How to Save the American Economy

[mrstickball]

MDMAlliance said:

mrstickball said:

1. Cut federal government spending. Preferably by 35-43% (the amount we're borrowing). Do this primarily by cutting HUD, SNAP, both DoE's, and Defense spending. Reform medicare/SS as much as possible to save costs.
I've talked to a lot of people about these issues and I would like if they could cut spending on these certain things.  However, there's actually a lot less that can be cut before you're royally screwing certain people over.  Such as for defense spending, the places that are usually cut are the payrates of soldiers and checks sometimes get sent to veterans for services they have received in the past.  (EDIT): I believe the word I'm looking for was "compensation"

 
2. Enact either a income-based flat tax, or fair tax. Do away with corporate taxes.
A very conservative answer, if I do say so myself.  This would essentially be a form of regressive tax.  A flat tax on income would impose a greater burden on the poor than the rich.  This wouldn't be a very good idea in many cases, unless you don't really mind taking more from those with less.

 
3. Sunset Social Security. Allow the younger generation to invest their earnings in something else other than government debt.
Is this something you want to add to our spending?  If so, this would mean an increase in taxes, right?  Or is this something that replaces our current social security system, which would screw over those who are currently on it for those who are currently paying for it?  Either way, someone has to pay.

 
4. Adopt a sane monetary policy - one that doesn't simply print money at every turn.
I believe this is a fallacy.

 
5. Reform and remove government regulations in every area of life. Promote a "regulation holiday" that would allow businesses to invest and invent new technologies without fear of government destroying their inventions.
This is a fallacy as well.  There aren't government regulations on every area of life.  This makes it sound like the government has a tyranny over businesses.  Have you ever heard of Monsanto?

 
6. End the war on drugs. Impose a reasonable tax on pot and other drugs.
A very controversial topic that could do more harm than good.

 
7. Repeal (and do not replace) Obamacare. Force insurance companies to compete against each other over state lines, and promote freer-market reforms.
What about "Obamacare" (Patient Protection and Affordable Care Act PPACA) is a problem, specifically?  Our current health care system is broken.  It's obvious by how large a simple hospital bill is, even if you were on insurance. 

 
Do those 7 things, and we'd be growing faster than China.

I am not so sure about that.

By the way, tariffs and protectionism do not work. Don't believe me? Ask the Great Depression. Look up Smoot-Hawley and the effect it played on kickstarting the depression. There's a reason the stock market crashed in 1929 - the same exact day Congress took up debate on (actually) approving such an insane bill.

I don't know for sure whether or not tariffs or protectionism will work, but this is a different time.  What gives you the impression that doing this now will have the same effects it had a long time ago?

1. If you end the wars and bring a good number of troops home, you'd cut a significant amount of money off of DoD spending. We're spending anywhere from $50 billion to $100 billion annually overseas. Throw in a few other cuts here and there, and saving $100-150 billion USD would be pretty easy.

 

2. When I talk about a flat tax, I am talking about a flat tax with a pre-built deduction, which would be a percentage above the poverty level. Anything below that is 100% exempt. Therefore, if the deduction was $30,000 and you made $50,000, only $20,000 would be taxed. If you made $100,000, you would be taxed on the $70,000. The FairTax comes with a built-in prebate system, in which the government would pay each family a fixed amount of money each month to offset the tax. That would ensure that it is not regressive.

 

3. No. I'm talking about transitioning away from the 9.6% to 11.3% of highly regressive taxes that are under the "payroll" heading. Every American is taxed up to $107,000 USD annually, which is put into Social Security. The huge issue with that is that Social Security is not solvent, meaning that you will not get that 9.6% to 11.3% back, unless there are huge, negative changes made to Social Security (such as raising the retirement age).

Furthermore, another issue is with how Social Security invests its money. Instead of investing in American businesses, it invests in American government. That is, buys T-bills and other government debt. That provides an atrocious return on investment, which is about 2.32% annually. That is barely above inflation. Therefore, if the system was changed to a defined benefit plan, which invested the payroll taxes into bonds, stocks, and other securities (which would be selected by the government, or whatever entity was preferred - many countries do this, as well as state governments), a much higher interest rate would be achieved, which would result in a solvent pension system. You could then easily lower taxes (since less money was needed to meet OASDI guidelines), or pay out more money.

 

4. How so? Our Federal Reserve just stated they are printing $40 billion dollars each month to buy mortgages and securities. The result is very inflationary.

 

5. There are government regulations over almost everything you partake in. Your job has many government regulations. The cars you drive have many regulations. The healthcare you buy has many regulations. One way or another, government regulations restrict lots of things you do. You may not realize it, but it absolutely does.

For example, I looked over car regulations yesterday - what it takes to get a vehicle on the road. Do you know how many tens of millions of dollars must be spent on compliance costs? The result is the monopolization of the auto industry. New competitors cannot afford the government mandates, so they fold up. It stifles technology. Therefore, my suggestion is to allow businesses to compete in a very free-market experiment. If they can't build a better car, give better health care, or build a cheaper, safer house, then keep the regulations. But if they can innovate, then let them.

 

6. Health care costs have shot up since ACA went into effect. It does nothing to contain costs. Nothing. As I said, a huge amount of costs in regards to health care are due to government regulations - about 50-60% of every dollar spent on health care in America goes to government mandates and requirements for care. Get rid of many of them, and you'd see costs drop by the aforementioned 50-60%. Do you know why universal health care is cheaper outside of the US? Because its easier to get paid than it is through our Medicare system. Fix that by deregulation and more competition, and it gets much cheaper.

 

7. Look at the history of tariffs and trade wars. The thing about tariffs is that it is a two-way street. If America hits China with tariffs on, say, toys, they will hit us with a tariff on food. We would suffer under such a scenario. Look at when American industry began to go overseas - it all started in the 1970s. The same time the EPA was founded, and began to create regulation after regulation. Even Steve Jobs begged Obama before he died to make regulations easier, so he could bring the jobs back from China.

The rebuttal is that "We don't want to destroy our environment! We need the protections!". That is true, but what would you rather have? Reasonable regulations, American jobs, and a better environment because we're dealing with the consequences, or no jobs, a Chinese wasteland, and keeping what we have today?