10 Step Program For Economic Growth

The debt crisis in Europe that we have watched across the pond for the last two years is finally starting to play out. The riots in Greece and marches in other countries may cause Americans to take their eye off the ball.

There still is a debt crisis at home.

And it is not going to get better with out some large changes in the way we govern our country.

We know that we are sailing on a financial Titanic. What do we do to avoid the iceberg?

If you listen to some, it is raise taxes. Robert Reich and the intellectual elite among the liberal part of the country believe we should increase marginal rates to 70% for the rich. Many liberal(Keynesian) economists also believe that we need to keep the pedal to the metal and increase government spending. They don’t think we did enough.

They’re wrong. Been there done that. Didn’t work

We are debating the debt ceiling. We have until August before things start to unravel. Both parties have drawn a line in the sand. However, both parties ought to refocus there energies elsewhere, while solving the debt ceiling problem permanently.

The trick is to manage for growth, and to cut spending. Growth will increase the amount of tax revenue generated. The tax base will broaden. The pie will get bigger.

Here is what they ought to do:
1. Raise the debt ceiling by two trillion dollars. Eventually, we will hit it again. But, if we structurally reform government and the economy, we will hit it under a far different debt/asset ratio than we have today. We will hit it because of growth, not spending.

2. Decrease the amount of real government spending by the same amount of the raise of the debt ceiling.

3. Cut the corporate tax rate to 15%. At the same time, eliminate their subsidies and deductions, and eliminate taxes on dividends.  Get corporate cash back off the balance sheets and into the market place where it can be reinvested in more productive assets.

4. Flat tax individuals at a 15%-19% rate with no deductions (not even for charity or mortgages). Hauser’s Law shows we never pay more than 19%.

5. Change immigration policies. If a person has a graduate degree in science, math or engineering, put them on a fast track path to citizenship. Innovation will help us grow faster.  Gary Becker had the best idea.  Charge for it. We need entrepreneurs.

6. Repeal Obamacare and Dodd-Frank. Something on both these fronts need to be done, but both of these laws socialize and centralize power. Our economy works better with flatter, horizontal structure-not administered vertical silos.

7. Change all government pensions from defined benefit, to defined contribution. Trade off may be increased pay for government workers. This decreases future liabilities. State and local governments need to do this too. Immediately.

8. Enact the Ryan plan (although I think we could go further), and develop a similar plan for Social Security.

9. Begin to privatize many government services; begin selling of large tracts of government land. In bankruptcy workouts, this is called selling off some assets.

10. Deregulate. Deregulate. Deregulate. Kill entire agencies and toss out their rulebooks with them. They are chewing gum on the sources of productivity.

No doubt, it will take time for America to re-adjust.  It will take time for government to adjust.  But at the end of the day we will be left with a system that is less vertical silo, less hierarchy and a flatter, more dynamic,entrepreneurial ecosystem.

There will be no limit to where we can go.


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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