End the illusion banner

 

The Big Picture
Part 3 - What can we do?

By Rudy Avizius
Posted February 5, 2009
.

PoliticsEconomy

TThe big picture
Part 3 - What can we do?


In Part 1 of this series, we examined how our “leaders” and “experts” ignored the warning signs of an impending economic storm and ended up with huge trade deficits, growing budget deficits, rising consumer debt, the collapse and loss of trust for our financial sector, the erosion of our middle class, significantly increased corporate debt levels, the United States as the world’s largest debtor nation, a planet on the verge of potentially catastrophic climate change, and out of control population growth. We essentially had a system that was not sustainable.

In Part 2, we examined how the government response has essentially rewarded the same people who created this economic mess with massive bailouts, guarantees, cash injections that have the taxpayer on the hook for $trillions. The article showed how the government people running the bailout were complicit in this fraud, how its actions have essentially been ineffective in rescuing the banks that are effectively insolvent, and have failed to stop the downward spiral of the economy.  Part 2 also showed how those people in our financial system add nothing to the productivity of the nation and how they are in fact parasites that skim money from the productive sectors of our nation for their own personal wealth. It also showed how the money was being wasted in unproductive mergers and acquisitions. One would be hard pressed to look into history and see any society where national savings have been defrauded on such a scale and the perpetrators rewarded with more money.

In Part 3 we will explore some of the things we can do on both the government and personal levels.

Government Action
The Star Trek series had a law called the Prime Directive that forbade the transfer of knowledge, strength, or technology to a less developed society. This law was the highest law that superseded all others. In order for any government intervention to rebuild our economy, we need a Prime Directive for any future government expenditures to be limited to only those that will have long term benefits to the economy. This would include expenditures that help to rebuild the economy, improve productivity, and create a system that is sustainable.  This will help eliminate unnecessary spending, pork projects, and other waste that our politicians are so adept at.   

I remember growing up in Toronto and being able to be transported anywhere in the city by means of an outstanding public transit system of clean and timely subways, street cars, electric and diesel buses. You would merely have to walk to a major street and look for a pole with the Toronto Transit Commission (TTC) logo. This walk was rarely more than 10 minutes. You simply waited and within a few minutes either the bus or street car would arrive. There was no need to know any schedules because the lines ran 24 hours a day and you simply knew that one would arrive in a few minutes. In fact Toronto is currently implementing a new GPS based system that will inform passengers of the wait time to the next vehicle arrival. In Toronto, you do not need a car to get around. You can use the public transportation to get quickly anywhere. You can also ask for a transfer so that you can get off of one line and transfer to another all on the same standard fare that gets you 1 block or to the other side of the city. By eliminating the need for an automobile to get around, Toronto has also effectively reduced traffic congestion.

I now live in the suburbs of New Jersey and while there are bus lines here, you need to look up schedules, routes, and other information to be able to use them efficiently. I would love to have given up my car to be able to take public transportation to work every day, but it simply was not practical. If we had a public transportation system such as Toronto, people could use the system to commute to work every day and we could go a long way to solving many of the problems we are facing.

One of the first things we need to do for the economy is to reassure our creditors of our nation's creditworthiness. Any withdrawal of foreign credit at this critical time would be disastrous. What would help significantly would be a plan to drastically reduce our budget and trade deficits. Since oil imports are a significant part of our trade deficit and a significant contributor to greenhouse gasses, would it not make sense to start reducing our consumption of oil? I would propose that a significant part of the economic stimulus monies be used to start building mass transit systems everywhere across the US. I know many people would be glad to forgo driving their cars to work every day if timely, comfortable mass transit was available as in Toronto. We have people who live inside cities that cannot get to work unless they have a car. This transit system would also serve to help these people who live in the inner cities to get to their jobs in the suburbs.

Some of these systems could be overhead rails that would be built right along our current interstates which usually have dividers between the 2 directions eliminating the need to secure additional land for this system. These rails would also run along the major highways. There could be stations at the major intersections with parking lots. This way a commuter could drive their car (electric maybe?) a short distance to the station and pick up the rail. The advantage to this approach is that the lines would be running along existing main paths making it easier for users to use. We could supplement the system with bus lines running along minor highways to get people within a short distance of their final destination. They could walk the final short distance.

