This Plan is a two-fold attempt to build/construct the Best Economy possible. And the Best way to do this is to: (1) Maximize Consumption as much as possible (while still maintaining an adequate Tax Base for governmental expenses and obligations (the relevance of this to be explained, infra.) Such maximization of Consumer Spending (Consumption) will maximize Overall Production (of those industries, businesses producing/contributing to/involved with consumer goods and services) which, in turn, will maximize Employment. Again, all this is subject to maintenance of an adequate Tax Base for governmental expenses, obligations (the relevance of to be explained.)
Also, in addition to the hiring of more employees, this would lead to wage increases for many employees, greater business and corporate profits, dividends to stockholders, a greater tax base for state, local, and federal government. In short, Everybody Wins!!
As an aside, one cannot help but note that this Plan is the Inverse of Arthur Laffer’s “Trickle Down” Theory in that when a “sizable” tax break is given to upper-income earners, personal and corporate, those monies are reinvested back into The Economy through business start-ups, new factories, refurbishing of existing plants, purchasing of additional, modern equipment to produce new products and ALSO EVEN MORE of what’s out there! But here’s the rub–if the problem is where inventories in general are NOT being sold TO BEGIN WITH then more businesses/products (of the same) will NOT solve the problem. That is, where the problem is lack of consumer spending (easily identified by the amount of unsold inventory, statistics being kept by the GAO) then opening up additional similar businesses where there is existing competition is NOT going to solve The Problem! Instead, putting more cash in the hands of the Consumer is the most direct approach and fastest “way-to-go” to boost The Economy. I call this method, in honor of Arthur Laffer, The “Sprinkle-Up” Theory.
In contrast, The Laffer “Trickle-Down” Theory approach (popularly “Reaganomics” as we all know) actually, in practice, works best where entire sectors of The Economy need to be built from “scratch” or where sectors of an Economy need to be revitalized, overhauled with modern technology often in order to “keep up with the competition.” A prime example coming to mind when Reagan came into Office was Detroit: i.e., Lee Iacocca and the Chrysler Corp. on the verge of bankruptcy needing to “catch up” with Japan. Other examples where Arthur’s Laffer “Trickle-Down” Theory approach would have worked best would be where in the 1930’s under FDR, the United States, in general, was moving (being transformed) from a predominately agrarian society to an urban one where whole populations were moving from farms to towns and cities.
This is when entire sectors of society had to be built from the ground up where it was better to have massive sums of capital in the hands of “the few” so such monies could be pooled into large-scale business start-ups giving jobs to hundreds, thousands of out-of-work people. By the way, this is what’s happening in China today with their Belt and Road Initiative where cities not just infrastructure (roads, bridges, rail-lines, gas-water pipelines) are being literally built “from the ground up”. Which, by the way, is why China has reduced buying huge sums of Bonds (National Debt) from/for us. This fact will be discussed in the paragraph following (2), the relevance of which will be become readily apparent.
(2) The 2nd major category of This Plan (although many Foreign Entities/Nations especially China (until recently) already do) is to require foreign corporations doing business here selling their imports (which are in direct competition with domestic manufacturers producing the same goods or providing the same services) with a percentage of their profits (to be determined by study) to purchase US Treasury Bonds to finance our Annual Budget (and/or Infrastructure Rebuilding) which, in turn, will provide Long-term Low Interest Rate Stabilization and offer a Strategy to deal with Our Growing National Debt (which, btw, just surpassed the $22 Trillion Dollar Mark and will hit $30 Trillion in seven (7) years when Trump’s eight (8) year Tax Plan lapses (our Annual Budget now (incidentally) running in the red at about One Trillion per annum up from the 500-600 Billion we usually had been running short.)) The providing of Long-term Low Interest Rate Stabilization and Strategy to deal with Our Growing National Debt with this bond requirement, again, to be explained, infra.
Discussion of (1): To maximize Consumer Consumption (Spending) subject to proper maintenance of an adequate National Tax Base for governmental expense obligations is to (further) raise the Federal Income Tax Standard Deduction keeping in mind the absolute need to maintain proper National Tax Base Revenue. It is this author’s contention: Why tax that which would otherwise be spent immediately back into The Economy (subject of course to maintenance of an adequate National Tax Base Revenue for necessary, legitimate governmental expenses and obligations.) This author proposes we FURTHER increase the Federal Income Tax Standard Deduction.
ONLY IF—SUBJECT TO STUDY—IT IS DEEMED FEASIBLE!!!
Currently, pursuant to The Tax Bill which was passed by Congress last year the Federal Income Tax Standard Deduction for individuals is now $12,000 and $24,000 for married couples. Question: What were to happen if the Federal Income Tax Standard Deduction was raised further? It is this author’s contention there is a HIGHER level of income where every cent is promptly spent back into The Economy. Point of Contention: To maximize an economy why should income that which would otherwise be immediately spent back into The Economy–be taxed?
Such a tax (without, for a moment, factoring in Tax Revenue issues) would be counterproductive to maximizing consumer spending which in turn would be counterproductive to maximizing Production which in turn would be counterproductive to maximizing Employment.
