Introduction/Guide to Reading My List of Proposals:
This is my devised list of Economic proposals. I have received inspiration for my proposals from various sources, but unless otherwise noted, each of my ideas is completely original. I have also focused more on the expression of my ideas rather than rhetorical utilization of my language. As a result, my work may have a few grammatical errors and may sound overtly colloquial at times. I apologize.
I would also recommend that my piece be printed out and read due to its text heavy nature. It can be copied and pasted onto Microsoft Word and printed from there. I tend to find it much less taxing to read a paper article than an online article.
Also, since I realize my work is quite long, I would like to note which proposals I deem most essential. My most critical proposal is the one titled Welfare. Read it before reading either of the others. Also close in importance and originality are the proposals titled The Employment Bureau, and A Nuanced Solution to Outsourcing.
These three are by far the most original and the most integral to my overlying plan. However, I would love for anyone to read my piece in its entirety and would greatly appreciate some feedback as well.
-Good Luck, Yousuf Hafuda
Cut military spending: Since the United States already has a military force powerful enough to destroy the World a few times over, there is no need for expansion. Much of the money spent on Military expenditures could be utilized elsewhere, and cutting it could help curtail the widening deficits.
Furthermore, Military cuts do not hinder the economy like other cuts, because they are not tied to the well-being of the average American. Sure some people are employed by Northrop or Lockheed Martin, but a downsizing of both our costs and a complete pullout from the Middle East could help the underlying economy and the overall health of the United States.
If a military is designed to parry attacks, then our military has done its job. Once the Military is used to infringe on the rights of other people then there is a problem.
The United States no longer faces a potent threat in the same way it did in the 60's with the USSR. Thus, a downsizing by the World leader would induce other countries to follow suit and create a domino effect that makes the world a whole lot safer. Sure, a world without Military is unlikely and imprudent, but a world with excessive military powers is the worst of them all.
Ban Securitization: It must be made clear that the reason why bankers behaved irrationally leading up to 2008 is because of flawed incentives. People respond to incentives, and the crux of the financial crisis lies in the lack of proper incentives. The traditional method of banking used to be as follows: Banks give out loans. They are attached to these loans and eventually receive (or do not receive) payment for the loans. Thus, banks loaned money to candidates they thought would eventually pay them back.
However, what was once a functioning system was unscrupulously replaced in the 1980s.and more prominently in the 90s. Instead of being attached to their loans, banks were free to sell their loans as investments.
The aim of this new approach was to spread risk so that an honest bank would not be hindered by extraneous circumstances. However, what began to happen was the natural tendency of banks to sell faulty loans as securities and label them as secure.
Since selling the loan to duped investors meant the bankers would receive the money for the loan before it was paid back, their path to maximizing profits involved handing out as many loans as possible.
The banks were only as successful as the amount of loans they issued. To achieve this, they began to sell loans to virtually any customer with a social security number. The rating agencies, who were established to rate such securities, surprisingly granted the majority of these exotic investments a AAA rating.
The truth was that these loans were extremely risky. The banks knew it, and so did the regulatory agencies. Yet unfortunately, investors did not know this, and found these investments to be a great bargain. They were secure, and provided a high return on assets.
The failure of the rating agencies to rate these risky loans accordingly also stems from flawed incentives. For the most part, these agencies were paid by the banks. Thus, each of the agencies competed for these funds by rating their investments favorably.
The widespread use of securitization and its abuse in fact betrayed its initial purpose. Securitization was meant to spread risk so that an assiduous bank would not suffer from factors that they were not involved in. Ironically, the very aim of securitization led to its downfall. So many banks adopted this highly profitable and highly risky method of business, that the risk had been spread to the point where good banks were in fact hindered by extraneous factors.
Securitization serves absolutely no purpose in society. Banks must learn that maximizing profits must involve ethical practices. Securitization promotes the very opposite of this, and it is why we must rid ourselves of this inherently flawed method.
Increase regulation: This point should be a given yet unfortunately it seems there remains an ensuing debate regarding its implementation. I will not dwell on this topic for too long, as I have already discussed the majority of the points regarding this topic in my article on the crisis itself. I will say this though. Regulation establishes rules that must be abided by.
There is a reason why there is the existence of such rules. They place restrictions on what can and cannot be done. History has shown us that without the existence of such rules there becomes the tendency to commit unethical infractions. A prime example would be the implementation of child labor. If laws hadn't been instituted outlawing child labor, companies would still be exploiting it.
