We need to get back to basics. You can’t get more basic than avoiding bankruptcy.
1/16/14: Until they allow unfettered inspections of their nuclear facilities and they dismantle their nuclear weapon programs, increase sanctions on Iran and North Korea.
6/22/13: Enact The Medicare Data Access for Transparency and Accountability Act, introduced by Senators Charles Grassley (R-IA) and Ron Wyden (D-OR). Make Medicare claims data publicly available. Require the Department of Health and Human Services Secretary to issue regulations making available a searchable Medicare payment database that would be accessible to the public at no cost. Data on Medicare payments to physicians and suppliers should not be exempt from the Freedom of Information Act. The lawmakers noted the legislation is intended to increase transparency and reduce fraud, abuse, and waste in the Medicare program.
2009: Enact the plan of the National Commission on Fiscal Responsibility and Reform. http://www.fiscalcommission.gov. Stop using the tax code to grant subsidies.
10/8/12: Notify investors that money market funds could “break the buck”. Once investors learn that their money market funds are not savings accounts, they are less likely to panic if the value of their money market fund declines. If the money market funds want federal guarantees similar to what the FDIC provides to banks, then the money market funds should pay insurance premiums, just as banks do, or retain sufficient capital to meet investor “runs on the bank”.
10/8/12: Enact guard rails for high speed stock trading. No federally insured funds or retirement funds (pension funds, mutual funds held in 401(k) accounts or IRAs) may be used for high speed stock trading.
If a FDIC insured bank engages in high speed stock trading, it may be done only by a separately capitalized subsidiary not insured by the FDIC. The same leverage limits which apply to individual investors (margin loans) should also apply to high speed stock traders. No high speed trading of options because options magnify leverage.
Healthcare spending will bankrupt the United States.
a) expand health savings accounts. If people spend their own money rather than someone else’s money, they will be more frugal. i) or enact “The Whole Foods Alternative to ObamaCare,” 8/11/09 Wall Street Journal, similar to the above. http://online.wsj.com/article/SB10001424052970204251404574342170072865070.html (2009)
b) or enact The Patients’ Choice Act by Congressman Paul Ryan (R-Wisconsin) which lets patients choose from the same health plans available to Congressmen. http://www.house.gov/ryan/PCA (2009)
c) 10/8/12: Lower healthcare costs. Increase the supply of nurses, physician assistants, nurse practitioners, nurse anesthetists. When the supply increases, prices decrease. Medicare and insurance companies should publish on the web prices of tests, medical equipment, physician services, surgeries, etc.
d) Wealthy people, such as AARP members, could help subsidize health coverage for younger, poorer Americans. In an eBay or Facebook system, a benefactor could see the photos of working class Americans and select the families they wanted to help. Or contribute now to Remote Area Medical which provides free clinics to the uninsured. http://www.ramusa.org (2009)
e) Raise more revenue for health care by imposing uniform cigarette taxes across the country. Currently cigarette taxes are different in different states, so organized crime smuggles cigarettes from low tax states to high tax states. The federal government should add an excise tax to equalize the price of cigarettes in all states, dedicate the funds to a healthcare trust fund, say, to pay for Medicaid or community clinics, and eliminate a revenue stream for organized crime. (2009)
f) move Medicaid patients to managed care. If costs are reduced and we still have Obamacare, move patients to managed care. (5/8/10)
g) if everyone lost weight and exercised more, health costs would decline. A salad costs more than a Big Mac. Stop subsidizing the production of meat, milk, cheese, grains, sugar and alcohol. (5/8/10)
10/21/12: abolish payroll taxes and fund Medicare and Social Security with a new sales tax. Exempt groceries, medicine, etc. from the new sales tax. Send the funds collected to actual trust funds dedicated to Medicare and Social Security which the politicians could not spend.
2009: We had a real estate bubble and bust because they made loans to anyone who could fog a mirror. Liquidate or privatize Fannie Mae and Freddie Mac. No more crony capitalism! Require 10%-20% down payments for mortgages.
12/16/12: I like TripAdvisor and Rotten Tomatoes. Let’s publish a website where a mentally ill person or his parents can post “Please do not sell me (him) a firearm.” Dealers can search the website for the person’s name before selling him a firearm. Only firearm dealers could access it, which would preserve the person’s privacy. In certain states, a psychiatrist can report a patient’s violent tendencies without breaching confidentiality protections. Or the psychiatrist can ask the patient for permission to post on the website and have the patient sign a waiver of liability. Voluntary action by private citizens does not violate the Second Amendment, which only limits government action.
Government should pick up the trash and patch the potholes.
