Unfortunately I believe that the prevailing view on immigration reform in the Republican Party is unrealistic and simplistic. Every nation undergoing a prolonged economic expansion has needed a significant immigrant population to meet it workforce requirements. The vast majority of illegal immigrants in the United States came here to improve their lives and contribute positively to society. Given that their are an estimated 20-30 million illegal immigrants currently in the United States with nothing to return to in their native countries, it is entirely unrealistic to expect them to simply pack up and go home before being eligible for U.S. citizenship. Such a policy would devastate our economy by leading to an abrupt shortage in our workforce not to mention the resulting human catastrophe of displaced, unemployed people. Besides, many of the jobs that employ these workers are low paying jobs that U.S. citizens are unwilling to take. What we need is a comprehensive policy that provides the U.S. with its needed workforce, provides stability and security for those workers, and collects taxes sufficient to cover the services that these immigrants consume while at the same time providing this nation the border security needed to ensure that terrorists and drug-traffickers are kept out.
The first step must be to dramatically improve the work visa program needed to adequately bring needed workers to this country. The program must not only be able to provide sufficient numbers of workers but must be nimble enough to bring them here in a timely fashion to meet the needs of our ever changing workforce requirements. Illegal immigrants already in the U.S. should be rapidly enrolled in this work visa program. Employers hiring illegals without a work visa should be aggressively pursued and fined. The work visa program should be designed to provide immigrants with long term stability to promote family and community among this population.
Once we have a well functioning work visa program in place we can aggressively begin securing our border. The reason this is not the first priority, although the first steps can be undertaken simultaneously, is that we can not shut off the supply of immigrant workers until we have a program in place to provide our country's needed labor force. To secure our southern border we should continue building a fence adequate to prevent easy border crossing, strengthen the border patrol, and move military bases closer to the border. Part of the military mission and training should be to secure our border.
All immigrants with a work visas should pay taxes sufficient to cover their usage of social services, education, national defense, social security, Medicare/Medicaid, and national infrastructure. In other words, they should pay the same taxes that U.S. citizens pay. They should have access to their social security savings just like U.S. citizens. However, since few of these immigrants are home owners and thus do not pay property taxes to support county and city expenditures, i.e. public education, they should pay an additional tax to cover this expense.
To provide this population with long-term stability and to reward positive contribution to society, a pathway to U.S. citizenship should be developed. After ten years of successful work visa employment and with tax payments sufficient to support their consumption of government provided services, these individuals should be offered full U.S. citizenship. The necessary tax payments will vary from individual to individual and family to family, i.e. a single working individual will require fewer tax payments than a family and a family with one child will require less than one with four children. Immigrants serving in the U.S. armed forces or in under served areas of public service should be offered a shorter period to full citizenship. Immigrants committing felony crimes should be denied pathway to citizenship.
Only by developing a plan to realistically solve the problem of illegal immigration by creating a nimble, robust work visa program, a pathway to citizenship, and securing our border will we be able to create a sustainable, workable solution to provide our great nation with its needed labor force.
Wednesday, April 14, 2010
Tuesday, March 23, 2010
...On Social Security
As the Baby Boomer generation retires, the Social Security Trust Fund has projected deficits in the tens of trillions of dollars over the next several decades. This deficit threatens to consume all of federal spending resulting in huge budget deficits, the destruction of the value of the dollar, and economic hardships and inflationary pressures the likes of which this country has never seen. The looming Social Security Crisis is possibly the greatest example of poor government planning, political ineptitude, and generational theft ever seen in history. The program was doomed to failure from the beginning due to a poor design that limited the funds ability to grow adequately over time and depended on an ever-expanding tax base. This failure was compounded when our politicians irresponsibly allowed the Social Security Trust Fund to be continually raided in an attempt to balance out-of-control federal spending. It has not been a secret that the Social Security Trust Fund is rapidly heading towards insolvency, this fact has been well known and publicized for decades. Unfortunately the baby boomer generation has irresponsibly failed to take any substantial steps to fix this impending crisis and has knowingly and willingly burdened their children, grandchildren, and other future generations due to their greed. short-sightedness, and fiscal irresponsibility. To stave off certain financial disaster, the United States must immediately take drastic measures shore up Social Security. These measures will not be popular with retired seniors however, given their inability to responsibly address the problem during their working lifetime, I do not believe that it is right to now burden their children or grandchildren with the responsibility of cleaning up their mess. Ideally we should begin to phase out Social Security and remove the federal government from the retirement game altogether. However, given that this is politically impossible, some aggressive action must be taken to prevent social security from gobbling up and destroying our economy.