Consider all of the benefits of the above proposal:

  • We reduce our oil consumption
  • We drive down our trade deficit
  • We reduce our CO2 emissions.
  • We put people to work immediately building the rail cars, busses, stations, and rail lines.
  • This is also a much more economically sustainable
  • This is a less resource intensive model that has less environmental degradation.
  • It reduces traffic congestion creating further drops in oil consumption because cars are not sitting in gridlock.
  • Another less tangible benefit is that people will be less stressed because they are not driving or stuck in traffic. 
  • Also the walking will help people lose weight reducing national medical costs. 

This proposal would meet the Prime Directive.

The airlines in the United States alone use 19.7 billion gallons of fuel annually. This adds significantly to our trade deficit and to greenhouse gas emissions. However, a freight train really can move a ton of freight 436 miles on a gallon of fuel. I believe that it would safe to assume that passenger rails will also be significantly more fuel efficient than air travel. Countries in Europe and Asia now have trains that can move passengers up to 300 MPH with significantly less fuel than by flying. Since these trains can come right into city centers, when one considers the time spent driving to an airport on the outer fringe of a city, this not only saves time, but also saves fuel. Would it not make sense to start building a high speed rail system connecting the major cities across the entire nation, not just the north east corridor?

Our nation achieved significant growth and efficiency gains after the original railroads were built. We now need to build a modern 21st century high speed rail system crisscrossing the continent and we will again reap the benefits of this investment in our future. Decades from now, the nation will be grateful that we had the foresight to make those investments. Drivers on our interstate system will look up at the trains passing them at over 240 MPH and wonder to themselves why they are driving rather than being on that train. It is time to start modernizing our mid 20th century rail system with a modern 21st century system. Such a modern high speed train system would have the same benefits as mentioned for mass transit above and would also meet the Prime Directive.

Now this may be a more controversial proposal, but please consider the benefits before dismissing the next part. To further encourage mass transit and discourage private transportation, we should start adding an additional 25 cent a gallon gas tax per year for the next 10 years. This would serve 3 purposes:

  • It would slowly phase in an incentive to start using mass transit and to start weaning ourselves from the private automobile. By phasing this in over 10 years the system does not get shocked by this.
  • These funds would help finance the construction and development of this new mass transit system
  • The costs of maintaining the new mass transit and high speed rail systems would borne by the gas tax
  • It would help reduce our budget deficits.
  • It would provide a reliable funding source for the duration of the building project.

Now there are those that say that say we should not be subsidizing public transportation and they have a point. However consider that we have been subsidizing PRIVATE transportation all along by using the gas tax to build roads and bridges and look where it has gotten us. President Eisenhower was a visionary when he proposed the Interstate highway system, however the unintended consequence of the Interstate system was the rapid growth of the private transportation and all of its now apparent downsides. Our nation spends 22% of its income for transportation, while Japan spends 9%. It is truly time to break away from old thinking and start thinking about long term benefits. If we spend too much economic stimulus money on roads and bridges, we are continuing along the same path we are currently on which we now know is not sustainable and is ultimately doomed to fail. The funding of this high speed rail system and modern local mass transit systems with a gradually increasing gas tax would be consistent with the Prime Directive.  

Another way to help with the budget deficit is to increase tax revenues. The best way to accomplish this is to improve productivity in the nation so that as wages and number of jobs increase, so will the tax revenue. Up until now the standard government response has been to give a tax cut to everyone. This is not the focused answer we need at this time. We need to provide TARGETED tax incentives to those individuals and businesses that will be adding to the productivity and wealth of the nation and reducing government costs. We can use the tax codes to accomplish the following:

  • Tax breaks or credits for those attending college or paying for someone’s college since they will earn better wages in their lifetimes increasing tax revenues.
  • Tax breaks or credits for those who are taking care of an elderly parent, since this will cost less than having the government take care of them.
  • Tax breaks or credits for businesses that are building or expanding in the United States and will employ people here since this will also increase tax revenues.
  • Additional tax incentives for any business that is starting or expanding that will PRODUCE things that can be sold domestically or exported to reduce the trade deficit. Producers will add to the wealth of the nation and need to be encouraged.
  • Increase taxes for businesses that are laying off employees in order to move production overseas.
  • Significant tax incentives for any company that reduces energy use or greenhouse gas emissions.
  • We need savings to build up a capital base for reinvestment in our nation. We need to provide appropriate incentives for people to save.  The first $1000 of interest earned on saving should be tax free to everyone. This would have the added benefit of helping individuals and families to ride out difficult periods without having to turn to the government. This is a family friendly policy.
  • We need to provide capital for future investment in our industries. We need to encourage the small investor to be part of this effort. The first $1000 in capital gains for everyone should be tax free.

