective citizenship will have to be utilized to change our country. Some of the members that signed onto Raging Debate and I have formed a think tank, to better facilitate this national dialogue and apply constituent pressure on Washington. It's a process and massive undertaking just to begin this national debate. Of that I believe we would all agree.


On Jan 05 01:04 PM axelrod608 wrote:

> >> "Absolute liberal hogwash" >> Abolishing corporate income taxes
> is LIBERAL ?? C'mon people, read the article and think it over before
> posting something stupid.
>
> The US tax code is one of the most regressive "systems" on earth.
> Social Security in all its idiotic splendor is a bad joke just waiting
> to become a nightmare.
>
> How retirees are to pay for their retirement is a conundrum with
> Soc Sec swirling in the bowl and interest and dividend rates being
> held at absurdly low levels by the feds.
>
> WE NEED THIS DEBATE. Even more to the point, Congress needs this
> debate rather than 99% of their time being spent to get re-elected.
>
>
> All these suggestions are at least somewhat feasible. I would like
> to see no income tax on cap gains in qualfied retirement plans, as
> is the case with Roth IRA's today.
>
> The biggest lift we could give our economy is a release from excessive
> paper pushing to conform to IRS requirements. It is like a down anchor
> is to a ship underway.
>
> National sales tax - 1% - collected daily from sales of new goods.
>
>
> 1% federal gas tax, collected daily.
>
> And finally, when will the make-believe capitalists get on the bandwagon
> for universal healthcare - NOT health INSURANCE - so our health plans
> masquerading as companies can become competitive global companies
> ?
>
> We have huge, serious problems. Doing everything the same way we
> have been doing it will only ensure that the problems will persist
> unsolved.
>

Jan 05 01:52 PM

[Smarty_Pants:]

Raising taxes on capital gains and dividends will simply result in capital fleeing to other countries for investment opportunities. This would stagnate business investment and productivity improvements. Less growth.

I don't know about others but I am tired of the "tax the rich" line of thought. How about substituting a more apropos and accurate phrase instead? To wit:

"Steal from the productive via threats of voilence at the hands of federal agents."

Give it a little thought. Who generates most of the gains in standard of lining? The productive businessman that figures out how to make something cheaper and saves millions for consumers through lower prices. In the process that businessman becomes wealthy by splitting the cost savings with his customers and employees. Market capitalism in a nutshell.

Who better to have access to excess capital than the person with a track record of improving the public's standard of living and providing jobs?

Nah! Let's steal it from him with threats of violence at the hands of federal agents and give it to somebody else to study the changes in arctic ice floes instead, on the remote chance that such information might prove useful. Nobody's going to notice those jobs that didn't get created so a handful of guys could spend a couple months writing a study paper.

Yeah, that'll really get the economy roaring again! Who needs more of those productive jobs? Let's write study papers instead.

As for taxing pollutants and emissions, who gets to decide what constitutes a 'pollutant', or how much the tax should be? How do you accurately measure such emissions? If we tax CO2 generation, do volcanic emissions count? Do cow farts count in the methane totals? What about cows that cross state lines in the pursuit of commerce, is there an adjustment factor?

Tell me why the gub'mint should get paid for the 'pollution' released within its jurisdiction. Isn't that kind of like a reward for letting people do the wrong thing then pretending to catch them at it? No chance for corruption there I presume. No siree, never any corruption in gub'mint regulatory agencies.

Once again, you wish to direct gub'mint force to further goals you personally believe in at the expense of others. In short, you wish to extort money based on your beliefs from those who may not agree with you.

Does this mean you can't think of any better way to accomplish your goals than to have the gub'mint threaten to prosecute those who will not change their actions voluntarily? Hey! It's only property rights after all. No big deal.

Maybe it would be better if everyone just gave all their money to you so you could spend it in the 'best' possible way.

axelrod's idea about scrapping the income tax in favor of a flat consumption tax is better than stealing from the productive. At least the victims have a choice about whether to buy something that's taxed or not.

The best thing Congress could do to 'solve' any of those problems is declare permanent recess and let the market work out the details amongst themselves based on voluntary property rights.

Jan 05 03:58 PM

[Socialism c...:]

1) "Abolish corporate income taxes." -- Yes.

2) "Phase out the universal pension program, “Social Security.”" -- Yes.

3) "Let everyone into tax-advantaged retirement plans." -- Yes...already available to all = IRAs.

4) "Raise taxes on capital gains and dividends." -- No. Not right to tax on front-side, either income or gains. See point below regarding personal income taxes.

5) "Raise income taxes on the wealthiest Americans." -- double No! This, combined with your elimination for those below "double poverty" level amount to pure socialism. Where's the incentive to work and be better than average? Income taxes *in general* are wrong -- no government should have a preemptive right to its citizens earnings! Our Founders warned against this, and pushed consumptive taxes as "the least burdensome"...since those paying can decide if and when to pay.