First, in order to stop the hemorrhaging, we must immediately place the Social Security Trust fund off-limits for any purposes other than Social Security disbursements.
Second, we need to raise the minimum Social Security eligibility age from 67 to 70 years old. In a nutshell, when initially implemented in 1935 social security eligibility was 65 years of age for those born before 1938, age 66 if born before 1955, and then to 67 years of age for those born thereafter. Since the inception of Social Security in 1935, the expected lifespan of United States citizens has increased dramatically, thus increasing working and retirement lifetimes. Due to improvements in public health measures and health care knowledge the average life expectancy has increased from 62 years old to 78 years old since the inception of the social security system, thus dramatically increasing the number of retirement years. Since people are now healthier and are more physically capable of working later in life in order to save more for the additional retirement years, we need to further adjust the social security eligibility guidelines to reflect increased lifespans.
Each working individual should have their and their employer's social security contributions place into an account that is distinctly and solely theirs, much like a Health Saving Account. The account should be part of their estate and inheritable on a tax-free basis, an idea that will promote savings in this country. By placing social security collections into personal accounts, individuals can better track their contributions and will have a sense of ownership of their own retirement plan. Additionally, this will help this money remain free of government thievery.
Allow individuals the option of placing a portion of their Social Security savings into low risk interest bearing accounts, or in broad-based market funds. Perhaps a better idea for consideration is the establishment of an account that automatically adjusts asset allocation based on risk and age with funds moving from riskier to less risky investments as the individual ages. This would allow for a greater return on the savings, thus bringing social security closer to solvency, as well as mitigate the risk of people losing their retirement savings. A federal agency would be place in charge of determining permissible investments.
The cap on wages susceptible to social security taxation should not be lifted. This is a blatant attempt at income redistribution and is un-American. Social security was never established to be an additional tax burden on the people but rather to be a "forced' retirement plan. We must return to a society that promotes personal responsibility, part of which is individuals consuming less and saving more for the future. Any other solution will simply delay the day of reckoning when Americans can no longer finance their spending habits and the entire financial system collapses.
First, in order to stop the hemorrhaging, we must immediately place the Social Security Trust fund off-limits for any purposes other than Social Security disbursements.
Second, we need to raise the minimum Social Security eligibility age from 67 to 70 years old. In a nutshell, when initially implemented in 1935 social security eligibility was 65 years of age for those born before 1938, age 66 if born before 1955, and then to 67 years of age for those born thereafter. Since the inception of Social Security in 1935, the expected lifespan of United States citizens has increased dramatically, thus increasing working and retirement lifetimes. Due to improvements in public health measures and health care knowledge the average life expectancy has increased from 62 years old to 78 years old since the inception of the social security system, thus dramatically increasing the number of retirement years. Since people are now healthier and are more physically capable of working later in life in order to save more for the additional retirement years, we need to further adjust the social security eligibility guidelines to reflect increased lifespans.
Each working individual should have their and their employer's social security contributions place into an account that is distinctly and solely theirs, much like a Health Saving Account. The account should be part of their estate and inheritable on a tax-free basis, an idea that will promote savings in this country. By placing social security collections into personal accounts, individuals can better track their contributions and will have a sense of ownership of their own retirement plan. Additionally, this will help this money remain free of government thievery.
Allow individuals the option of placing a portion of their Social Security savings into low risk interest bearing accounts, or in broad-based market funds. Perhaps a better idea for consideration is the establishment of an account that automatically adjusts asset allocation based on risk and age with funds moving from riskier to less risky investments as the individual ages. This would allow for a greater return on the savings, thus bringing social security closer to solvency, as well as mitigate the risk of people losing their retirement savings. A federal agency would be place in charge of determining permissible investments.
The cap on wages susceptible to social security taxation should not be lifted. This is a blatant attempt at income redistribution and is un-American. Social security was never established to be an additional tax burden on the people but rather to be a "forced' retirement plan. We must return to a society that promotes personal responsibility, part of which is individuals consuming less and saving more for the future. Any other solution will simply delay the day of reckoning when Americans can no longer finance their spending habits and the entire financial system collapses.