TEN (10) YEARS AGO I suggested THE SAME in a 2-page letter/email sent to the Obama Administration Whitehouse website the very Bill that was passed by Congress last year to increase the Federal Income Tax Standard Deduction to stimulate consumer spending. My urging to the Obama Administration to substantially increase the Income Tax Standard Deduction WAS DESIGNED to increase production levels to BRING DOWN the then 10.8% Unemployment, (See Exhibit 1, my 2 pg. Letter-email sent to the Obama Administration Whitehouse website suggesting the above.) As a further note, when this 2 pg. Letter-email was sent to the Obama Administration THE ONLY OTHER IDEA OUT THERE WAS A GENERAL TAX FREEZE MORATORIUM! I KNEW THIS BECAUSE I MONITOR ALL NEWS OUTLETS. SUCH A GENERAL TAX FREEZE MORATORIUM WOULD HAVE LEFT THE FEDERAL GOVERNMENT WITH Z-E-R-O FUNDS FOR ITS MANY LEGITIMATE, NECESSARY OBLIGATIONS! REMEMBER WHAT HAPPENED WHEN TRUMP FROZE THE FEDERAL BUDGET EARLIER THIS YEAR–WHAT A TOTAL DISASTER!!! AND THAT’S WHEN THE FUNDS WERE ALREADY ON HAND BUT FROZEN!! NOW IMAGINE IF THERE WERE NO FUNDS TO BEGIN WITH!! IN MY LETTER TO OBAMA I FULLY EXPLAIN>> WHY SUCH A GENERAL TAX MORATORIUM WAS SIMPLY NOT A PRACTICAL SOLUTION BUT RATHER AN INCREASE IN THE FEDERAL INCOME TAX STANDARD DEDUCTION WOULD WORK JUST AS WELL AND YET LEAVE THE FEDERAL GOVERNMENT WITH SUBSTANTIALLY THE SAME LEVEL OF FUNDS NEEDED TO CARRY OUT ITS NECESSARY, LEGITIMATE OBLIGATIONS! (Also see this author’s explanation (Exh. 2) as to why such 10%+ Unemployment (that Obama inherited) existed. How IT all related to Real Estate Market Price Conditions prior to the Real Estate Market Crash of 2007.)
Based upon the above analysis, this author suggests that we raise the Federal Income Tax Standard Deduction from $12,000 per annum for individuals to $24,000 per year and for married couples to $36,000. This extra untaxed (payroll check) income will noticeably increase consumer spending thereby measurably increasing Production Output and hence Overall Employment Levels. This by itself will add to Our National Tax Base needed to counteract the reduced level of payroll withholding due to the Federal Income Tax Standard Deduction increase. Perhaps adding a Federal Sales Tax in addition to a State Sales Tax would in part help make up for any overall decrease in Total Tax Revenue. Only a suggestion! ALL THIS PURSUANT TO STATISTICAL STUDIES DONE FIRST TO DETERMINE FEASIBILTY OF SUCH A PLAN!!!
ADDITIONAL FUNDS NEEDED TO FINANCE OUR ANNUAL BUDGET would be generated from Point (2) requiring foreign corporations doing business here selling their imports (which are in direct competition with domestic manufacturers producing the same goods or providing the same services) with a percentage of the profits (also to be determined by study) to purchase Treasury Bonds to finance our Annual Budget (or Infrastructure Rebuilding.) For 2018, UN IMF US Census Bureau figures indicate almost 16% of our Economy was from foreign imports up from 12% the year before. (For details re 2017 facts & figures see Exh. 3 a paper written last year by this author “WHAT ARE WE TO DO WITH A LOOMING, PROJECTED FEDERAL ANNUAL BUDGET SHORTFALL OF $1 TRILLION DOLLARS AND FUTURE INTEREST RATE HIKES BY THE FED WHICH TRUMP ABSOLUTELY ABHORS”)
Reasoning for requirement of Foreign Corporation Bond Purchases: In all FAIRNESS Shouldn’t foreign corporations doing business here selling their imports help with the costs of maintaining this–The Greatest Marketplace in The World where the average consumer has the available income and credit to purchase just about anything—cars, computers, etc.?? Now this author is NOT suggesting these foreign corporations doing business here selling their imports pay a tax or tariff but rather—LEND Us the Money to finance Our Annual Federal Budget at least in relation to their Share of Total Sales here in the US in 2018 that being 16%. With our 2019 Annual Budget $5,111,364,000 that equates to a little over $800 Billion for foreign importers. Again, this would NOT be a tax, tariff (igniting yet another trade/tariff war counter tariff/trade response) BUT INSTEAD an Interest Yielding Triple AAA Investment-Grade U.S. Treasury Bond.
This $800 Billion Bond figure IF NOT attainable would still serve as a goal/statement as to what foreign importers’ “Fair Share” if broken down mathematically IS for the up-keep, maintenance of this—The World’s Greatest Marketplace! Federal Revenue for 2019 is projected to be $4,986,937,000 but as stated earlier experts agree we will “run in the red” about $1 Trillion and will continue to do so for the next seven years. This bond purchase requirement for foreign corporations doing business here selling their imports (which are in direct competition with domestic manufacturers producing the same goods or providing the same services) with a percentage of their to finance our Annual Budget (and/or Infrastructure Rebuilding) could very well be “just what the doctor ordered” as a cure to our repeat annual budget shortfalls and consequential Growing National Debt PROBLEM where we would normally in such a case have to issue bonds to ourselves (done on the Fed balance sheet) thereby printing extra dollars thereby decreasing the value of the dollar itself. As an aside, this author further opines that in a perfect Economy it is best to have foreign capital finance Debt which in turn frees up domestic money supply for private sector business maintenance and growth, hiring, sufficient pay, wage increases, and which in turn promotes consumer spending to purchase what’s being produced and Maintains Maximum Production/Employment. With added flow-through to business/corporate profits and dividends for stockholders.
Exceptions to this bond purchase requirement would be–what is being imported is a good (or service) NOT in competition with anything being offered here domestically OR where the same good or service is offered here but CANNOT meet our Demand OR where the foreign corporation has (or agrees to relocate) their factories/plants, i.e., (means-of-production) here OR make critical (business or other) investments here in the US OR AT MINIMUM this could work as another negotiating point, bargaining chip, for any further trade talks the Trump or future Administrations would engage in.