1) National defense is a basic duty of government. (Article I, section 8 of the Constitution) It is obvious our armed forces are over-extended. We need 100,000 more soldiers in the Army and Marine Corps. Possible threats may require naval blockades of Iran or North Korea so the Navy needs more ships.
2) Fighting crime is a basic duty of government. We should increase the budget of the FBI and forensic labs. The FBI has new anti-terrorism duties, but its budget has not increased. We need more DNA testing to link criminals to different crimes and to exonerate innocent prisoners.
3) The judiciary was established by Article III of the Constitution. Judgesï¿½ pay has not increased with inflation. We need to increase the pay of federal judges to maintain the quality of justice.
4) The Patent Office was established by Article I, section 8 of the Constitution. The Patent Office is overwhelmed with a 2 year backlog of patent applications. We need to:
– reform production quotas of patent examiners and open regional offices in locales with lower costs of living than Washington, D.C. (similar proposal adopted in June 2010)
– impose user fees. Like passports, if an applicant wants faster processing, she pays more. It is likely 20% of patent applications result in 80% of positive economic impact. Those 20% should receive priority processing. Applicants pay a toll for faster processing and for those who cannot pay the toll, a committee decides whether to reduce the toll. (similar proposal adopted in June 2010)
– establish bonus fund for patent examiners to improve the quality of patents. For each year a patent is not invalidated (up to, say, 5 years), the patent examiner gets a bonus each year.
– reduce frivolous lawsuits by amending the Federal Rules of Procedure to include an offer of judgment. If a litigant offers a settlement, the other litigant rejects it and does not recover more than the offer, then the rejecting party must pay the legal expenses of the offering party.
5) We must update infrastructure. We need to:
– repair bridges and roads. Fund with stabilizing gasoline tax. Price of gasoline may increase but it would not decrease. If actual cost of gasoline decreases, taxes increase to keep price stable. High gasoline prices discourage consumption. Buying less gasoline reduces the funds flowing to Hugo Chavez of Venezuela and Middle East terrorists. Stable gas prices make the auto market more predictable and help auto companies produce vehicles which people want.
– If gasoline tax insufficient, reduce earmarks and use the resulting savings, and also increase use of toll roads.
– update the air traffic control system with GPS technology. Sign on at http://www.smartskies.org. However, passengers must pay at least half of the user fees necessary to renovate the system.
-5/12/13. Privatize the Federal Aviation Administration. Users (fliers) would pay to modernize the air traffic control system.
– reduce traffic. Use congestion pricing; if you want to drive during rush hour, you pay a toll. Expand mass transit and reduce its cost for passengers. Fund with gasoline tax. This would reduce regressive effect of gasoline tax.
6) We need rational immigration laws (Article I, section 8 of the Constitution) based on market principles.
– There is a 5 year backlog to become a citizen. We need to impose user fees. Those who can afford to pay more get quicker processing, which shortens the line for everyone else. The delay is caused by background checks required since 9-11. User fees would pay for faster and more accurate background checks.
– We need a guest worker program. If unemployment is 5% or less, we allow more guest workers. If unemployment exceeds 5%, we allow fewer guest workers. Some argue that illegal immigrants drive down wages of American citizens and legal residents. If the average compensation in a particular occupation decreases, we allow fewer guest workers or immigrants to fill positions in that occupation.
– Mexicans wonï¿½t stop crossing the border until (1) Mexico adopts free market reforms, modernizes its economy, and creates more jobs, and (2) U.S. employers stop employing illegal immigrants.
– We should abolish quotas on work visas. If a business canï¿½t find an American engineer and wants to hire an engineer from overseas, the business can pay a user fee for a work visa, with the user fee fluctuating according to demand and supply.
7) We need to simplify the income tax system (Amendment 16 to the Constitution). See The Fair and Simple Tax Act (FAST Act), H.R. 5105. People making less than $40,000 would pay 10 percent; incomes between $40,000 and $150,000 would pay 15 percent and higher incomes would pay 30 percent. We could file our taxes on one sheet of paper.
8) 5/12/13: Privatize the U.S. Postal Service. Congress is blocking reforms which would help keep the service solvent.
Solving the financial crisis:
1) Require immediate full disclosure of excessive leverage and the capital of derivative traders. Require derivatives such as credit default swaps be traded on an exchange such as the Chicago Board Options Exchange (CBOE) or regulated by state insurance commissioners. Everyone must make full disclosure, including Wall Street firms, hedge funds and private equity firms. Banks pay premiums for deposit insurance, so derivatives traders must pay premiums to fund these outrageous bailouts. The AIG bailout has cost $183 billion, so derivatives traders owe U.S. taxpayers $183 billion. Ban credit default swaps unless investors own the underlying bonds. (Jan. 2009: House Agriculture Committee Chairman Collin Petersonï¿½s draft bill) The value of credit swaps cannot exceed the value of the actual bonds.