I am sure that there are many other types of targeted tax programs that could be added to the above that would help start the process of creating a healthy, sustainable, and PRODUCTIVE economy. Bottom line is that you get a tax break because you are doing something constructive, not because you simply exist. Sectors of our economy that actually PRODUCE wealth include manufacturing, mining, agriculture, software, movies, and other things that can be sold or exported. All other sectors including service and finance are parasitic in that they cannot survive without the hosts or PRODUCERS.

We should also target grants and low interest loans to companies that develop green energy efficient technologies. Our nation needs to become the world leader in green technologies as this will allow the entire planet to start responding to the climate change issue. The resulting exports and tax revenues will also help balance the trade and budget deficits. The above proposals would all meet the Prime Directive.

Now this may be the single most important change proposed. We need total public financing of all political campaigns. There are those who say that we cannot afford to do this. However, look at where we are now with all of the lobbyists, corporate donors, PACS, and other special interests that use their money to pull our elected officials from their constituents. Look at how much the current system has cost us. Currently we have a totally incestuous system where we have the finest government that money can buy. Consider that the largest contributors to political campaigns are the same banks and investment houses that got this nation into this economic mess. They are the ones who lobbied for deregulation so that they could unravel the protections that were wisely put in place during the Great Depression. This allowed them to gamble on Wall Street with YOUR money, YOUR savings, YOUR pension, YOUR tax dollars and look where it ended.

I read somewhere that as soon as a Senator is elected, he or she must immediately start raising money for the next election. This is not the way our elected officials should be running our government. They should be focused on good governance, not fund raising. Do you really think that you have the same access and influence on your elected officials as the lobbyist who can contribute $millions? Do you really think they are contributing more money than they ultimately will get out of the system in return for their contribution? With public financing of campaigns, you will have the same access to your elected officials as the lobbyists. The politicians will be considering voters rather money when deciding who to meet with.

Look at how much these bailouts, loans, and guarantees have cost this nation. In the end the bill will probably be $trillions. Yes, that is with a “T”, a $trillion is $1000 billion! We cannot afford NOT to have public financing of campaigns. This proposal for full public financing of campaigns would meet the Prime Directive and would certainly increase the likelihood that any new proposals coming from our political leaders would also meet the Prime Directive.

For the past 30 years, our government has overspent and depleted the wealth of our vast economy. We were encouraged to consume more than we produce. We even started selling our companies, roads, ports, and other infrastructure to foreigners pay for this. This is the equivalent of a family selling their furniture to pay the bills. What do they do when there is no more furniture? Sell their car? Sell their house? As a family or a nation this is not sustainable and only serves to mask the problems.

Our government’s response to this crisis has been to try to jump start the status quo which we know is not sustainable. What is needed now is for us to wisely use the economic stimulus monies to rebuild our manufacturing base, educate our citizens, reduce our dependence on fossil fuels, and to transform our nation so it can thrive sustainably. When they talk about getting consumers to restart spending, that is absolutely the wrong approach. A consumer creates no wealth! A consumer can only spend if they go into debt and that is what got us into this mess. Only PRODUCERS can create wealth. The government needs to create an environment that facilitates the creation of PRODUCTIVE jobs that create wealth for the nation.

Other things the government can do include:

  • Start an orderly process of breaking up any company or entity that is "too big to fail". These entities represent a mortal threat to the nation and its economy and should not be allowed to continue in their present form.
  • Reinstate the "uptick rule" to prevent predatory activity in the markets.
  • Go after corporations and individuals who use off shore banking services to avoid paying their fair share of taxes.
  • A strict prohibition on federal, state, or municipal contracts for any company that bases itself off shore to avoid paying their fair share of taxes.
  • Draw up rigorous regulations on derivatives and new financial instruments in the market and setup enforcement agencies.
  • Setup a watchdog group to monitor all the regulators to be sure they are doing their work.
  • Prohibit pension funds from gambling on hedge funds or any new exotic instruments.
  • Start work on eliminating the Federal Reserve Note fiat currency and replacing ir with United States Notes issued by the treasury at no interest to the taxpayer, rather than the private Federal Reserve which charges interest.
  • Start the process of removing the private cartel that controls the Federal Reserve. These private bankers have been a cancer on our economy since its inception in 1913. our currency has been debased and is not only worth 5% of what it was in 1913, we have seen 2 depressions now, and multiple recessions. We need a stable economy, not one that goes through induced boom and bust cycles that serve to enrich the already grossly rich even further.