Now if a particular foreign corporation did not want these Bonds and its Annual Percentage Yield they easily could borrow against them. What lender in its right mind wouldn’t take as collateral such an Interest Yielding Triple AAA Investment backed by no less than United States Treasury!! OR such an Interest Yielding Triple AAA Investment could readily be sold on what could literally could well become a Secondary Bond Market similar to The Secondary Mortgage Market we now have.
Foreign corporations doing business here now having to buy bonds but wanting instead the cash-equivalent to invest elsewhere could easily do so and here’s how:
For example, say Toyota Corp. instead of keeping their bonds which would now have to be purchased pursuant to this new bond purchase requirement, instead wanted to build a plant or say a dealership in Indonesia. They could simply go to the Bank of Indonesia or any bank in Indonesia; take their Triple AAA Investment-Grade U.S. Treasury Bonds to their bank of choosing (in Indonesia) and put up as collateral their U.S. Treasury Bonds or sell them to the bank. Either way they get back in (and here’s the important point) the currency of the country in which they are doing business or investing in–to pay the start-up fees of whatever they’re doing—in this case, paying an Indonesian-based construction company to build their new dealership in Indonesia!
This, in fact, if this Plan (of requiring foreign corporations doing business here in the U.S. selling their imports here) were to be adopted would become the prime, best way foreign corporations could/would/should use their U.S. Treasuries (around the world or in their own country.) That is, under this scenario, which I (this author) believes would be commonplace: i.e., where foreign corporations pursuant to world-wide business expansion plans would routinely be using these bonds in such a manner as, frankly speaking, it would be most productive way to utilize “get rid of/unload them.”
This scenario would also lead to–the U.S. Treasury Bond, in addition to The Dollar, becoming established as the world’s major alternate (collateral) currency, in a much more significant way than it is now! In fact, in a novel way, another “bit-coin”! Just imagine every year pumping $800 Billion into the World’s Banking System. This would insure our place in the world financially as China gains power because every bank/institution/country would have an actual interest in keeping the Dollar strong!!
Returning to the situation in the U.S. regarding this new bond purchase requirement: If certain foreign corporations wanted to purchase more than their designated share they could purchase what another foreign corporation was required to buy and charge such foreign corporation a fee for such a service. If there were no buyers for such Bonds the US Treasury Department could buy such Bonds back at a discount and thereby actually “retire” Debt! Also by having this guaranteed set of buyers The Fed would hardly ever if at all have to simply raise interest rates to attract New Buyers (at Bond Auctions) to cover any anticipated Annual Budget cash shortfalls instead–limiting raising interest rates as a tool-hedge to combat inflation/the heating up of an Economy or where The Fed would want to do an anticipatory interest rate hike to later lower such rate to “jump-start” a stagnant economy keeping in mind the recognized 2% (amongst experts) neutral rate point where the Banking Industry (and their depositors) Insurance Industry and Pension Funds would NOT be negatively impacted. Regarding Interest Rates: Question—What interest rate is best for The Economy? Low Interest Rates promote business growth, expansion and for consumers the purchasing of homes, automobiles, etc. But too low of an interest rate prevents Banks from making a reasonable profit for the risks they take and from depositors making a reasonable return as well especially with CDs, etc. This author opines the interest rate best for The Economy is the rate that produces the highest GNP or better yet the highest GDP.
AGAIN THIS “PERFECT” INTEREST RATE TO BE DETERMINED BY STUDY!
Now back to the Marketing of these Bonds to foreign entity/corporations. If the Treasury Department were to get into the business of selling Bonds to foreign institutions with this new Bond purchasing requirement the Treasury Department would have an unprecedented opportunity to market the new Mnuchin 50-year Bond by creating a shell corporation to actually sell these Bonds to foreign corporations. They would do this by purchasing a certain amount of these 50 year Bonds say by purchasing a One Billion dollar amount then subdividing into denomination sectors of say 100 million dollars each or by maturation dates: 10 year, 20 year, 25yr. Bond categories; what this author will coin as “sector” selling in terms as described either by numerical amounts or varying maturation dates (see Exh. 4 attached herein.)
IN CLOSING, regardless of a Secondary Bond Market or shell corporation, just alone with a guaranteed source of corporate buyers required to purchase bonds in relation to their profit levels whom more than likely would re-purchase upon maturation of their U.S. Treasury Bonds along with other large-scale purchasers—Foreign Governments, Domestic & Foreign Banks, Pension Funds, Insurance Funds, etc. The Treasury Dept. would always have more than enough Incoming Capital to retire any Maturing Bonds.
ONE LAST IMPORTANT POINT—Because of the bond requirement for foreign corporations doing business here selling their imports (which are in direct competition with domestic manufacturers producing the same goods or providing similar services) their (“liquid’) profit margin wouldn’t be as great which could very well cause them to raise prices on their goods which would make them less competitive with domestic manufacturers producing the same products therefore increasing market share and profits for American manufacturers thereby increasing and expanding Our Tax Base.
The following pages are Exhibits 1-4, prior articles written by this author:
- 2-page letter/email sent to the Obama Administration Whitehouse website the very Bill that was passed by Congress this last March to substantially increase Federal Income Tax Standard Deduction to stimulate consumer spending to increase production levels to BRING DOWN the then 10%+ Unemployment.
- THE ECONOMY: THE STUDY OF ECONOMICS IN UNDERSTANDABLE LANGUAGE FOR PEOPLE JUST LIKE ME
This author’s explanation as to why such 10%+ Unemployment existed–how all this related to pre-Real Estate Market Price Conditions prior to the Real Estate Market Crash of 2007.