2) Directors and officers of companies (Bear Stearns, AIG, Lehman Brothers, etc.) that traded derivatives without sufficient capital should be barred from the financial industry, sued to recover restitution for shareholders, and tarred and feathered.
3) Directors and officers of companies (Countrywide) that made subprime mortgages without a down payment, verification of income, etc. should be barred from the financial industry, sued to recover restitution for shareholders, and tarred and feathered. If someone wants an ï¿½affordableï¿½ mortgage, they can apply for a loan, make a 10%-20% down payment and verify their income, like the rest of us. The Federal Housing Authority (FHA) should stop guaranteeing mortgages with less than a 10% down payment. Abolish the Office of Comptroller of the Currency (OCC) which sued to block states from regulating liar mortgage loans to borrowers who could not afford them.
4) Liquidate or privatize Fannie Mae and Freddie Mac. No more crony capitalism!
5) Issuers of asset backed securities should be required to file with the SEC, extensive detail in a uniform format about the composition of the original pools and their subsequent structure and performance, and whether they were sold as SEC registered offerings or private placements. By creating a centralized database with this information, the pricing process for the toxic assets becomes possible. Kenneth E. Scott (Stanford law professor) and John B. Taylor (Stanford economics professor), ï¿½Why Toxic Assets Are So Hard To Clean Up,ï¿½ 7/20/09 Wall Street Journal, p. A13.
6) Investing government funds by buying preferred shares of banks was correct. We needed to bolster the capital of companies who inherited impaired assets so that they could absorb any losses or have the ability to wait until the market recovers for those assets. Going forward, we should establish another Resolution Trust Corporation to take bad assets from banks and other companies. If we don’t want to create another government bureaucracy, have Fannie Mae or Freddie Mac buy the bad assets. Establish a reverse auction to establish the price of the assets. Holders of impaired assets could: (a) sell them in the private market and take the loss, (b) hold them to wait for values to recover and pay 5% dividends on the preferred shares the government bought, or (c) sell them to the new Resolution Trust Corporation and take the loss.
7) Because the ideal solution is to encourage holders of impaired assets to sell them in the private market, give buyers temporary tax concessions such as 0% or 10% capital gain tax rate if the buyer holds the impaired asset for at least a year. Alternatively, in order to attract private capital, the new RTC would issue shares tied to a liquidating trust of bad assets. If held to maturity, the government would guarantee no loss of principal, and the investor could reap whatever dividends or capital gains the shares generate from the restructuring or sale of bad assets. One advantage of Treasury Secretary Geithner’s Public Private Partnership Investment Program is taxpayers share in any gains.
8) Modify mark to market rules. Securities composed of mortgages should be treated the same way as mortgages actually held by the bank. If a bank had made the mortgage and kept it, and the borrower stopped paying, it would be classified as in default, delinquent, and after, say, 6 months, charged off. The mortgage would not be considered worthless immediately. Impaired assets, securities comprised of defaulting mortgages, could be marked down over the same time period regular mortgages are. Or if the impaired asset was supposed to pay $100 of interest and it is paying only $80 of interest, then the impaired asset should be marked down 20%. In addition, if the property is foreclosed and resold, a lender could recover some amount, say 50% to 66%, not $0, so the mortgage securities should not be valued at 10% of the original value.
9) We need to let the market work its magic. Do not modify mortgage contracts or stop foreclosures. This just rewards imprudent lenders and borrowers. People who could not afford the houses in the first place should surrender the keys to the bank and rent an apartment. The faster prices fall, more bargain hunters will bid, and prices will stabilize. This started to happen in the fall of 2008, but bargain hunters could not get financing. The Federal Reserve was correct to lower mortgage rates by buying more long-term mortgage backed securities. (Lawrence Yun, chief economist of National Association of Realtors, January 26, 2009 Barronï¿½s, p. 47) This move rewarded prudent borrowers who did not over-extend themselves to buy a house and kept current on their payments. The government should not extend the tax credit for first time home buyers; there is already too much government subsidy of the residential real estate market.
10) If credit default swaps or collateralized debt obligations are not involved, let the FDIC close banks. We have survived normal real estate busts in the past. One reason Japanï¿½s economy lagged for 20 years was it propped up zombie banks too long and failed to recognize reality.
11) Stop subsidizing residential housing. The FHA has run out of money, so it should stop guaranteeing loans. Increase down payment requirements.
12) Break up companies which are “too big to fail” or regulate them as though they were utilities. If they expect a government bailout, they have to pay insurance premiums, just as banks pay FDIC premiums. To prevent panics, give the Federal Reserve authority to decide whether to place a company in receivership and whether to appoint the FDIC as receiver.