6) "Tax pollutants and emissions." -- I'm against pollution, but let's talk *real* pollution -- chemicals and such -- not "carbon emissions"!! Cow flatulence is NOT causing any environmental harm! There is no "global warming":
a. Exhibit A: www.dailytech.com/Arti...
b. Exhibit B: blog.heritage.org/2008.../

Time for the greenies to get their heads out into the sun!!

What do we really need to do for this economic mess? Simple:
1) Abolish ALL confiscatory taxes -- income tax, property taxes, gains taxes.
2) Implement the fair tax.
3) Pass a Balanced Budget Amendment.
4) Term limits for Congress.

Jan 05 04:30 PM

[JGatsby:]

Stick to playing your horn! Your proposals are not only harmful to the people of the United States they reak of Republican rhetoric..

Thank God we have an incoming President who ruly wants to save Social Security for the people who have paid into it and for those of future generations!

Jan 05 04:47 PM

[Ross Snyder:]

Thanks for the comments - I wish to clarify a few of my points, just in case anyone reacted with their knees and not their heads ...

Abolishing Social Security can be done by *phasing out* benefits. Any FICA taxes you've paid through 2009 can be given back as benefits as though no law changes ever occurred. The real crunch to the system will occur in 2017 (or earlier) when outlays exceed receipts ... so if we change the law before then, presumably the trust fund can still fund benefits the way they were intended.

I would propose that the scope of taxes on capital gains and dividends remain unchanged ... only change the percentages. So some pensions and retirement plans might be affected when funds are withdrawn. But really - we should all have Roth IRA's so that these questions are irrelevant.

Requiring all employers to supply a 401(k) plan is meant to replace the mandatory aspect of Social Security. The cost should be either neutral or positive for employers, depending on the match percentage and on participation levels. To put it bluntly: conservatives believe that most people are smart and can take care of themselves, and liberals believe that enough people are stupid that we need government programs to protect ourselves from the damage stupid people can cause. Eliminating Social Security without another safety net puts a lot of manics and spendthrifts out on the streets.

I agree with the user "Socialism cannot compete!", that focusing on pollutants other than carbon makes more sense in the near-term. Just one example of how EPA could monitor: It would be pretty simple to tally at a coal energy station the amount of coal going in, and the amount of mercury trapped before going out the smokestacks. Have a formula for how much mercury would be expected to be used, and tax the difference. ... My proposal is meant as a way to continue taxing corporations, not for their positive impacts (making money), but for the negative (pollution). Cap-and-trade is better than what we have now, but it's subject to market distortions - just look at how Russia makes out under Kyoto protocol, thanks to their 1990's recession.

Jan 06 02:17 AM

[Adron:]

Just getting rid of social security for people under - let's say 40, cuz then they can get rid of mine too, would be AWESOME.

Even with market fluctuations like right now, if I was retiring now, and saving moderately in a 401k, I'd still have more in the 401k even after this MASSIVE market collapse than I ever would in social security. Aside from that one can save 3-6% and have it doubled by their employer and retire good on a 401k. However the Government backed social security at 7.5% out of pocket (by force, no choice given) and 7.5% taken from the employer - even small business, is insane. One can't even retire on that.

15% lost, not able to retire.
6-12% taken by choice, retire comfortably.

WTF? That's a no brainer, why are we still paying into social security.

Jan 07 09:12 PM

[Diegojames:]

FELLOW AMERICANS
Why did I spend time in a university to learn how to treat sick people and work for 45 years to have it all removed by lack of Congressional oversight over Wall Street?
Why did Wall Street leadership allow these swaps,CDO and sub prime to take precedence over true financial projects such as improving power grid, improving power plants with lower emissions, funding wind power, building bullet or TGV trains(instead of money sucking airlines) and designing and building HYBRID CARS/TRUCKS/SUV/BIG RIGS? WE SUBSTITUTED FRAUD FOR research and PRODUCT DEVELOPMENT.
NOW that my 401 K is gone and you are removing social security. What is next.? Can I at least have a TENT like we used in the military during Vietnam or can I have a YURT voucher since I paid such a large amount of income tax over the decades???
Whatever political party you are in if you are over 60 let me know if you want to buy some farmland in OHIO(?) . we can grow food and live in YURTS.
Meanwhile. Waiting for new tech to save us ? Or a MASSIVE REBATE TO TAX PAYERS INSTEAD OF TO BANKS AND AIG AND WALLSTREET.
ALSO TAX REBATES TO people who put 20% DOWN ON THEIR ONLY HOME would be nice from the tooth fairy.
Long CVS, HE, Valero, COP,OI, ANADARKO,EUROTUNNEL,NO... SOUTHERN, ALCOA, DENNISON MINE,
The USA will work this out- have TRUST- REMEMBER the STRENGTH OF FALLEN FRIENDS FROM you Military Service, trust the Family strengths you might have, write Congress and DEMAND intelligence AND PUNISHMENT/ACCOUNTABIL... AND WORK LIKE THE WHOLE MESS DEPENDS ON YOU.....
DIEGOJAMES
NORTHRIDGE, CALIFORNIA

Jan 09 01:43 PM