- “WHAT ARE WE TO DO WITH A LOOMING, PROJECTED FEDERAL ANNUAL BUDGET SHORTFALL OF $1 TRILLION DOLLARS AND FUTURE INTEREST RATE HIKES BY THE FED WHICH TRUMP ABSOLUTELY ABHORS”
For a detailed discussion and facts/figures Per Wikipedia this author found that between 1/8 to 1/7 of our Economy is from foreign imports/products.
- PRESIDENTIAL PLAN AND PLATFORM FOR
FULL EMPLOYMENT, FULL PRODUCTION, FULL CONSUMPTION
Original article written 2016 when Mnuchin introduced his 50-year Bond. Ways to market it.
FOLLOW-UP ON TRUMP’S NEW TAX PLAN
A Main Focal Point of President Trump’s New Tax Plan—The Doubling of the Standard Deduction for middle, lower income working Americans: This was actually proposed by Yours Truly in a detailed letter/email sent to the Obama White House Website when Obama first came into Office (when unemployment was rampant where more consumer spending was needed to bolster/stimulate the economy specifically those businesses, industries largely dependent upon money left over from people’s paychecks after their cost-of-living bills/expenses were met! This was just prior to the Real Estate Market Crash of 2007.)
HERE’S THE EMAIL I SENT TO OBAMA’S WHITE HOUSE WEBSITE
HARRY W. ZIMMERMAN, ESQ.
Law Offices of Harry W. Zimmerman
821 N. Citrus Ave.
Covina, CA 91723
TO THE PRESIDENT OF THE UNITED STATES
MR. BARACK OBAMA
A PLAN TO SAVE/STIMULATE/STABILIZE THE ECONOMY
WHAT I PROPOSE IS AN ECONOMIC STIMULUS PLAN THAT IS SIMILAR TO THE TAX MORATORIUM/TAX HOLIDAY PLANS OUT THERE.
ALTHOUGH MY PLAN IS SIMILAR IT’S DIFFERENT BECAUSE IT’S SPECIFICALLY DESIGNED TO DIRECTLY STIMULATE THAT PART OF THE ECONOMY WHICH IS CURRENTLY MOST SLUGGISH (I.E., CONSUMER SPENDING) AND AT THE SAME TIME IT DOES NOT UNNECESSARILY DEPLETE THE FEDERAL GOVERNMENT OF INCOMING CASH/OPERATING CAPITAL AS AN ACROSS-THE-BOARD TAX MORATORIUM/TAX HOLIDAY PLAN WOULD DO.* (SEE BELOW.)
HERE’S MY PROPOSAL:
RAISE THE CURRENT STANDARD INCOME TAX DEDUCTION FROM $8,000 TO EITHER $50,000/$60,000OR $70,000 AND ADJUST IT ON A QUARTERLY OR YEARLY BASIS.
IF YOU MAKE THE STANDARD INCOME TAX DEDUCTION $50,000 INSTEAD OF THE CURRENT $8,000 PER TAXPAYER, THAT WOULD GIVE EACH TAXPAYER ANYWHERE FROM ZERO TO $8,120 IN EXTRA (UNTAXED) INCOME DEPENDING ON THEIR YEARLY AGI. IF YOU TAKE THE MEAN OF THIS $8,120 FIGURE, I.E., $4,060 AND MULTIPLY BY EVERYONE PAYING TAXES, I.E., 109 MILLION TAXPAYERS THAT GIVES $442,450,000 IN EXTRA DISCRETIONARY INCOME ON A NATIONAL SCALE.
THIS WOULD IMMEDIATELY STIMULATE THE ECONOMY, IN PARTICULAR, REVIVING THOSE OPTIONAL (NON-ESSENTIAL) GOODS/SERVICES INDUSTRIES THAT ARE BY FAR THE MOST AFFECTED SIMPLY BECAUSE PEOPLE JUST DON’T HAVE THE EXTRA DISCRETIONARY INCOME AFTER PAYING THEIR BILLS AND PURCHASING ESSENTIALS AS THEY ONCE HAD.
UNDER THIS PLAN, PEOPLE WOULD HAVE EXTRA MONEY TO PAY THEIR MORTGAGES, PAY DOWN THEIR CREDIT CARD DEBT, GET THOSE THINGS THAT THEY NEED OR WANT: I.E., BUY THAT EXTRA DRESS, NEW CAR, FURNITURE, TV SET, COMPUTER, VACATION, NIGHT OUT ON THE TOWN, A MEAL AT THEIR FAVORITE EXPENSIVE RESTAURANT AND SO FORTH.
*AN ACROSS-THE-BOARD TAX MORATORIUM/TAX HOLIDAY PLAN WOULD GIVE TAX BREAKS TO ALL LEVELS OF WEALTH/INCOME AND UNDER DIFFERENT CIRCUMSTANCES THIS WOULD BE A VERY USEFUL ECONOMIC TOOL WHERE LARGE SUMS OF CAPITAL ARE NEEDED FOR AN EXPANDING ECONOMY TO BUILD FACTORIES AND SO FORTH. BUT THIS IS NOT THE SITUATION WE HAVE NOW; I.E., WE HAVE ENOUGH FACTORIES AND INVENTORY—WE JUST DON’T HAVE ENOUGH CONSUMER SPENDING; I.E., WE DON’T HAVE ENOUGH DOLLARS IN THE HANDS OF THE GENERAL POPULACE TO BUY/SELL ALL GOODS THAT WE ALREADY HAVE THE MEANS OF PRODUCTION FOR. AGAIN, THE TAX CUTS SHOULD BE DIRECTLY AIMED/SURGICAL FOR MAXIMUM STIMULUS BENEFIT.
