H.J.Res.31 Homeland Security Conference Report

Michael Bindner, Center for Fiscal Equity,  prepared for the Subcommittee on Homeland Security Conference re: Boarder Protection Agency H.J.Res. 31, January 30, 2019

This is submitted as a way out of the border wall dispute.

In 2007, Raytheon was tasked with developing non-lethal active denial technology. From their 2007 press release:

Raytheon Company (NYSE: RTN) delivered its non-lethal Active Denial System 2 to the U.S. Air Force Aug. 31. Raytheon's Active Denial System is designed to use millimeter wave technology to repel individuals without causing injury. Active Denial System 2 is an enhanced, ruggedized version of the initial active denial capability that Raytheon built for the Air Force under the Office of the Secretary of Defense's Advanced Concept Technology Demonstration program....The Active Denial System emits a focused beam of millimeter wave energy that penetrates the skin to 1/64th of an inch, producing an intolerable heating sensation that causes targeted individuals to flee. The Advanced Concept Technology Demonstration program has conducted extensive human effects safety testing and extended user evaluations in field conditions. The program has focused on developing and fielding the U.S. military's first extended range, non-lethal, directed energy platform independent system. Under oversight of the Joint Non-lethal Weapons Directorate, the Air Force is designated as the lead service for the program....Raytheon's Active Denial System 2 provides military, civilian law enforcement, and security organizations with a truly non-lethal system that is optimized for situations where the use of lethal force may not be appropriate or warranted.

CBS news aired a report describing a previous segment on 60 Minutes. It can be viewed at   https://www.cbsnews.com/news/the-pentagons-ray-gun/

This system goes beyond using surveillance technology to dispatch Border Patrol agents to intercept intruders. It is a virtual wall and, when combined with detection systems, can be powered up as needed to repel unlawful immigration without building a physical barrier or requiring that the system be constantly powered up. It's very existence will deter travel outside official entry points.

The original contract has long since expired because ground commanders in Afghanistan did not wish to use non-lethal systems. Raytheon has a current One Acquisition Solution for Integrated Services (OASIS) contract vehicle Pool 3 Engineering for Military and Aerospace Equipment and Military Weapons, and Engineering for Naval Architecture (GS00Q14OADU328) Contact Ray Moehler, 571-250-1090.

A demonstration project could easily be fielded at some point along the border (without prior announcement of the test) to determine whether the system works as required, including a predicted decline in attempted incursions. It would, of course, be preceded by testing to confirm its non-lethality. It is not meant to be a death ray. Designing such a pilot project will likely provide a solution meeting the short term need to fund the government beyond February 15th. 

Full deployment of a border active denial system wall must be contingent on a permanent compromise. Such solutions have been hard to fashion. Prior agreements were dishonest attempts to embarrass the other side politically. Indeed, the manufacture of a concern for birthright citizenship was an obvious attempt to scuttle the last real proposal for compromise.

Compromise does not meet the needs of certain industries where the threat of deportation leaves undocumented labor powerless to complain about unsafe conditions and insufficient wages. There can be no justification for supporting such virtual slavery. Keeping food cheap at the suffering of others is distasteful. It must not be allowed to thwart reasonable provisions to legalize those within our borders and to let the market decide how many workers are needed in the future.

To end the incentive to maintain slave-like conditions in the food and construction industries, disallow current right-to-work laws, which are essentially right to hire undocumented worker laws in today's economy. Most employers will no longer seek undocumented labor at union wage rates and protections. Migrants must no longer be pawns in the argument between restricting immigration and resisting organized labor.

The most obvious solution is to allow undocumented migrants to apply for the status that fits their circumstances (up to and including permanent residency) without having to meet current lawful status requirements. Once this status is achieved, allow application for naturalization to proceed in normal course. To quickly manage the work load, empower local boards of election to process cases and order National Agency Background Checks with a processing fee not to exceed $500 per person.

New workers from Mexico and Central America must be given the same rights as Canadian workers under the North American Free Trade Agreement. That the same rights do not currently exist can only be explained by racism, classism and a desire to keep workers in the darkness.

To end migration from failed governments in Honduras, Guatemala and El Salvador, offer assistance in re-arresting gang members deported to their country of origin and returning them to the United States for incarceration and, as they mature, rehabilitation. Continued prison reform in the United States will certainly make beds available as non-violent offenders are released. Ending the war on brown people who use drugs will end the drug trade as well. No one in Chicago operates a large criminal enterprise to sell alcohol now that prohibition has been ended. Of course, further action on these fronts is outside the scope of the current issues.