Thursday, February 18, 2010
...On Healthcare
We all agree that the U.S health care system needs some major reform. However, in the process what we should not do is destroy the best, most innovative health care system in the world by imposing a central bureaucracy that will attempt to regulate and control 1/6 of the U.S. economy, namely health care. Health care is unique in its size, complexity, rate of innovation, and ability to impact the lives of the customers it serves. Therefore, it would be impossible for any centralized planning agency to ever effectively or efficiently manage all of the variables associated with the day-to-day caring of patients. Additionally, the health care system must be nimble enough to rapidly adapt to the dizzying pace of technological innovation seen in modern health care, something that no centralized agency with all its inherent layers of bureaucracy and competing political interests could ever hope to achieve. The only mechanism that can successfully meet the need for rapid adaptation, complex solutions, and optimal patient care is the unleashing of market forces on U.S. health care.
The current third party system of payment in the United States, i.e. health care insurance, is largely responsible for the uncoupling of consumer demand and health care supply. Few health care consumers consider factors such as cost when choosing to seek health care, therefore health care providers do not feel market forces driven by the consumers of health care but instead by the insurance industry. The goals of insurance companies are not always aligned with those of consumers therefore health care providers, while responding to the demands of their customers, i.e. the insurance companies, may not necessarily be responding optimally to the needs of patients. So any modification to the current system of health care must better align consumer demand with health care supply.
One solution being proposed by conservatives is allowing consumers to purchase health care insurance across state lines. To me this appears to be a short term solution at best. The reason insurance rates vary from one region to the next has to do mostly with varying rates of risk between regions. Thus where the rate of a certain medical malady is higher, the insurance companies will charge a higher premium to offset that cost. Additional reasons may also include varying regional minimal benefits insurance providers are required to offer by local law, i.e. mental health services, that force them to bare additional costs that they then pass on to the consumer. It is reasonable then to conclude that with the removal of regional boundaries for obtaining health care insurance that health care premiums will equalize across the nation over time. This will occur because the risk pool will equalize across the country and thus the cost of providing insurance will equalize among insurance companies. Over time, more efficient companies will consume the less efficient with a subsequent reduction in the number of insurance companies until only a few major players are left, thus reducing the competitive argument for eliminating state insurance boundaries. I suspect that the net effect of all of this would be a small reduction in the overall cost of providing health insurance, and thus in health care costs, as less efficient companies will be weeded out, however the overall cost savings will not be enough to expect this measure to save us from the exponentially rising cost of health care. So while removing state boundaries to health insurance might marginally improve health care costs, the greatest gains can be had by allowing consumers to drive health care demand which in turn will optimally effect health care supply.
The best idea to date I have seen to both encourage consumers to save for their own health care and to make consumers the determinant of health care demand are Health Savings Accounts. Health Savings Accounts allow consumers to place pre-tax dollars into an account that both earns interest and that they alone control and that can only be used to pay for health care expenses. These accounts are unlike traditional FLEX accounts in that they earn interest and the balances do not expire. Over time these accounts can accrue significant balances that can be used by health care consumers to make their health care purchases, thus placing consumers in control of health care demand. There should be no limits to how much people can contribute to a HSA. The fact that HSA dollars can only be used to pay for qualified health care expenses will naturally limit how much individuals will save in their HSA's thus countering the argument that the wealthy will abuse them as tax shelters. Given that only the absolute wealthiest patients could afford a truly catastrophic medical illness (probably only 0.1% of the population) costing hundreds of thousands or millions of dollars (i.e. major trauma or advanced cancer treatment), it is critical that HSA's be paired with a true Catastrophic Insurance Plan. This Catastrophic Insurance Plan should be a very high deductible plan with a minimum deductible high enough to truly be a catastrophic plan, i.e. $25,000 or more, but could actually be decided by the consumer, with higher deductibles charging a lower monthly premium. As an individual's HSA balance increases he or she might choose to increase their deductible and thus lower their annual catastrophic insurance premium. I would even be open to mandatory catastrophic coverage as a compromise with those who believe in mandatory universal coverage provided that the insurance was provided by private companies. Given that only a very small percentage of the population has a catastrophic illness in any given year, the overall cost of catastrophic claims should me manageable over time.