WITH EXTRA INCOME/MONEY IN EVERYONE’S POCKET, THIS WOULD GENERATE AND REGENERATE ADDED SPENDING CREATING A RIPPLING EFFECT THROUGHOUT THE ECONOMY AS THESE EXTRA DOLLARS ARE BEING RESPENT AGAIN AND AGAIN (THE VELOCITY OF MONEY) CREATING EXTRA PROFITS FOR BUSINESSES PUTTING PEOPLE BACK TO WORK AT ALL LEVELS OF SOCIETY.
THIS WOULD CREATE A BIGGER TAX BASE FOR SALES TAX TO LOCAL AND STATE GOVERNMENTS AND INCOME TAX TO THE FEDERAL GOVERNMENT (REAGANOMICS.) ALSO, WE WOULD PAY MUCH LESS IN UNEMPLOYMENT BENEFITS/COSTS AS UNEMPLOYMENT WOULD DRAMATICALLY DECREASE. ALSO, THE MORTGAGE BAILOUT PROGRAM WOULD NOT BECOME OVERLY BURDENED.
BECAUSE OF LESS TAXATION, THE WAGES THAT PEOPLE ARE PAID WOULD HAVE MORE PURCHASING POWER. THEREFORE WAGE INCREASES WOULD BE LESS COMMON AND LESS OFTEN. THIS WOULD ALSO HAVE THE EFFECT OF STRENGHTENING THE (VALUE OF) THE DOLLAR. WE WOULD BE MORE COMPETITIVE OVERSEAS (OUR EXPORT INDUSTRIES WOULD BENEFIT) AND WE WOULD BE MORE COMPETITIVE AT HOME AGAINST IMPORTS.
GETTING BACK TO THE GENERAL PLAN PORPOSAL—IF YOU RAISE THE STANDARD INCOME TAX DEDUCTION UP ANOTHER NOTCH TO $60,000 THAT WOULD FREE UP 595 BILLION. RAISE THE STANDARD DEDUCTION TO $70,00—704 BILLION WOULD BE INFUSED INTO THE ECONOMY. HOWEVER, THERE IS A POINT AT WHICH WE BEGIN TO REALIZE DIMINISHING RETURNS.
TO PAY FOR THIS “TAX BREAK”, THE BUSH TAX CUTS COULD BE ALLOWED TO LAPSE TO COVER THE COST OF LESS REVENUE TO THE FEDERAL GOVERNMENT THAT THIS TAX BREAK TO THE WORKING MIDDLE CLASS WOULD IMPOSE.
THIS WOULD ALSO HAVE AN UNINTENDED POLITICAL EFFECT OF PUTTING THE REPUBLICANS IN AN INDEFENSIBLE POLITICAL POSITION IF THEY WERE TO ARGUE FOR THE BUSH TAX CUTS AT THE EXPENSE AND AGAINST THIS ACROSS THE BOARD TAX CUT TO VAST NUMBERS OF WORKING MIDDLE CLASS WHICH BY THE WAY WOULD BE ABOUT THE SAME DOLLAR-WISE.
THE BUSH TAX CUTS ADMITTEDLY WOULD HAVE THE TENDENCY TO STIMULATE BUSINESS GROWTH—BUT WHERE CONSUMER SPENDING IS DOWN, HOW WOULD THIS “BUSINESS GROWTH” HOPE TO BE REALLY SUSTAINED WITH ONLY THE SAME LEVEL OF SOFT/DEPRESSED CONSUMER SPENDING THAT WE CURRENTLY HAVE? IT IS BETTER TO STIMULATE SPENDING WHICH IN TURN WOULD THEN FURTHER SAVE JOBS AND BUSINESSES FROM GOING OUT OF BUSINESS AND ALSO STIMULATE JOB GROWTH.
THE BUSH TAX CUTS SOMEWHAT PUTS THE CART BEFORE THE HORSE.
AN ACROSS THE BOARD TAX CUT TO VAST NUMBERS OF WORKING MIDDLE CLASS IN ADDITION TO IMMEDIATELY AND DIRECTLY STIMULATING THE ECONOMY, WOULD BRING POPULARITY BACK TO YOU MR PRESIDENT AND THE DEMOCRATIC PARTY.
WE WOULD BE ABLE TO RECAPTURE THE HOUSE, KEEP THE CONTINUED MAJORITY (AND POSSIBLY 60 SEATS) IN THE SENATE AND MOST IMPORTANTLY YOUR RE-ELECTION WHICH IS ABSOLUTELY NECESSARY FOR THE WELL-BEING AND BENEFIT OF THIS COUNTRY WHICH YOUR CONTINUING VISION AND YOUR PROGRAMS CAN ONLY BRING!!!!!!!!!!!!!!
Harry W. Zimmerman, Esq.
THE STUDY OF ECONOMICS IN UNDERSTANDABLE LANGUAGE FOR PEOPLE JUST LIKE ME
To understand economics, one must first construct an economic model; start with the basics and build from there.
The thing we learn in ECON 101 is Supply and Demand. Well, that’s just part of it–it’s a good starting point but one must also at some soon point in introductory Economics factor in MONEY SUPPLY. Just to back step a bit, Demand is what we need and what we want. Supply is what’s available out there in terms of what’s on the market (open or otherwise (black (lol))) or what somebody is willing to part with “if the price is right.” (Hey, baby, you lookin’ for some………)
Money Supply is essential to the understanding of elementary economics but is unfortunately subsumed, for the most part, in a discussion of first-year economics. Money Supply is what makes the world of the economy go ’round. It’s the grease that makes the engine of living runnable.