The FDA is another example, and there are countless others. Basically, rules exist because they are necessary. The argument that a reduction in regulation will lead to a more robust economy is the same fallacious assumption that has been proven wrong countless times.
Even if it does increase economic output it decreases Americans' level of freedom which is a terrible trade-off. We currently have a shortage of regulations in our country. To promote the safety, fairness, and well being of capitalism and those under its system, we must impose regulations to ensure just that.
Welfare: This will be by far the longest section as it comprises the majority of my propositions. Like Robert Reich, I am in favor of a reverse tax. However, I have my own ideas on its implementation and integration in our overlying economic system.
The philosopher John Rawls once stated that a society must be conducted such that the absolute worst circumstance one can be in a society is bearable. I agree with this statement, and think it is essential for the establishment of a fair society. However, he also noted that inequality is often beneficial for society, and so it should be maintained for that sole purpose.
Under this system a clear, well established, impermeable poverty line is to be set by the government. This line is to be determined by economists who calculate the cost of living in the United States and ensure that every member in society will at least survive with the bare minimum. In order to ensure that this poverty line is not breached, the reverse tax must be implemented.
It works as follows: There will be a set poverty line that is to have already been established. Unlike the unemployment system, or tax cuts which redistribute money indirectly, this will be a direct method of redistribution. If an individual is under the poverty line, they will be given funds by the government to ensure that they do not fall bellow this level.
Let us assume for practical purposes that the poverty line for an individual is $15k. Theoretically, no citizen should be allowed below this threshold. So if an individual makes $0 yearly, they will end the year with $15. This method will probably receive criticism and will be lambasted as an easy way out for lazy citizens. Although I happen to believe that citizens do not consciously choose to be poor, I acknowledge that government help can prove problematic and can provide for a lack of incentive.
In order to remedy this, we ensure that a citizen who opts for an otherwise unsatisfactory job is adequately compensated. I could spend the ensuing paragraphs explaining a highly abstract concept, but instead I will provide graphs, after which I will provide corresponding explanations. Simply keep in mind that the entire purpose of such a convoluted system is to provide incentive, especially for unsatisfactory jobs(which are currently the most plentiful.)
Represented above is a chart displaying the implementation of the reverse tax. If a citizen makes absolutely nothing, they will be have an EE(eventual earning) of 15k. However, if someone decides to take a sub-par job that pays a paltry 10k a year, they will have an eventual earning of $18.3k.
The idea is that the individual who decided to take an unsatisfactory job is rewarded and makes more than the individual who does nothing. This provides incentive for even a recently fired white collar worker to temporarily accept a low paying job because of the financial incentive.
The chart also displays two clear and vital trends. The EE correlates with the IE(initial earnings), and the government contribution has an inverse correlation with the IE. In short, the citizen makes more money the higher job they take, and the government's contribution steadily decreases as the IE increases.
When a citizen makes 0k, the government contributes 15k, but when a citizen makes 12k, the government contributes 7k. This contribution continues on its downward trajectory until 22k, at which point the government stops redistributing wealth.
What is crucial to keep in mind is that at no point is it more financially rewarding to accept government aid. This creates for a system in which the government continues to help citizens but does not lessen the incentive to seek and keep work.
Since methods of redistribution will be direct, several government roles can be demolished. Unemployment benefits will no longer be necessary as a result of the direct redistribution. The costly and often ineffective institutions of Social Security, Medicare, Medicaid, and more recently ObamaCare will also be superfluous.
Social Security will not be needed because of direct redistribution.(Redistribution for seniors will be nuanced, but will work much like the general redistribution system I have proposed. I have not devised a plan for retirees as of yet.)
Despite the demolition of programs that offer Universal healthcare, the healthcare system will become nationalized. Personally, I happen to believe that medical care is an area that should always be handled by the government. The goal of a corporation is to make profits, and the the goal of medical company must be to care for its patients. These are two contradicting goals which highlights why the government should run our health care system.
A nationalized healthcare system does not require Universal health care however, and citizens will still have the choice to purchase medical care if they want to. However, unlike the current system, each citizen will have choice on whether they wish to purchase medical care. In calculating the safety net, economists will take into account the cost of medical care and ensure that even those at the poverty line can afford it.