What YOU can do

Write your elected representatives and make your voice heard! They need to hear from millions of us that business as usual just will not cut it anymore! Just look at some of the salaries in 2008 of these executives who ran their companies and our nation into the ground:

  • Lloyd Blankfein, Chairman and CEO of Goldman Sachs, $70 million
  • Gary Cohn, President and Chief Operating Officer of Goldman Sachs, $72 million
  • William Harrison Jr, Former Chairman of J.P. Morgan-Chase, $40 million
  • James Dimon, Chairman and CEO of J.P. Morgan-Chase, $27 million
  • Martin Sullivan, President and CEO of AIG Insurance, $14 million
  • Ken Lewis, President and CEO of Bank of America, $14 million
  • Kerry Killinger, Washington Mutual CEO took home $88 million in 7 years
  • Richard Fuld, CEO of Lehman Brothers received nearly $500 million in salary and bonus payments in the last eight years and still thinks he made prudent decisions.
  • Joseph Cassano, Vice president of Sales for AIG, decimated one of the largest and respected insurance companies and lost $11 billion in 1 year. He was still allowed to keep his $34 million bonus for that year.
  • John Thain, CEO of Merrill Lynch, redecorated his office for over $1.2 million while laying off people as Merrill bled. Now here is a true humanitarian, someone who truly cares about his workers.
  • Thain's predecessor, Stanley O'Neal, received a $160 million retirement package after posting write downs of $8 billion in a single quarter.

These are the same people who were lecturing to our “leaders” that we should limit government safety net expenditures and calling it a “redistribution of wealth”. Of course they did, they did not have to worry about how they were going to pay their mortgage or food bills. They will hunker down in their mansions or yachts and ride out the economic storm, while the producers in the nation are left to twist in the wind.

Tell your elected officials that this massive “redistribution of wealth” that actually went from the lower and middle classes will now have to end. No more tax breaks for the elites.

Tell your elected officials to “claw back” these obscene amounts of money from these people since it was not based on any sound financial decisions they made and any reported profits were only an illusion.

Tell your elected officials that there needs to be a thorough investigation of any criminal activities associated with this economic mess. Right now, white collar crime certainly does pay. Rob a 7-11 and you will get 20 years, rob $30 billion (Madoff) and you get to sit in your luxurious and comfortable New York mansion.

Tell your elected officials that there must be an end to this distorted incentive system that rewards short term gains, ignores the long term, and can ultimately bring down companies and the nation with them.

There is a saying that “the squeaky wheel gets the grease”. We have been silent far too long. Start squeaking, do so with your friends, neighbors and families and do so loudly. Our “leaders” need to hear from millions of us that we will no longer accept business as usual.

Buy products that are Made in the USA. That will employ people here, rather than in a foreign country. The job you save may be your own! The government cannot impose Made in the USA restrictions on any rescue package due to trade rules and inevitable retaliation by others. It is also not good policy to do so. However, you as a consumer can make a conscious decision to help your neighbors.  If a store does not have products that have been Made in the USA, ask the manager why not. Do not always go for the lowest price. Remember, if you always buy lowest ignoring US products, eventually you will pay more in taxes to support the unemployed worker. Eventually you may find yourself unemployed as well.  

Use cash to pay for your purchases. I remember seeing a commercial on TV not too long ago where people were in a convenience store ordering, buying and paying with a credit card and everything seemed to be humming along like a well oiled machine. Then somebody decided to pay for their purchase with cash and the whole machine just stopped. This is typical of the type of media propaganda that our financials use to increase their already very significant earnings. Are you aware that the merchant is generally charged 3% of the sale? This is on top of the exorbitant rates that you are charged for the use of the card. Some people are paying 29% on their credit cards and add the merchant fee and the amount these parasites are making is over 30%. I still remember when we had loan shark laws that would throw people in jail for this type of usury. Even the bible has prohibitions on excessive usury. Where is the religious right on this issue? Why are they not crying bloody murder? Is this not a family values issue? Remember, that in the end you also pay that 3% merchant share as it is passed onto the consumer whether they pay cash or credit. This becomes essentially a tax on all consumers that goes directly to the banks. Would you willingly agree to have your sales tax increased by 3%? Stop paying the BOAT Tax (Bank Of America Tax).