Another hot political topic is coverage of uninsured individuals. The solution to this problem must avoid undue cost to taxpayers, provide coverage to all uninsured patients regardless of citizenship, and positively encourage health care providers to treat these patients. My proposal is to allow health care providers to deduct their unreimbursed cost of caring for these patients, something current law does not allow. Such a system would have doctors lining up to care for these patients, solve the problem of the uninsured not having access to health care, not burden taxpayers, and not increase government expenditures.
By promoting and liberalizing Health Savings Accounts and allowing health care providers to deduct unreimbursed care of uninsured patients, the power and adaptability of free market supply and demand forces can be harnessed to both provide health care for the uninsured and more efficiently balance health care demand with cost, all with undue burden to the taxpayer.
Wednesday, February 3, 2010
...On Government Spending
The federal government spends WAY too much money. It's robbery, waste, and redistribution gone wild. Most of these expenditures are for policies, regulation, and welfare that far exceed the boundaries of federal responsibility outlined in the Constitution. Also, the process lends itself to promoting corruption and largess due to federal outlays being subject to the whims of the ruling party and politicians eager to remain in office. I propose a more systematic, stable, predictable, and less corrupt method for determining federal expenditures as described below.
The total annual federal budgeted expenses for any given year should be a rolling average of collected federal tax revenue over the previous 3-5 years. Any surplus in any given year should, by law, have to be used to reduce the federal deficit. Although this methodology might lead to a deficit in any given year, over time net federal cash flow should be positive, thus allowing a gradual reduction of the federal deficit.
All federally financed categories should be a certain percentage of annual federal expenditures to be determined by congress. For example, annual military spending should be set at 5% of total annual federal spending, Medicare and Medicaid at 5%, debt reduction and servicing 10%, and so on. These percentages can fluctuate from year to year based on the desires of the dominant party and needs of the country. However, in this manner Congress can only divvy up total federal spending, not intentionally pursue a budget deficit strategy since total annual spending is determined by previous years tax revenue. Also, I suspect that members of congress, given these fiscal limitations will be forced to behave more like responsible individuals with a fixed budget and weigh the relative merit of each program against other programs and only fund those considered most necessary.
Of course, at times emergency spending increases might be necessary in the event of a natural disaster, economic collapse, or war so a mechanism must be in place to allow for such. I propose an amendment that would require a 2/3 vote of the House of Representatives and the Senate to allow for expenditures in excess of the allotted total annual federal expenditure.
The total annual federal budgeted expenses for any given year should be a rolling average of collected federal tax revenue over the previous 3-5 years. Any surplus in any given year should, by law, have to be used to reduce the federal deficit. Although this methodology might lead to a deficit in any given year, over time net federal cash flow should be positive, thus allowing a gradual reduction of the federal deficit.
All federally financed categories should be a certain percentage of annual federal expenditures to be determined by congress. For example, annual military spending should be set at 5% of total annual federal spending, Medicare and Medicaid at 5%, debt reduction and servicing 10%, and so on. These percentages can fluctuate from year to year based on the desires of the dominant party and needs of the country. However, in this manner Congress can only divvy up total federal spending, not intentionally pursue a budget deficit strategy since total annual spending is determined by previous years tax revenue. Also, I suspect that members of congress, given these fiscal limitations will be forced to behave more like responsible individuals with a fixed budget and weigh the relative merit of each program against other programs and only fund those considered most necessary.
Of course, at times emergency spending increases might be necessary in the event of a natural disaster, economic collapse, or war so a mechanism must be in place to allow for such. I propose an amendment that would require a 2/3 vote of the House of Representatives and the Senate to allow for expenditures in excess of the allotted total annual federal expenditure.
...On A "Fairer" Tax System
How about we dump the progressive system of taxation and try something more "fair" to everyone. Everyone must have some skin in the game by paying some of the tax burden, regardless of income. I propose a combination of the "Flat" and "Fair" Tax.
The "Flat" tax rate should be around 10% with no deductions allowed, corporations included. The tax will kick-in at 250% above the poverty level which I believe is about $45-50,000. With a stable, simple, and predictable tax rate individuals and businesses will be able to more successfully plan and invest for the future with profound stimulus to the nation's economy.