In order to ensure that the brunt of the cost does not lie with the government; (since the health care system will be nationalized) Healthcare will run much like the USPS. It will function like a business and attempt to balance its books, but it will do so with the realization that in areas like healthcare people come before profits. Such is the system that can solve many of the omnipresent problems in our flawed healthcare system.
The Employment Bureau: This expansive welfare system will lead many to berate it for it socialistic aspects. They will point out that one may very well choose to live with the bare minimum, with their basic necessities guaranteed.
Although this problem has been addressed slightly through the utilization of incentive, it unfortunately remains. In order to eradicate such an option for straddlers, the government must play an active role in ensuring that its citizens are actively pursuing jobs. The only way in which this can be successfully implemented is through the establishment of a government institution that does just that. This institution is to be titled, the Employment Bureau.
The Employment Bureau is to be tasked with two primary jobs. It will ensure that citizens who are unemployed are actively seeking work, and it will help unemployed citizens find work. These seem like difficult goals to achieve, but through the employment bureau, they are achievable.
High schools hire what are called counselors. These counselors are tasked with various jobs. Among these jobs is to help their students through the high school experience. Counselors must ensure that their students are on track for graduation, and that they are maximizing their chances at going to college. The Employment Bureau will accomplish much of the same tasks, but will do so in a differing context.
The Employment Bureau will simply comprise of a reminiscent system. The government will hire counselors who will have the sole job of monitoring the progress of the Unemployed. They must simultaneously ensure that efforts to find a job are sincere, and they must aid citizens in their search.
In order to reduce government costs, these counselors can operate in existing government facilities, like police stations, courts, and city halls. If the government does indeed wish to augment its infrastructure spending, it may create independent government facilities for the Employment Bureau. This trivial detail can be dealt with as is seen fit.
When a high school sees a boost in enrollment, its counselors often feel overwhelmed. Likewise, during difficult economic times, officials at the Bureau will also feel overwhelmed. In order to mitigate this effect, the Government must hire part time counselors to work for the Employment Bureau when there is an increase in demand.
This will serve two purposes. It will ensure that the Bureau remains effective when it is most needed, and it will slightly mitigate the effects of an ailing economy by augmenting its workforce during lean economic times.
The modus operandi for this institution will be more or less what one would expect. However, there are a few nuanced aspects that must be kept in mind to ensure the Employment Bureau's effectiveness. It must meet with unemployed members frequently enough to remain aware of developments.
I would recommend a time period no longer than once a month. Then, it must also retain its regulatory purpose, while remaining a benevolent organization. The primary purpose of the Employment Bureau will be to help the unemployed find work. However, it must also ensure that citizens are not taking the easy way out.
Unemployed citizens will be given meeting times that will be scheduled by the Bureau itself. If a citizen cannot make it to this meeting, they must notify the Bureau and reschedule. If a citizen misses more than one meeting with not communication, they will subsequently lose the privilege of remaining above the poverty line.
Thus, the only way in which a citizen can breach the poverty line is through a self-inflicted wound. However, the assumption is that no individual will do such a thing to themselves, and as a result we will be left with a society in which each of its members have the right to live a bearable life.
Taxation: Naturally the taxation system will be progressive, and will require wealthier individuals to give back to the society that made them who they are. Taxation will be conducted based on affordability. Simply put, the rich must pay more taxes. This is not a result of a vehement attack the rich but rather the realization that the rich can afford to pay more in taxes, and should.
I highly disagree with the concept of tax brackets. This is because each individual is in a unique situation based on their income and thus should not be grouped with a group of people who make a similar income. Thus, I am in support of a rolling bracket, in which the tax rate increases progressively as the income increases.
Since I am not a mathematician, I do not know of a formula that will achieve this but I assume one can be created. This would largely solve the prevalent issue in the United States that a member of the upper-middle class pays the same rate as a member of the upper echelons of society. Furthermore, it will achieve the main goal, which is the calculation of taxes based on affordability.
Close Loopholes: This point should be quite apparent, but I wish to include it simply to stress its important. Ostensibly, it appears as if we have a progressive taxation system. However, once one looks at the actual data, it overwhelmingly proves that the innumerable amount of tax cuts have provided for a system in which many very wealthy Americans are paying less taxes as a percentage of their income as members of the middle class. This is simply perverse, and must be remedied, hopefully through the implementation of the reverse tax.
