Charlie Rose

sanserve  02/24/2009 12:34 PM Report

The President's $10,000,000,000,000 Economic Stimulus Package

For homeowners: Cut the interest rate on all mortgage loans by 50 basis points and extend the payment schedule by three to five years. Convert all variable rate loans to fixed, at prevailing rates, and extend the payment schedule by six to ten years. No fees, points or charges tolerated.

More for homeowners: Provide a pre-paid $5,000 debit card to all free and clear homeowners. The cards are worth double for Ford or GM car purchases, and expire valueless if not used for retail purchases within 60 days of issue.

For retirees: Eliminate all income taxation, at all levels, on any formalized retirement income program. Eliminate all income taxation on one half of all non-retirement plan investment income received by retirees. Provide totally free health care coverage.

For Social Security tax payers below age 35: Reduce mandated contributions to 3% of salary, but allow for additional voluntary contributions. Redirect all contributions to personally owned but "untouchable until age 60" SSRIA contracts with private insurance and annuity companies. Participants would be permanently assigned to qualified providors.

These fixed-income-investments-only contracts would be non-commisionable, management fee only, and benefit identical at all providors. Trustees responsible for directing the investments of SSRIA funds would have strict QDI (Quality, Diversification, & Income) guidelines, with a focus on all kinds of government securities--- federal, state, and local.

For Social Security tax payers from ages 35 to 55: Reduce mandated contributions as above and redirect to SSRIAs. Deposit one half of each person's total existing Social Security deposit account to the SSRIAs.

For Social Security recipients and taxpayers above age 55: Annuitize the income benefit over the next ten years using SSRIAs, starting with the youngest recipients.

For income tax payers: Over a five-year period, replace the Internal Revenue Code with a 10% tax on all income above $40,000 per year. During the same time frame, bring all state and local income taxes to a total of no more than 5%.

There are no tax deductions, but those earning less than $40,000 per year would be exempt from sales taxes.

For governments: Over the same five-year period, institute a 12% Federal Sales Tax on all goods and services consumed or used by individuals. Do the same at the state and local level with a combined cap of 6%. Decrease (thru attrition) the number of federal, state, and local government employees by 30%.

As surpluses develop, sales taxes on food, shelter, clothing, healthcare, and education would be cut or eliminated.

For the financial sector: Abandon mark-to-market accounting rules with regard to mortgage-backed securities until such time as all multi-level mortgage products can be unwound and restructured. Consider a permanent ban of all market value assessment of income purpose, and other illiquid, securities.

More for the financial sector: Unravel all multi-level derivatives, control blatant and damaging speculation, and protect shareholders from abuse by corporate executives. Adopt a global SIBORAP code, one that is created by securities investors.

For health care and insurance cost control: Reform the tort law system with an eye to restricting awards at reasonable numbers and to subject all law suits to non-peer, economic-impact, review before allowing them to move forward. All costs of extortionary and frivolous lawsuits must be borne by plaintiff attorneys.

For corporations: Eliminate all income taxes, fees, and nuisance charges at all levels in exchange for an audited requirement of: more jobs, higher non-management compensation, reduced product prices, or increased health care benefits.

Also for corporations: Eliminate matching contributions for Social Security over the next five years, starting with the age 35 participants and working higher. Note that all such contributions would have been reduced to 3% already.

For the self employed: Eliminate matching contributions for Social Security immediately, and refund all such contributions made over the past ten years to any business still in operation.

For heirs: Repeal the confiscatory death and gift taxes at all government levels and return all the stolen monies to the estates involved for immediate distribution--- also retroactive 10 years.

For investors: All investment income would be treated equally (at flat tax rates), except municipal bond interest would continue to be tax free--- but at all jurisdictional levels. All public corporations reporting profits would be required to disburse at least 25% of their profits to shareholders.

For education: The federal government would support and subsidize (even construct if necessary) fifty, non-sectarian, non-political, four-year, non-research, colleges or universities.

A total enrollment of between 100,000 and 150,000 students, with 75% tuition coverage, and some form of qualified pool lottery selection system. Management, administration, student selection, and professional staffing would be provided by the private sector.

For everyone: bring back usury laws with respect to credit card debt.

Chances are good that this revised package will reduce taxes, increase disposable incomes, grow the economy, eliminate the Social Security mess, increase tax revenues, reduce all budget deficits, provide better health care, reduce insurance costs, encourage home ownership, and reduce the size of government.

Hmmmm. Maybe the next President.

Steve Selengut

http://www.sancoservices.com/

http://www.kiawahgolfinvestmentseminars.com

Professional Investment Management from 1979

Author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"

Congruent1  01/09/2009 04:10 PM Report

What people need to realize is that the most important thing that came out of this interview is that we're going through an economic paradigm shift and it's very speculative as how long the process will take before we have a significant breakthrough such as he agricultural or industrial revolutions. It has been therorized by some that Broadband technology may be the answer however the products that reflect "need" not "desire" have to drive this "new" economy . Our consumer mentality as caught up with us.

jbjbjb  01/08/2009 07:18 PM Report

Stiglitz & Feldstein have explained that our great economic machine-- the envy of the world--- is seriously flawed. Will they have the courage to discuss the deeper problem: too many people and not enough work for everyone who needs an income. Only China realized that too many people actually means less consumption.