Wouldn’t you like to be able to “punish” those irresponsible companies that made those poor business decisions and are now having our government extort money from you so they can maintain their lavish lifestyles? Here are some suggestions:
Put that credit card away and pay cash. If we all did this collectively, it would be your way of saying how much you disapprove of their poor decisions. It would be telling them you do not approve of paying loan shark rates of interest on your cards. It would loudly tell the government that you do not approve of the bank and financial bailouts.

Change your insurance company if you have AIG coverage. If you had a neighbor that had offended you, would you shop at his hardware store? Then why are you patronizing the very companies that are extorting your taxpayer money from the government?
Take your money out of any insolvent banks that needed bailout funds and let them sink as they should. The only thing keeping them solvent are massive injections of YOUR money by politicians taking care of their campaign contributors. Place the money into a regional or community bank that has acted responsibly and is helping your local area. Let’s reward them and also help our communities. Be aware that AIG has realizized that their brand name is tarnished and they have changed their name to 21st Century insurance and have been advertising heavily recently. They are probably using TARP funds to pay for this advertising.

Stop shopping at companies like Walmart that come into neighborhoods with their predatory sweatshop pricing and then drive local mom and pop merchants out of business
. These mom and pop operations were providing for families and they were living in dignity. Now many of them are forced to go work at the Walmart where they cannot get by and need public assistance. Walmart actually helps their workers apply for this assistance. The taxpayer actually subsidizes Walmart’s payroll because of their low pay scales. In the end YOU pay in taxes to support Walmart workers, so it is really not cheaper to shop there in the long run. Walmart also has the audacity to demand free land from local and regional governments and to have the sales tax go to pay for their building. This means that schools, police, libraries and other services do not receive any benefit from the store. It is a small wonder the mom and pop stores cannot compete against them. They have to pay for their buildings and their fair share of taxes which did benefit your community.  I highly suggest that you read the book “Free Lunch”, by David Cay Johnson. It will open your eyes to how we have been manipulated by large corporations who are creating an uneven economic playing field for the rest of us.

While there are other companies that also engage in similar practices, Walmart is probably the most egregious. By the way, H. Lee Scott Jr, President and CEO of Walmart paid himself $31 million last year and has a net worth of close to $100 million. Using Walmart’s 34 hour per week full time definition and its stated average wage of $9.68 per hour, the average Walmart worker would earn $17,114 which is below the poverty line for a family of four. This same worker would have to work 1,811 years to earn the money H. Lee Scott paid himself last year.  The Walton family who own Walmart has a net worth of over $100 BILLION! This while they are forcing their employees onto public assistance because of low wages and poor benefits, and while their company earns record profits.

Patronize your local hardware store, bakery, bank, and other businesses. The community you save will be your own. Stop giving your money to large chains run by the wealthy elite who will remove that money from your community and skim a percentage for themselves despite the fact that they have already have amassed vast concentrations of personal wealth. When traveling, sample a local restaurant, not a national chain.

Join an organization that is seeking to protect the environment, limit population growth, protecting the free press, watchdog groups, and other worthy causes. Alone you cannot accomplish much, but collectively we can make the changes we need.

It is time to become active and join an organization that is fighting for the common good. One example is Common Cause which is working for full public financing of political campaigns. Stop watching American Idol and Dancing with the Stars and take the time to become informed about what is happening. Make one day a week a “no TV” day. That will provide you with free time to become informed and involved. We cannot expect our government to do this for us. We were not engaged for the last 3 decades and look where it has placed us. We did not hold our elected officials accountable, we did not ask and demand answers for the hard questions. Our prosperity was an illusion and it is time to take back our nation. We need to do so now.

 
.
We are pleased to be able to offer you the ability to comment on this article or on the comments submitted by others. We are going to try to do this in an unmoderated forum. We ask you to be polite and considerate of others. Please do not use language that is obscene, damaging, slanderous, or negative. It is all right to criticize an idea, but is not acceptable to criticize the person. Hopefully, we will not have the need to moderate this forum in the future.

To be able to leave a comment you need to register as a user. This can be done easily by selecting the drop down window in the comment box.

Since this unmoderated, your comments should appear immediately.