Why Federal Investments Matter
House Budget, Why Federal Investments Matter: Stability from Congress to State Capitals, January 15, 2020
Federal support for highways and pollution control is would be funded with our proposed carbon VAT (for receipt visibility for more informed consumer choice) and our attachment on infrastructure. The key to making such taxes adequate, aside from recognizing the inelastic nature of gasoline prices, is to bring back “pork barrel” spending. We repeat previous material provided to the committee on infrastructure in March of last year in Attachment One.
Some states receive support through military impact aid. Support for Native Americans is also important, although the biggest support for them may be in taking government out of the equation, allowing them to deal directly with extraction and ranching interests. Too much money has been lost to them in translation. It is racist to infer that they cannot manage these affairs themselves or that ranching interests need a buffer to do so.
We have attached excerpts from our recently released paper on the debt, Squaring and Setting Accounts: Who Really Owns the National Debt? Who Owes It? These include comments previously submitted to the budget and revenue committees on our tax reform plan and the national debt.
Our main tool in providing for human services is an employer-paid subtraction value added tax. This levy would be used more to channel tax expenditures to employees rather than through categorical or block grants. The most important feature is an expanded refundable child tax credit, which would be distributed with pay and set to provide income at middle class levels.
The S-VAT could be levied at both the state and federal levels with a common base and tax benefits differing between the states based on their cost of living (which would be paid with the state levy). The federal tax would be the floor of support so that no state could keep any part of its population poor, including migrants. It is time to end the race to the bottom and its associated war on the poor.
The S-VAT will also facilitate human capital expenditures, with credits to support tuition, wages and benefits for low-skill workers from ESL and remedial education to apprenticeship. These benefits can be used in cooperation with existing workforce investment boards, community colleges and economic development agencies.
Private education providers should also be included in the mix, including and especially the Catholic education system. Blaine Amendments need repeal, opposition to unions ended and a focus on non-collegebound students encouraged.
Medicaid for senior citizens and the disabled is a huge contingent liability for some states. In his New Federalism proposals, President Reagan offered to assume these costs in exchange for state funding of all other federal support. The first half of this proposal should be implemented in the form of a new Medicare Part E with no requirement for local funding.
The remainder of health costs would be paid through employer subsidies to low-wage trainees, as described above through an S-VAT, with state goods and services taxes (invoice VAT) covering cash, food and health benefits for unattached non-workers until they can be placed in the appropriate employment or disability program (including substance abuse intervention).
Increasing the general wage level, through higher minimum wages, will remove workers from poverty. The concept of being a member of the working poor should be banished from the national conversation with an eventual $20 minimum wage for both employment and training program participation, starting with $15 immediately. This wage level should adjust for inflation automatically. The best support for state budgets is to make sure that everyone is trained up to their potential.
Tax credit support for families is a better recession circuit breaker than waiting for the Congress and state legislatures to act, although increasing the child tax credit (which should be inflation adjusted) is the best way to provide immediate stimulus, as do higher Food Stamps (which would be mostly repealed by a higher CTC).
The other circuit breaker in a recession is increased income taxation on the wealthy. Recessions do not happen, as Marx and Schumpeter posited, from overproduction or a business cycle. They come about because the wealthy have received tax breaks which encourage asset inflation and questionable investment (often with an assist from the Federal Reserve so that such investments may be migrated to Main Street). Higher income tax rates take money from the savings sector so that the consumption sector can recover (even without government subsidies).
Higher taxes on the wealthy are beneficial to the economy, now and in the next recession, because they take money out of asset inflation in the savings sector and can then be used to increase spending on the elements of GDP: government purchases, household consumption, net exports and plant and equipment investment (which is not part of asset speculation, as supply side economists falsely assert). Again, please see Attachment Two.
A recession is inevitable because tax cuts and monetary policy are fueling asset speculation while fiscal policy is not. The current speculative toy is crypto-currency, especially Bitcoin. Bitcoin is starting to attract poor people. Coin collection machines now allow being paid in Bitcoin rather than in store credit or cash. Criminals also love it too. It is being sold as a way to invest and grow rich. There is even a fancy name for it: quantum finance.
Dealer claims that Bitcoin has big rises and smaller crashes simply proves the point that we are dealing with a legal Ponzi scheme. When the top of the food chain cashes out and everyone else realizes that they own a worthless product.
In the current bond market, properties that have been seized in foreclosure have been purchased with private equity and are so heavily leveraged that they cannot be sold until the holding company files for bankruptcy in the next Great Recession. See Homewreckers: How a Gang of Wall Street Kingpins, Hedge Fund Magnates, Crooked Banks, and Vulture Capitalists Suckered Millions Out of Their Homes and Demolished the American Dream by Aaron Glantz, who should be called to testify.
The C-SPAN Book TV discussion with Mr. Glantz will give the committee a heads-up on what such testimony would include. See
The long and short of it is that many now have to rent or own leveraged properties. Our absentee landlords have cashed out and left others to bled us dry. They essentially own us because we have to work harder and longer to have a place to live while those who have cashed out live in gated and high-end assisted living communities. In the last year, Exchange Traded Funds have been all the rage. Who wants to bet on where the latest pool of junk is hiding?
We suggest holding hearings as soon as possible to deflate this cancer before it kills the economy.
As we have stated previously, our budget process is badly broken. Our solutions to this ongoing crisis are again presented in Attachment Three. These also include why the Tax and Job Cuts Act (not a typo) aggravate the problem. We need more spending, not less, on both entitlements and discretionary programs. The proposed cuts will make asset inflation worse by freeing up more money to leverage the schemes described above.
The 2018 election has made Administration spending cut proposals dead on arrival. If the Intelligence Committee obtains testimony from investigations underway by the Southern District of New York regarding the President’s handler in the current impeachment trial, possibly arresting him as well, the proposed cuts will be a thing of the past. Vice President Pence will prove more reasonable and is unlikely to retain the Acting White House Chief of Staff. Mr. Mulvaney is likely the force behind the proposed cuts and Mr. Pence was known as a compromiser in his time as Governor of Indiana. Should he be implicated in the current scandal, the ascendant Madame President will surely withdraw any new spending cut proposals and work toward repeal of the ill-advised Trump-Ryan tax cuts.
Attachment One - Our Nation’s Crumbling Infrastructure, March 6, 2019
Attachment Two – Excerpts from Squaring and Setting Accounts: Who Really Owns the National Debt? Who Owes It? - December 2019
Attachment Three– The Budget Process, February 27, 2019
posted by Michael Bindner at 10:00 AM
0 Comments:
Post a Comment
<< Home