The Government cannot fire workers during a fragile economy: This should also be readily apparent, but when the American economy is contracting, or is enduring a fragile recovery, there is no discernible reason as to why the Government should cut jobs. Even if the government insists on making budget cuts during a downward economy, these cuts should never include the firing of government workers. When an economy is sputtering, the entire efforts of the government should be focused on improving the economy. The government must not exacerbate this problem by cutting jobs during a weak economic climate.
A Nuanced solution to Outsourcing: The very nature of the problem of outsourcing lies in the idea of incentive. Corporations often have the sole aim of making profits, and will do what is necessary to maximize profits. The United States has become a developed country in which wages have risen to unprecedented levels.
Unfortunately, the unintended consequence of this is that corporations can now go to foreign countries for cheap labor. This is only natural. If a corporation can find a way to maximize profits and minimize expenditures it can and should take it. The notion that corporations should "take one for the team(The US)" and continue to hire American workers with no financial incentive is fallacious, and we must understand that it is not viable.
Lamentably, there is yet another point we must keep in mind about outsourcing: there is no clear solution. Politicians do not like to admit this because it lessens their chances at winning elections, but it is invariably true. Logically, there are a few solutions, but these fail the test of viability.
We could take measures that will reduce American wages to compete with developing nations, but this is a step backward not forward. We could also subsidize American jobs such that a corporation hiring an American worker will receive enough compensation to the point where they will be more financially lucrative in the United States.
However, this is counter-intuitive to the idea of free enterprise that we Americans espouse and would be far too costly. However, we can take measures that will at least allow us to gain from outsourcing practices that are hurting our country.
American workers are taxed on their income, and these taxes are often unavoidable. Such is the cost for living in a great country like the United States. The very idea of paying taxes is that a citizen gives back to the country that protects and enhances their life.
When an American Corporation employs foreign citizens in other countries, they too owe something to the American entity. However, it is not allowed to tax those citizens because they are not natural citizens. Thus, the Corporations should be taxed precisely because they are benefiting from the utilization of cheap labor.
Essentially, the Corporation is taxed because it is making the choice to extend American Enterprise to a foreign nation, and it is unfair that natural citizens should pay taxes on this benefit yet foreign citizens remain unaccounted for.
Thus, the simple solution is to tax foreign workers American rates but ask for the corporations to pay those taxes. This ensures that the United States receives compensation for lost jobs and that these citizens are recognized as an extension of the American workforce. This provides incentive for corporations to hire in the United States namely because US citizens pay their own taxes.
Corporations must also be held accountable for their decision to hire foreign citizens. Since they make the choice to further their profits by exploiting foreign workers, they must realize that this is not tantamount to hiring citizens of the United States. Perhaps the way in which Corporations benefit the most from foreign labor is an increase in profit margins. If Nike exports jobs to Indonesia to make jerseys, they may pay around a dollar for the production of each jersey. However, they decide to sell the same jersey for around $100 dollars.
In response, the United States should impose a protective tariff for the production of goods outside the United States. If a company decides to hire US workers and sell a product in the US, they will be asked to pay a lower tax rate. However, if a corporation employs foreign workers, they will be taxed a higher tax rate. The idea is that this creates for an incentive to hire in the United States, namely a lower tax rate.
The United States has a widely coveted consumer market, one that should not be taken for granted. If an American corporation wishes to add value to a foreign country, it must make up for this by adding value through the United States, precisely through a higher tax rate.
Then, if an American corporation seeks elsewhere to sell its products, it will realize that it will be taxed on foreign expenditures as well. If a corporation wishes to sell its products in China because of a lower tax rate, it will realize that its expenditures in China will also be subject to taxation from the United States as well.
In short, the aims of these measures are to create a situation in which the most lucrative situation is the make and sell products in the United States, and this should boost the United States Economy.
Corporations have also decided to hold their cash elsewhere, and this is also detrimental to business in the United States. Many of these corporations retain this cash in foreign countries in search of tax havens. A United States corporation must invest its money in the United States, and if it does not keep the money in the US it cannot invest it there.
Thus, corporations must be taxed for foreign assets. Essentially, they will be taxed to the point where it becomes more financially sound to return their money to the United States. This policy will be much more effective than the widely criticized 2004.(Why should Corporations be rewarded for tax evasion?)
The effects of these measures will be a clear increase in revenue, an uptick in hiring, an uptick in business in the United States, and a system in which fairness is achieved.