Let’s just jump into it; we’re all Big Boys and Girls here. Let’s look at what happened in 2007-2009 and its aftermath. That’s when we had the Real Estate Crash. Everybody can remember that, right? Well, I can remember it very well. In May, 2007, I bought a house advertised at $1,275,000.00 for $1.2 Million (thought I was getting “a good deal”) putting down $450,000.00 cash. Just a few months later, it was, per Zillow, valued at only $915,000.00. I lost $285,000.00 in equity! Point of the Story-The Economy could no longer support the Price Structure of the Real Estate Market. Some say the Real Estate Market Bubble Burst. People couldn’t make their mortgage payments in part because pre-qualifying parameters were being ignored and, as a result, were getting in over their heads and so forth and voila!! total chaos (not to mention my life & pocketbook (lol).)
But let’s look at the economy in whole. There’s more to the story! Oooh! Tell me more: Unemployment was rising. Inventory was climbing. Goods and services weren’t being sold like they were before: because people didn’t have enough cash, as a whole, in the aggregate, if you will, after their cost of living expenses were met, enough leftover spending loot to purchase the things they wanted to get or have done, making improvements or keeping up maintenance. This, in large part, was due to the overpriced real estate market. Even if you didn’t own a house you were still affected because landlord/homeowners had to charge a higher rent due to their higher mortgages or if they held such rental properties for a period of time after initially purchasing their properties years earlier, they also, in large part, were taking advantage of current market (inflated real estate price) conditions (by charging higher rents, as well.)
In effect, the money (supply) available to the consumer/consuming/spending public was not sufficient to cover/maintain that part of the economy/business community which was providing such goods and services categorized as that which would be covered under discretionary spending (i.e., for non-immediate non-essentials (immediate essentials being housing, food, gas, utilities, repairs/maintenance needed to maintain current livability and steady cash flow))
Now that we’ve taken a couple steps forward let’s take one step back and let us begin to retrospect!
For instance, what other factors cut into the Money Supply that should be made available for a properly functioning MARKET economy? Well, there’s taxes and national debt servicing/financing and control (or is it out of control?? (lol))!! The National Debt which will be discussed at length in a further post is for now for this discussion, only, a “fixed” overhead. But how about taxes, payroll taxes? They can be adjusted!
Let’s look at the Standard Deduction and Exemption Schedule. Since we’re talking ’bout 2009-it was–the Standard Deduction was $8,000 and Personal Exemption was $1,500 per dependent. Raising either/both the Standard Deduction and/or Personal Exemption levels would give all taxpayers/consumers extra spending power and thereby keep those faltering businesses mostly fueled by discretionary income better afloat. This is similar in idea to the governmental bailout of Chrysler Corp. and Lee Iacocca. Anybody remember that? Allowing Chrysler workers to continue to work by the bailout also had the (extremely) beneficial, rippling, repercussive effect on all the businesses that each worker’s income previously and would now continue to impact.
Oops, used the same word/verb twice in a sentence; getting tired; time to quit FOR NOW. Previously had written an article describing what happened in 2009, also written in 2009. The solution to the events described therein were utilized by Japan last year in their effort to revitalize their staggering economy due to, again, a lack of consumer spending. Will post it a few days from now. Other articles will follow.
As the first sentence states we will, over the weeks, construct a model of a basic economy with all its functioning parts much the same way the Ancients constructed their concept of the Universe from the four basic elements earth wind water and fire with the one tool they had and we have-The Wisdom of Logic.
Now I must get Comfortably Numb with Pink Floyd…………………..
Thank you for your time in reading this. Hasta la Vista
WHAT ARE WE TO DO WITH A LOOMING, PROJECTED FEDERAL ANNUAL BUDGET SHORTFALL OF $1 TRILLION DOLLARS AND FUTURE INTEREST RATE HIKES BY THE FED WHICH TRUMP ABSOLUTELY ABHORS
BY HARRY ZIMMERMAN, LegalRescue247@yahoo.com, 1-866-218-6650
Our next big problem for us to look at after the current Trade/Tariff War dies down, is our increasing annual Budget Deficit projected to be $1 Trillion and the rising of Fed Interest Rates. Here’s My Plan to best help finance our Annual Budget and keep interest rates low (except when used as a tool by the Fed to combat, prevent (hedge against) inflation):
Although many nations and foreign entities already buy bonds from us we should (from here on in) make it a requirement for any foreign entity and/or corporation doing business over here selling their imports—goods that are in (direct) competition with our domestic producers—that they from their net profit margin, with a percentage of that, purchase US Treasuries and/or Infrastructure Bonds to help finance any projected shortfall of our Annual Budget or Infrastructure Package. Exceptions would be where such foreign entities/corporations maintain the means-of-production (factories) here employing American workers and are paying their fair share of (corporate-business) taxes or where more of a product-item is needed although made by a foreign entity/ corporation as well or where a separate trading agreement has been entered into taking into account this bond purchase requirement. This bond purchase requirement would also tend to keep interest rates down as we would always have a guaranteed source of bond sales with such a requirement to do business here and as a result not have to raise rates to attract buyers to be explained in more detail, infra.
The Reasoning, Justification for, Scope and Method by which to Implement This Plan
The 2018 Federal Annual Proposed Budget (per Wikipedia) is $4.094 trillion with a Projected Shortfall of $440 Billion. The 2018 GDP is estimated to be $20.237 trillion. Our total 2017 imports last year were 2.895 trillion. This gives $23.132 trillion in total sales (domestic and import) with imports representing a “tad” over 12.5% or 1/8 of total sales. If we view the US as the Greatest Department Store, Marketplace in the world with the cost of maintaining this Outdoor Swap Meet (LOL!) to be our current Budget of $4.094 trillion per year then our foreign importer businesses would be responsible in all fairness for 12.5% (1/8) of that figure for the luxury of being able to sell their goods (and services) here the Greatest Marketplace in the world. Their 12.5% (1/8) share of the 2018 Estimated Annual Budget (estimated to be $4.094 trillion) equates to roughly $512 Billion (coincidentally about our annual trade deficit.)
