Daily Archives: September 17, 2010

A Series of Unfortunate Blogs: Part VII—Not just getting out of the hole, but getting ahead

So with the last blog I outlined getting rid of most of the biggest government socialistic habits in terms of spending. Let’s talk about the final piece required for true capitalism to make a comeback: Regulation and Enforcement.

Despite what some people think, capitalism is not anarchy. In fact capitalism is not possible without a government. Rule of law is a corner stone requirement for capitalism to work. But that law needs to only set the rules of the game and work with a light touch.

Some of the things you need.

Contract law needs to be sacrosanct. Unless the contract is fraudulent or illegal (like bilking the public for obscene pensions) no contract should ever be broken nor will the law or courts allow it to be broken except under the most extreme situations (for instance bankruptcy).

Private property rights. John Locke listed private property along with life and liberty as our most basic unalienable rights; the Fifth Amendment also sees these three as a holy trinity; and I doubt Jefferson thought most people would pursue happiness as paupers. Property rights need to be placed as absolute. The government has no right to your property beyond an absolute necessity to continue its existence as a necessary evil.

Sadly both of these rights have come under fire by recent Supreme Court decisions. If you are going to have capitalism then they need to be reiterated by Constitutional Amendment that in no uncertain terms lists them as unalienable and absolute.

Further the government has an obligation to punish those who would steal or commit fraud. Next to violent crime these are the two greatest sins in capitalism.

But what else does the government need to do:

(1) I know I said in the last blog we shouldn’t mess with the tax rate but I have one exception. A flat tax. If a simple 12% tax on personal income were put in place then you could change the tax code. Let me make this clear, no deductions for anyone. No floor, if you only got paid $20 last year, then 12% of that belongs to Uncle Sam. Yes this will all but put the IRS out of business, and it will also put tax accountants out of business (sorry Tony, it’s nothing personal, but it’s better in the long run) but it needs to be done. This will stop the rich from hiding funds, and it will finally allow everyone to pay their fair share in this government. Other taxes, while they need to be eventually dismantled or changed, my suggestions are radical as it is…one thing at a time.

(2) The Fed needs to stop messing with the interest rate. It needs to over the course of the next decade raise the interest rate back up to 6% and then never touch it again. No real growth can occur with it currently at 0% and no stability can occur with the Fed constantly changing the rate. It needs to go to 6% and stay there. No exceptions.

(3) A Constitutional Amendment needs to be passed making this a right to work nation. Forcing people to join unions just because they want a job is a violation of the most basic freedoms of capitalism and it must end. Will this kill unions, no. But it will make them actually have to work for their employees instead of just taking their money. Further in the industries where union salaries have become outrageous (auto industry) this will bring the pay scales back down to what is reasonable thus making the products made by those industries affordable again.

(4) Minimum wage needs to be lowered by at least a dollar (disbanded entirely eventually, but one thing at a time). Everyone knows you raise minimum wage you will increase unemployment and raise prices…it works the same in reverse.

(5) Congress has the power to put a ceiling on what credit cards can charge. They should use it. 20% interest rates are a good ceiling. Maybe if they couldn’t charge even higher rates they might exert some discretion on who they give cards out to. Credit cards companies have a right to a profit, but over 20% is just usury and it’s stupid because it only encourages people to default on their payments.

(6) There needs to be a new rule that any bank that is FDIC cannot give a loan unless the applicant has a 20% down-payment and their monthly payment is no more than a third of their income. This may slow down home sales, but it will all but kill foreclosures which are far more detrimental to the long term health of the economy. However with this banks must be allowed to opt out of the FDIC program, this will lead a resurgence of smaller Savings & Loans which will be able to make riskier investment, but for higher returns for the people who invest in them. And if someone is actually dumb enough to put all their money in one of these noninsured S&L’s rather than just a small fraction of their income, well then that person was a complete idiot and needs to live with the result of their actions.

(7) Regulation about insurance companies crossing state lines need to end. This will provide more competition, less overhead for large corporations and drive costs of medical bills down down down.

(8) Tort Reform. If you get rid of litigious frivolous lawsuits you will save billions across the board in almost every field, billions which will trickle down to the customer.

(9) Anything that can be privatized in the government should be. I have no doubt UPS and FedEx can deliver letters better than the US Postal Service. I have no doubt a private firm can keep national parks cleaner, with more interesting tours and gift shops, for much lower costs. I know for a fact freeways work better as privatized toll roads. All the government has to do is in addition to the initial lease fee, they get 5% of any profits the company makes off these services. Everybody wins.

(10) Either through Constitutional Amendment or through Supreme Court decision the commerce clause of the Constitution has to be reinterpreted to only apply to commerce that actually does cross state lines, not that could theoretically cross state lines and not that aids in crossing state lines only that which does cross state lines and those actions which impede commerce crossing state lines. The commerce clause was meant to only stop barriers from being put up, not to allow the Federal government to put up restrictions.

(11) And this was implied in the last blog but I felt this needs to be made explicit Fannie Mae and Freddie Mac must be destroyed.

These reforms remove barriers and lay the groundwork for true capitalism. If you put in place all 24 of my suggestions we would still be several steps off pure laissez-faire capitalism, but we would be much closer and the system would be on a stable foundation to grow in such a way that it would not collapse at the first slow down.

Or we could continue spending ourselves into oblivion?


Filed under Capitalism, Conservative, Debt, Economics, Free Will, Government is corrupt, Government is useless, Laws the GOP should pass, Long Term Thinking