Thank you for allowing me to contribute to the work of the Conference.

Protecting Americans with Pre-Existing Conditions

Comments for the Record

United States House of Representative

Committee on Ways and Means

Protecting Americans with Pre-Existing Conditions

Tuesday, January 29, 2019 - 10:00am

By Michael G. Bindner

Center for Fiscal Equity

Chairman Neal and Ranking Member Brady, thank you for the opportunity to submit these comments for the record to the Committee. As usual, let us preface our remarks in the context of our four part tax reform proposal.

•                     A Value Added Tax (VAT) to fund domestic military spending and domestic discretionary spending with a rate between 10% and 13%, which makes sure very American pays something.

•                     Personal income surtaxes on joint and widowed filers with net annual incomes of $100,000 and single filers earning $50,000 per year to fund net interest payments, debt retirement and overseas and strategic military spending and other international spending, with graduated rates between 5% and 25%. 

•                     Employee contributions to Old Age and Survivors Insurance (OASI) with a lower income cap, which allows for lower payment levels to wealthier retirees without making bend points more progressive.

•                     A VAT-like Net Business Receipts Tax (NBRT), which is essentially a subtraction VAT with additional tax expenditures for family support,  health care and the private delivery of governmental services, to fund entitlement spending and replace income tax filing for most people (including people who file without paying), the corporate income tax, business tax filing through individual income taxes and the employer contribution to OASI, all payroll taxes for hospital insurance, disability insurance, unemployment insurance and survivors under age 60.

The key issue for patients is the impact of pre-existing condition reforms on the market for health insurance. If people start dropping insurance until they get sick – which is rational given the repeal of mandates – and Congress does nothing private sector health insurance will be lost. This will require a bailout.

Resorting to catastrophic insurance with health savings accounts (another Republican proposal) would not work as advertised, as health care is not a normal good. While mandates could be replaced with a single payer catastrophic system, it will work.

People will obtain health care upon doctor recommendations, regardless of their ability to pay. Providers will then shoulder the burden of waiting for health savings account balances to accumulate – further encouraging provider consolidation. Existing trends toward provider consolidation will exacerbate these problems, because patients will lack options once they are in a network, giving funders little option other than paying up as demanded.

In what seems counter-intuitive, with the repeal of mandates, should coverage for the poor decline, the best option is to also repeal  pre-existing condition reforms. The only way to stop this from happening is to enact a subsidized public option for those with pre-existing conditions. I could end here except that enacting a public option opens wide the issue of funding.

Shifting to more public funding of health care in response to future events is neither good nor bad. Rather, the success of such funding depends upon its adequacy and its impact on the quality of care – with inadequate funding and quality being related.

Ultimately, fixing health care reform will require more funding, probably some kind of employer payroll or net business receipts tax – which would also fund the shortfall in Medicare and Medicaid (and take over most of their public revenue funding). We will now move to an analysis of funding options and their impact on patient care and cost control.

The committee well understands the ins and outs of increasing the payroll tax, so I will confine my remarks to a fuller explanation of Net Business Receipts Taxes (NBRT). Its base is similar to a Value Added Tax (VAT), but not identical.

Unlike a VAT, an NBRT would not be visible on receipts and should not be zero rated at the border – nor should it be applied to imports. While both collect from consumers, the unit of analysis for the NBRT should be the business rather than the transaction. As such, its application should be universal – covering both public companies who currently file business income taxes and private companies who currently file their business expenses on individual returns.

The key difference between the two taxes is that the NBRT would be the vehicle for distributing tax benefits for families, particularly the Child Tax Credit, the Dependent Care Credit and the Health Insurance Exclusion, as well as any recently enacted credits or subsidies under the ACA. In the event the ACA is reformed, any additional subsidies or taxes should be taken against this tax (to pay for a public option or provide for catastrophic care and Health Savings Accounts and/or Flexible Spending Accounts).

The NBRT would replace corporate income taxes and proprietary and pass through taxes and treat all business income the same. It would provide for a public option, the health insurance exclusion or fund single payer insurance.

The NBRT would replace disability insurance, hospital insurance, the corporate income tax, business income taxation through the personal income tax and the mid-range of personal income tax collection.