This $512 Billion would be used to help maintain this (the) Greatest Department Store in the world. Now, the $512 billion is just a figure from which to work from and please keep in mind we’re not asking these foreign entities to pay any income tax or any other kind of tax or tariff but only that they purchase US bonds to help finance our Annual Budget. And again, this $512 billion figure is mentioned purely to add perspective to what the cost is of maintaining our society where the standard of living is such that 2.895 trillion can be had (made) in gross sales by (foreign entities) doing business here.
So if we were to charge foreign entities a certain reasonable percentage of their net sales profit margin (to be determined by study) it wouldn’t be out-of-line to do this per the sense of fairness argument/observation put forth above. Also, as a side point, what we could do with this money to avoid tariffs all together would be to instead subsidize our steel and aluminum producers that are being currently affected by China’s “dumping” policy. As is common knowledge, tariffs would simply cause inflation by adding in this case a 25% added cost to all domestic industries using steel or aluminum in their finished products (which would be passed on to the consumer in the final analysis) versus the few industries that produce steel and aluminum that the tariff would help. Also, if we simply matched China’s production costs with our subsidies we would always have the advantage–China would (still) have the cost of overseas shipping their steel and aluminum.
Now what happens when all these bonds mature? Well, first of all, any increase in sales of bonds to cover any current budgetary shortages would be warranted (as printing money as a last resort is the worst thing one can do which would be the case where bond sales and tax revenue fall short of any immediately due-and-owing US obligations.) However, there really wouldn’t be that much of an increase in the total sales of bonds but rather instead, there would be a marked percentage increase in the number of foreign entities versus domestic investors making these purchases and also the respective amounts associated with these sales since such sales would become mandatory for those foreign entities selling their goods (and services here) in competition with domestic entities unless, as previously mentioned, such foreign entities’ means-of-production are located here or the where the product-item in question is relatively scare and foreign manufacture is needed for adequate supply or where a separate trade agreement has ceded this requirement. AND EVEN IF THERE WERE AN INCREASE WITH FORCED BOND SALES WE COULD ALWAYS USE THE MONEY FROM THE SALES OF THESE NEW BONDS TO PAY OFF MATURING BONDS WITH A SURPLUS LEFTOVER!
Required foreign bond purchase, by the way, would be a good thing for a totally different reason but equally as important because bond sales in the private sector of our Economy, which is where we would otherwise have to go, simply diverts money supply from private sector activity (i.e., consumer spending and also business maintenance, investment and growth.) Logically speaking, It’s much better to maintain adequate overall money supply in the private sector and get outside investor purchasers to buy US Treasuries and Infrastructure bonds to help support our budget and the proper maintenance of our society and what better way to do this then to have these bond purchases made from profits of sales of goods sold here as opposed to trying to attract foreign purchasers (or domestic purchasers) where interest rates could well have to be raised to attract such sales. Also requiring those bond purchases made from profits of sales of goods sold here prevents dollars from actually leaving our country in the first place thereby further preserving (maintaining) adequate levels of money supply.
And as first alluded to, still yet for another equally important and even more highly beneficial reason for such a foreign entity bond purchase requirement is also a large mandatory, guaranteed supply of foreign purchasers and purchases would tend to keep interest rates down as there would be less circumstance and reason to raise interest rates to attract domestic (or foreign) buyers in a situation where there would otherwise be a perceived or actual shortage of bond purchasers to support, finance our debt. This is especially important because our interest rates, for the most part, are higher compared to other countries to begin with (EXCEPTIONS are where a particular country’s currency is in trouble and interest rates have to be dramatically raised—examples: Italy, Turkey and Venezuela.) And because our interest rates are generally higher, it would be shame to have to further raise them just to attract additional bond purchasers where such a predicament would be more likely without a guaranteed foreign purchasing base. This would also further avoid the scenario where given all actual revenue and bond sales there was still not enough money to cover current expenses and the government would then have to resort to printing money (the worst situation of all as this strategy devalues the dollar, itself.)
And still yet another reason for required bond sales of foreign entities selling goods here–it could act as a motivation for these foreign entities to relocate or setup new plants here that would not otherwise exist but for the required bond purchases–if they have their means-of-production here (factories) then they’re exempted! Voila! More plants, more jobs here! More tax revenue! And last but not least, President Trump could also use this as a bargaining chip for a better trade deal as he is attempting to do with the (threat of) tariffs.
Now what happens if nations retaliate with the same purchase requirement? It would be same with a tariff trade war. The country with the trade deficit would win out as the nation with the deficit would have more imports to impose a tariff on or, in this case, would have more imports to require bond purchases thereon.
In summary, this is really the only way we can ever “get a handle on” THE FINANCING of our Annual Budget Deficit and
As a Final Note: This could very well be the best and only practical way for Mnuchin to market his new 50-year Bond!
PRESIDENTIAL PLAN AND PLATFORM FOR
FULL EMPLOYMENT, FULL PRODUCTION, FULL CONSUMPTION
Require All foreign nations selling their imports in our country (the greatest marketplace in the world with the most affluent consumers as a direct result of the (our) highest standard of living funded, in part, by our national budget/debt) to purchase Treasury bonds/bills to help finance/defer our (national) debt and help pay for any New Tax Plan proposing a reduction in either or both personal and/or corporate tax rates designed to stimulate our economy and relocate/incentivize businesses back to US soil.