13) Before the financial crisis, securitization had funded lending for 59% of mortgages, 50%-60% of credit card debt and 90% of auto loans. Make mortgage securities and asset backed paper more standardized and transparent. Disclose data on the underlying loans and borrowers in a uniform manner. Darrell Duffie of Stanford Business School. I would want to know what the down payments were (10%, 20% etc.) and the credit ratings of the borrowers. Impose banking regulations on structured investment vehicles (SIVs) by requiring minimum capital, regular examinations, and access to the Federal Reserve’s discount window. Gary Gorton of Yale University. 12/28/09 Barron’s, p. 25.
14) Use unspent stimulus funds to reduce payroll taxes by 50% for two years. (Newt Gingrich, 1/18/10 Forbes) Economist Robert Reich made a similar proposal (tax credit for employment taxes (Social Security, Medicare) paid on the first $15,000 of income of each employee). Scott Minerd, chief investment officer, Guggenheim Partners: reduce Social Security payroll taxes and pay for it by raising the retirement age. (11/8/10 Barron’s) Reducing payroll taxes would encourage companies to hire employees and reduce the regressive nature of employment taxes.
15) 11/26/10: Abolish payroll taxes and replace them with sales taxes to pay for Social Security, Medicare and Medicaid. The proceeds would go to trust funds which would pay for only those programs. Politicians could no longer use the funds for unrelated programs. Groceries and medicine would be exempt from the new sales taxes. Criminals and wealthy retirees would help pay for Social Security, Medicare and Medicaid benefits.
16) Reducing payroll taxes lowers a company’s cost of hiring a worker. The Democrats’ health care reform proposals would increase the cost of hiring a worker and therefore would cause higher unemployment.
17) Reduce unemployment by increasing the size of the pie. Ratify free trade agreements such as those with South Korea and Colombia.
18) Focus infrastructure spending on needs rather than pork:
a) build new ports or expand current port capacity,
b) modernize the electrical grid to reduce waste and increase efficiency. If we lower the cost of electricity, everyone benefits and more people will buy plug-in hybrid cars, thereby reducing gasoline use, pollution and greenhouse gases,
c) build more mass transit, not more highways, thereby reducing gasoline use, pollution, and greenhouse gases,
d) fund deferred maintenance on bridges, sewers, etc.
e) modernize the air traffic control system
19) Healthcare spending will bankrupt the United States.
a) expand health savings accounts. If people spend their own money rather than someone else’s money, they will be more frugal. i) or enact “The Whole Foods Alternative to ObamaCare,” 8/11/09 Wall Street Journal, similar to the above. http://online.wsj.com/article/SB10001424052970204251404574342170072865070.html
b) or enact The Patients’ Choice Act by Congressman Paul Ryan (R-Wisconsin) which lets patients choose from the same health plans available to Congressmen. http://www.house.gov/ryan/PCA
c) Wealthy people could help subsidize health coverage for younger, poorer Americans. In an eBay or Facebook system, a benefactor could see the photos of working class Americans and select the families they wanted to help. Or contribute now to Remote Area Medical which provides free clinics to the uninsured. http://www.ramusa.org
d) House calls cost less than emergency room visits. Set up neighborhood clinics with physicians, physician assistants or nurse practitioners who make house calls
e) Raise more revenue for health care by imposing uniform cigarette taxes across the country. Currently cigarette taxes are different in different states, so organized crime smuggles cigarettes from low tax states to high tax states. The federal government should add impose an excise tax to equalize the price of cigarettes in all states, dedicate the funds to a healthcare trust fund, say, to pay for Medicaid or community clinics, and eliminate a revenue stream for organized crime.
f) move Medicaid patients to managed care. If costs are reduced and we still have Obamacare, move patients to managed care. (5/8/10)
g) if everyone lost weight and exercised more, health costs would decline. A salad costs more than a Big Mac. Stop subsidizing the production of meat, milk, cheese, grains, sugar and alcohol.
20) Vote against politicians who received the most contributions from Fannie Mae and Freddie Mac, such as Senator Christopher Dodd (D-CT). Dodd also received sweetheart refinancing (no fees) of his mortgage from Countrywide. For the full list, see http://www.opensecrets.org/news/2008/09/update-fannie-mae-and-freddie.html
The top 10 recipients:
|Name||Office||State||Party||Grand Total||Total from
|Defeated: Dodd, Christopher||Senate||CT||D||$165,400||$48,500||$116,900|
|Defeated: Bennett, Robert||Senate||UT||R||$107,999||$71,499||$36,500|
|Bond, Christopher ‘Kit’||Senate||MO||R||$95,400||$64,000||$31,400|