Collection of this tax would lead to a reduction of gross wages, but not necessarily net wages – although larger families would receive a large wage bump, while wealthier families and childless families would likely receive a somewhat lower net wage due to loss of some tax subsidies and because reductions in income to make up for an increased tax benefit for families will likely be skewed to higher incomes. For this reason, a higher minimum wage is necessary so that lower wage workers are compensated with more than just their child tax benefits.

For further  cost savings under an NBRT, allow companies to offer services privately to both employees and retirees in exchange for a substantial tax benefit. Employers who fund catastrophic care would get an even higher benefit, with the proviso that any care so provided be superior to the care available through the public option.

Companies who hire their own doctors and pharmacists and buy their own drugs would get a tax exclusion from single payer (third party insurance would be discouraged), and would negotiate with drug makers for lower prices, although this would leave small firms at a distinct disadvantage and would discourage such practices as franchising and 1099 employment. Still, on the whole, it would decrease cost while not discouraging innovation. Expanding the Uniformed Public Health Service into the Medicare and Medicaid markets (edging out HMOs) would also lead to cost cutting on drugs.

This proposal is probably the most promising way to decrease health care costs from their current upward spiral – as employers who would be financially responsible for this care through taxes would have a real incentive to limit spending in a way that individual taxpayers simply do not have the means or incentive to exercise. While not all employers would participate, those who do would dramatically alter the market. In addition, a kind of beneficiary exchange could be established so that participating employers might trade credits for the funding of former employees who retired elsewhere, so that no one must pay unduly for the medical costs of workers who spent the majority of their careers in the service of other employers.

Employer provided health care will also reverse the trend toward market consolidation among providers. The extent to which firms hire doctors as staff and seek provider relationships with providers of hospital and specialty care is the extent to which the forces of consolidation are overcome by buyers with enough market power to insist on alternatives, with better care among the criteria for provider selection.

CBO Budget and Economic Outlook, House and Senate Budget Committees

The Tax Cut and Jobs Act gave most people neither a real tax cut or jobs. The goal was to stimulate an already growing economy by giving tax breaks to "job creators." The reality is that these cuts went to asset speculators, as they always do. It does not matter what the asset markets do, they are their own master and their prices are about too much money chasing too few good instruments, which leads to funding such garbage as Bitcoin. Eliminating that inflation through bond sales is a good method, as is making such sales unnecessary through higher tax rates on the wealthy, preferably from an income and inheritance surtax.

Low tax rates on the CEO and Mega-owner class give them an incentive to get even richer by saving labor costs. If that savings were taxed away, labor costs CEOs would not seek economic rent to the detriment of their employees. Cutting labor costs eventually cuts purchasing power so much that the economy requires large worker debt loads to grow.

The TCJA is offset by the omnibus biennial spending deal, which increases GDP by every measure. To say otherwise is bad economics. The CBO needs to clean house and fire anyone who is operating on belief over fact. Indeed, the cuts in output from the shutdown confirm the truth of this proposition.

Low taxes for the donor caste do nothing for GDP, which equals Government Purchases plus consumption from government employees, government transfer payments to retirees and the poor and second order consumption in the private sector who provide services to government payees and themselves. Their consumption leads to business investment in plant and equipment.  While companies can certainly issue primary share offerings to the secondary market to finance investment, they could also use spare cash or issue securities or bonds.

The other elements of GDP are exports less imports. If imports are more than exports, foreign borrowers are providing goods to the US for our Treasury Bills. US Government Bond sales counter the asset inflation from tax cuts, especially if government spending over and above net interest rolled into new debt is more than the tax cut for the wealthy.

If taxes go up on the rich, it is safe to cut spending and the economy will grow at a nice 3% clip, which does not cause inflation to any great extent. That is what happened under Clinton until he cut capital gains tax rates (which fueled the tech boom) and it was starting to happen for Obama once he raised taxes on the wealthy in 2013. The steam in the economy comes from that spending and the new spending insisted on by Pelosi, which Ryan agreed to. That spending is why the economy still hums.

The tax used to pay back the debt without crashing the economy is the income tax (FICA goes to an insurance fund, although it is borrowed from).Transforming it to an income and inheritance surtax is the best way to balance the budget long term. Cash from an estate, but not the assets, are taxed as normal income when received or sold after a $100,000 standard deduction for joint filers, half that for singles. The ESOP exemption would be maintained. The surtax would be earmarked for debt reduction, starting with funding the retirement of the Social Security Trust Fund as baby boomers use it, the funding of net interest to stop the bleeding and war (both nuclear and imperialistic), which is usually funded by deficits.