Also this would have an ancillary but yet enormously important effect of increasing the supply of available money into our internal/domestic economy to help support the flow of cash and credit into all sectors of business and society which if such had been available in sufficient quantity would have helped avert the recessionary crisis that occurred early on in the Obama Administration. Another equally important and extremely beneficial side effect of these proposed required bond sales to foreign entities doing business here in the United States would be Long Term (Low) Interest Rate Stabilization. (To be explained in detail, infra.)
By requiring foreign entities doing business here in the United States (in proportion to gross or net sales (such to be determined upon study)) to purchase governmental debentures this would guarantee a continual annual (fairly) consistent (within percentage parameters) amount of bond purchases (in the least) and hence dollars to partially cover the operating costs of the Federal Government in addition to our annual tax base revenue and sales (military hardware to foreign nations, etc.) and account receivables. Such consistent sales which we could depend on year in and year out! If a nation/foreign entity decided it wasn’t going to purchase our bonds with a percentage of their profit they were reaping from our economy and the affluent customers able to financially obtain their products as a result of our high standard of living kept artificially afloat in part by our large national budget, then they would not be allowed to conduct business here in the USA (until such conditions were met) and the next nation “in line” would readily take their place and pick up the “slack.”
What could happen when a foreign entity retaliates by engaging in a “trade war” by imposing a comparable (in-effect) tariff on our imports to their country–they can’t because of the trade imbalance so far in their favor (their imports into our country versus our export goods/services being imported into their country–If they were to raise rates on our relatively small amount of exports into their country they would lose considerably on what they would have to pay on an equal amount of increase of their far outweighing quantitative (positive) trade balance of goods–we would make money in this situation if that were to happen– we would have them “over a barrel” and the sad part is that “we” don’t even know the power we have if it were to come to a trade war as such!!!
Another point of interest would be that with a continual sustained steady flow of bond purchases from foreign investors, there would not be such an urgency to cut programs here funded by U.S. tax dollars. For example, the President under pressure to get his economic stimulus package tax plan through Congress wants to drastically cut the DEA budget. If we had a steady flow of dollars from foreign government-entity-investors purchasing bonds making extra funds available to fund needed domestic programs Trump and future Administrations and/or Congress would not be forced to make such which-program-to-cut decisions.
Imagine if we made long-term bonds rate adjustable so that they became so handsomely marketable to foreign nations and require these nations-foreign entities (post-sale) to purchase such bonds this would solve all our budget problems forever–the ultimate legal Ponzi Scheme if you will.
To best implement, this Plan would be the offering of Treasury Secretary Mnuchin’s new 50-year bond. I am referring to the new 50-year bonds that Mnuchin wants to market/introduce for infrastructure funding. Use these 50-year bonds to sell to foreign nations doing business/selling their goods here. Here’s the analysis. First of all, who would ever buy a 50-year bond with the low-interest rates we presently have knowing that if interest rates went up then the value of said bond-principal would dramatically drop? Why not to market said 50-year bonds to the public and in particular to large institutional investors such as foreign governments, large corporations, pension funds, and financial institutions.
WHY NOT market/make them (as) Upside Adjustable Rate Bonds? For example, you sell a 50-year bond with, say, a 4% yield. Under normal conditions (present bond parameters), interest rates go up to 5%–catastrophe! Again, who wants to take that risk?? Now sell 4% 50-year bonds with an Upside Adjustable Rate. Say rates go up to 6% so does your bonds say rates go down to 3% your bonds only drop to their initial issuance rate of 4%. There would be no risk to investors, what country-nation would complain that such an offering is unfair. With this strategy, we could (re-)finance enormous amounts of debt. OF course, we would still pursue budget balancing efforts as we do now (lol.)
Exceptions to the requirement that all foreign nations purchase US Treasury Bonds as a condition of selling their imported products here would be in order. For example, those providing energy (oil, etc.), raw materials, and investments would be exempt. A prime exemplar being that of Saudi Arabia’s recent 40 Billion dollar investment here. Basically, only those selling finished retail merchandise such cars, computers, etc. would be required to purchase US bonds. And, again, such foreign entities would have the option of investing here in the United States subject to guidelines to be determined. More than likely, a separate sub-department to be formed within the Dept. of Commerce would be designated.
This added money coming from foreign entities (the bond proceeds) would be applied to the annual budget. This would help the unnecessary cutting of government programs simply to justify/pass through legislation for any new tax plan. Also, Congress would be less dependent on any domestic tax revenue base. In fact, what could be done would be to increase the Standard Deduction to a level to be determined by statistical study indicating where at what point a person/taxpayer would spend their added untaxed dollars, i.e., the maximum consumption level, the level at which every dollar is immediately/soon spent and not saved. Tax rates would begin above this predetermined maximum consumption point (complete spending/no saving level.)
This would guarantee all businesses providing essential (cost-of-living, maintenance of livability) and even those catering to discretionary choices, interests, leisurely pursuits, non-essentials would also be fully employed. All such industries/businesses would be operating at full employment, full production satisfying the full consumption of everyone provided there was a sufficient supply of money “to go around” which would be assured by the capital (from purchases/sales of US treasury bonds to Foreign entities) supplied into the government coffers needed to pay our public programs, military, homeland security, research medical, all research of every type, the space program, all government-run activities.
TO BE CONTINUED . . .[TOMORROW To be discussed [Long Term (Low) Interest Rate Stabilization (Why such would necessarily occur); and (Annual Budget Resultant Revenue Analysis Based On Proposed Tentative Figures for Required Bond Sales to Foreign Entities); (What is the Average Person’s Fair Share of Fiscal Responsibility/Share of Cost of Our Annual Budget; What is the average Annual Income; At what Income would a person’s tax liability match one’s share of their budgetary costs/responsibilities?]