IRISH  01/08/2009 05:43 PM Report

Stiglitz and to a lesser degree Feldstein clearly see the importance of post-stimulus economy and its position whereby consumers become savers, corporate competitive innovation may be cut back and a general attitudinal rejection of the Ponzi-like economy of bubbles that characterized USA since 1982 culminating in the home mortgage crisis.Americans will have to accept an economy that is less wealthy, less consumption, greater saving, less demanding of public services and a military that is smaller but smarter.

ginunn  01/08/2009 10:01 AM Report

The recession is not a problem. It is the solution to an earlier problem - one of excessive debt incurred to support profligate consumption and spending. In a recession, overleveraged and imprudent fiscal behavior – greed - is rewarded by failure. Prudent behavior is rewarded by access to discounted assets from the failed.

Of course 60% of the earlier stimulus went to savings - or in recent parlance, repairing the balance sheet of the individual. That's because the individual is much smarter than politicians and economists calling for stimulus to encourage spending.

I know what is best for me in terms of personal finances and spending. No government official, politician or economist has ever talked to me. Therefore they can know and say nothing about my circumstances and what is the best way for me to handle a stimulus payout.

I can understand politicians trying to spend their way out of a recession. They simply push the problems further into the future, where they become their successor’s problems.

I can understand economists, who have access to all the data on personal debt, savings rates and other statistics that show the consumer has no spending margin left, who know that personal consumption is responsible for about 70% of economic growth, and still discuss techniques for getting the consumer to spend more. They want to keep their jobs.

I have respect for neither.

REMant  01/07/2009 04:47 PM Report

This was a very good and well-managed discussion I thought, but Feldstein and I seem to share a similar perspective, beginning with his position on the mortgages. Ditto Stiglitz. I only wish he had brought out the macro aspects of our Iraq War debt earlier. I also have been impressed with Alice Rivlin's statements on NBR, where she is almost alone among the parade of Wall St inflationist economists. The main problem tho, as has been said in this interview, is that we have 40-50 yrs of asset inflation (ie, bubbles) to deflate. At the same time we have to try to keep the economy going, so that ppl can keep eating. I wrote this a couple days ago in response to an NBR program and sent it to them yesterday:

"So-called economic stimulus won't work, because there's no credit to fund it, unless at the same time it is possible to depreciate dollars and put them on a longer basis, just as ppl are trying to do with mortgages - one can think of the dollar as house whose value is declining - and then also because it won't transfer into the private sector. The best that it can do is to put the private sector on life-support, and it will have to financed by taxes in some manner to prevent hyperinflation. What the admin and Congress might do is to form a Japanese-style technology office - the MITI - to provide venture capital, which will likely provide more bang for the buck. In addition, "green" and infrastructure projects, and health care reform would be among the more beneficial, if, or when, they can be afforded. We have no alternative but to save our way out of what looks to me to be a significant depression. We can do it by doing without, getting others to eat our debt, continuing to try to slough it off on them, or by increasing our productivity. The last seems to me the only feasible means. What worries me the most about continuing to depreciate the dollar, is that it may collapse as a world currency. We need to think of this in exactly the same way that you would a firm or household, not as some sort of alchemy. The problem we have is that many ppl, including economists, think of our paper money as the equivalent of gold or silver bullion, given its value by government fiat, and that it is always possible then to create more, thus insuring everyone. As I've said before, any pre-19th c writer would have known better. Even if we used gold or silver coins, the value of them would ultimately depend on productivity, and the best way to insure that money keeps its value is to make it depend on savings, not credit. Money should not be an IOU, as at present, but a certificate of deposit. By depending on credit, we encourage the parasitic behavior of the people in the stock and other markets, whose whole purpose life is to insure that they come out ahead and force present and future generations to support them."

Another stumbling block is the persistence of the Mandevillean view that private vice, rather than rational hard work, brings public benefits. It is the great paradox of our essentially Progressive thought that it unites greed and security, tho M, himself, I think, never believed that. And I am glad, too, that Stiglitz brought up the issue of burden, because ppl need to understand that the Fed has been running what amounts to a Ponzi scheme for years, and in such a circumstance, their money not only has no independent value, they have no legal right to it.

tartufe  01/07/2009 04:20 PM Report

Feldstein is deep into the financial wise-guy's koolaid, which ipso facto disqualifies his credibility. Get him outa there! Paulson et al are more than enough. More too clever by fractions types is anathema!

Northof49th  01/07/2009 01:52 PM Report

Thoroughly enjoyed this interview and the points of view which seem to run contrary to popular opinion regarding how effective stimulus packages will be for the US economy. It is always a jolt to our intellectual framework when we hear opposing discourses on the economic recovery which many others seem to assume will magically and spontaneously appear on the horizon sooner rather than later.