Because we finance war with deficit spending, to get out of debt we must make the rich pay pay for it through higher taxes. The same is true for reimbursing the Baby Boom in retirement (in other words, now) and in shifting from rolling over interest payments to new debt. Payment of an income and inheritance surtax on all income received over $100,000 to fund these things while adopting a Goods and Services Tax and an Employer paid VAT for discretionary and social spending,will demonstrate why the rich need to pay more now  We do not have a per capita direct tax. It was never actually implemented though written into the Constitution.

The Sixteenth Amendment allowed a progressive income tax, which provided a revenue stream that could handle a larger debt. The liability for the debt, therefore, is not per capita but a function of income tax paid. Currently, $1 paid means $13 owed in debt. $10,000 paid means owing $130,000 in debt. $100,000 paid means a debt load of $1,300,000, etc.

Not paying now makes the problem worse and leaves it to the children of large income tax payers. We suspect that when this is made obvious, most will happily do their share. To be clear, per capita measures of responsibility for the debt are erroneous because it could never be retired that way and poor families cannot afford to pay their share. We do not have a head tax. If we did, the debt would not exist and we would be speaking Russian.

Making debt finance a matter for income surtaxes means that everyone else, including the wealthy, must pay more using a consumption tax. It could all be loaded onto a Subtraction VAT/Net Business Receipts Tax, which would leave most delightfully unaware of a larger tax burden, however a GST is more easily border refundable and a carbon tax serves its purpose as well, with both financing current military and civil domestic spending (from military bases to the FBI).

The SVAT would fund social spending, from an adequate refundable child tax credit of $1000 per month per child (which is in line with the USDA estimate for the actual cost of raising a child), which is four times more generous than the Harris proposal. Using an SVAT also implicitly (if not explicitly) burdens childless taxpayers with lower salaries, but also takes away the incentive to fire older workers with children because it is easier to replace them with two recent graduates.

This would especially be the case if we shift longevity funding to ownership of preferred or voting shares in employer stock.This makes it possible to bring more democracy to the workplace and to use such firms to shift social spending to the employer from the government, taking away the sting of higher rates. Crediting retirement savings (both public and private) through the SVAT at an equal basis rather than linking it to income, allows for higher collections and more generous distributions, including to current retirees and the disabled.

Why I am a Democratic Socialist

I disagree with such neo-liberal claptrap. I will say why below. It is why I am a Democratic Socialist rather than a Clintonian, or worse, a follower of von Mises and the Austrians.
https://t.co/GIbmXvoMx2

 I ran the numbers. If the deficit (net of net interest as % of GDP) is higher with tax cuts then there is better growth the next year than with lower deficits. This is s because bond sales eat the tax cut and stop asset inflation. The more you take from rich, the higher government purchases.

The more money households have for consumption (first order gov employees and transfers and second order - multiplier, from private sector households) the more private sector investment funded by primary share sales and debt.

Asset market activity is pure inflation. Rein in such speculation with a VAT on asset sales of at least 25%. That should also be high income & inheritance surtax rate, all of which will fund war (hot & cold), net interest and debt reduction as ideal tax reform. The other components are a goods and services tax to fund domestic military and civil sending on a regional basis (with a balance requirement so more spending automatically means a higher rate) and a subtraction VAT to cover all social and educational spending, including a much higher child tax credit.

Higher income taxes under Democrats makes lower deficits hold at 3% because asset inflation is lower and government purchases keep economy moving at a nature growth rate, at least until the Austrians come back into power and mes the whole thing up with boom and bust cycles which require huge deficits to both recover from and keep in check.

That deficit management helps the economy comes from the view that both sides must have something to say. Supply side has nothing to say. Growth, by definition requires more spending. Higher taxes fund that and pay down debt.

Higher rates prevent CEOs from charging economic rent through lower wages, benefits and union rights, which they then use to pay themselves and their shareholders in the secondary market (who are busy trying to inflate it, as if that were a good thing. It is not. High rates transfer all savings to the government, so no savings are attempted. The only problem is that sometimes wage and price inflation occurs. If this happens, slightly lower tax rates could control but not eliminate such inflation.