The "Fair" tax portion should be a consumption based tax exempting items considered necessities for living. Basic food items, clothing (say any garment under $50), rent, housing purchase, higher education, and basic medical care should all be exempt from taxation. Their should only be ONE tax rate for the "Fair" tax, not some arbitrary progressive tax. Think about it, if the tax rate is 10% and one item cost $100 and another cost $100,000 then one is already paying ALOT more in taxes for the latter ($10 vs. $10,000 for those of you who are math challenged). So for all of you that believe the wealthy should pay more in taxes, this plan will meet that need. Under this plan the wealthy will pay more in taxes because they consume more and more of the items they consume cost more, thus they will pay alot more in taxes than the non-wealthy.
The appealing part of this plan is that now individuals, not the government, are deciding how much they pay in taxes by choosing their spending patterns. The downside is that government revenues will be more cyclical as tax revenues will decline if consumption falls. On the other hand, perhaps this threat will force government policy makers to adopt more pro-growth policies that benefit the economy and ultimately, the consumers.
Perhaps we need to reconsider how the federal budget expenses are determined to smooth out these fluctuations in the long run. But that is another blog for another day.
The "Flat" tax rate should be around 10% with no deductions allowed, corporations included. The tax will kick-in at 250% above the poverty level which I believe is about $45-50,000. With a stable, simple, and predictable tax rate individuals and businesses will be able to more successfully plan and invest for the future with profound stimulus to the nation's economy.
The "Fair" tax portion should be a consumption based tax exempting items considered necessities for living. Basic food items, clothing (say any garment under $50), rent, housing purchase, higher education, and basic medical care should all be exempt from taxation. Their should only be ONE tax rate for the "Fair" tax, not some arbitrary progressive tax. Think about it, if the tax rate is 10% and one item cost $100 and another cost $100,000 then one is already paying ALOT more in taxes for the latter ($10 vs. $10,000 for those of you who are math challenged). So for all of you that believe the wealthy should pay more in taxes, this plan will meet that need. Under this plan the wealthy will pay more in taxes because they consume more and more of the items they consume cost more, thus they will pay alot more in taxes than the non-wealthy.
The appealing part of this plan is that now individuals, not the government, are deciding how much they pay in taxes by choosing their spending patterns. The downside is that government revenues will be more cyclical as tax revenues will decline if consumption falls. On the other hand, perhaps this threat will force government policy makers to adopt more pro-growth policies that benefit the economy and ultimately, the consumers.
Perhaps we need to reconsider how the federal budget expenses are determined to smooth out these fluctuations in the long run. But that is another blog for another day.
...On Taxes in General
First of all, I hate taxes but I realize that they are a necessity for the successful functioning of the government. Remember that there was no federal income tax before the first quarter of the twentieth century. Our founding fathers would be rolling over in their graves if they knew how confiscatory the federal government has become. The government has only a few responsibilities as outlined in the constitution. The federal government should conduct foreign policy, provide for the national defense, and maintain a stable currency...and that is about it!!!!
The current progressive system of taxation is criminal and in my opinion, illegal under the constitution. Unfortunately the Supreme Court did not agree and thus it became the law of the land. Since abolishing the income tax altogether is probably out of the question, we need to explore some more "fair" (and I hate to use that word) methods of taxation. Everyone needs to have some skin in the game and thus pay some share of the tax burden.
The "Flat Tax" is a very intriguing option, say 18%, no deductions for anyone. This would be damn near impossible to pass. The "Fair Tax," a consumption tax, also sounds good but it too would be impossible to pass. So how about a combination of the two? See the next blog for these ideas.
The current progressive system of taxation is criminal and in my opinion, illegal under the constitution. Unfortunately the Supreme Court did not agree and thus it became the law of the land. Since abolishing the income tax altogether is probably out of the question, we need to explore some more "fair" (and I hate to use that word) methods of taxation. Everyone needs to have some skin in the game and thus pay some share of the tax burden.
The "Flat Tax" is a very intriguing option, say 18%, no deductions for anyone. This would be damn near impossible to pass. The "Fair Tax," a consumption tax, also sounds good but it too would be impossible to pass. So how about a combination of the two? See the next blog for these ideas.
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