Some Economic Suggestions:

PREAMBLE

The government is in a unique position to influence the economy through its actions. Nudging the interest rate nudges the economy. Large tax and spending changes create more substantial impact. These are essential functions.

During the Bush years, the government went into debt to give money to taxpayers at the expense of the overall community and at a time when the economy did not need the stimulation. This contributed significantly to turning an ordinary real estate downturn into an economic meltdown.*

During the last decade, money flowed up to the rich as both tax breaks and big bonuses. When worthless investments disappeared from the economy, jobs and a substantial portion of the nation's wealth disappeared as well. The proportion of wealth held by the rich increased, and money at the poor end started drying up completely. This inequality is bad for the majority of citizens and bad per se for the health of the economy.

SPENDING:

Use the power of government to continue to send money to the bottom 90% of the economy now. Unemployment insurance. Public works jobs. Payment for previously volunteer jobs. Open up poverty programs like food stamps to those with minimal incomes even if they have assets. We want to reward saving and preserve the assets of the bottom 90%, not force them to sell off their retirement.

INVESTING:

Investing bubbles in real estate derivatives, dotcom startups, and junk bonds have been responsible for the last few recessions. One common thread among these is too much risk for the entire market to bear. There needs to be a mechanism to limit the quantity of high-risk investments in the market.

Another related common thread is investing in speculation rather than in growth. Investing in companies contributes to economic growth. Speculating on which way prices will go skims money off the economy and hurts long-term growth investment. Thus, it should not be treated the same as growth investment. Speculation investment should be limited and burdened with a surcharge. This is not as cut and dried as I have made it sound. For example, you can use foreign currency as a hedge against foreign stocks to eliminate currency risk. This should not be surcharged. Or you can speculate in foreign currency on its own, and this should be surcharged. The professionals have the knowledge to sort it out.

High-frequency traders have been gaming the market with bazillions of bids and asks. Easy solution for this is a ha'penny tax on each bid and ask whether or not it goes through. Long-term traders won't notice the difference because they (should) trade infrequently.

TAXING:

Use taxation to get money back from the superwealthy.

Temporarily apply a high estate tax with a $1.5 million exemption

Charge a higher CG tax on speculation (derivatives, etc.) and disallow losses.

Introduce tiered CG tax for growth investments that ties in with income tax. If a retired person is living on $25K in investment income annually, he shouldn't be taxed the same as a person who has $25K investment income on top of a $2MM salary.

Mandatory retirement contribution from salary

Change tax laws so as not to penalize those who are withdrawing retirement funds to live on. Ideally, these people should not have to live on their IRAs or 401ks before retirement at all.

Add annual tax for those who own residential property but don't live in it.

Offer tax credits for landlords who are renting property on a rent-to-own basis. England has had a formal rent-to-own program for years.

Offer tax credits for bringing jobs into the US and for converting location-fixed US jobs to telecommuting US jobs. Telecommuting offers new employment opportunities for people in areas where jobs are scarce and allows them to stay in their homes (which are probably underwater).

*since this isn't about the causes of the meltdown, I'm only touching lightly here

Cutting Back the Kudzu

Long-term investors want growth products and smooth, steady upward market growth.

Short-term speculators want betting products and volatile market performance.

These two groups will always be in conflict and will always be competing for money. But the health of our economy is firmly on the side of the long-term investors.

Stocks and bonds support the economy. They provide capital for growth and a return on investment the way a home garden provides food for the table.

Speculators are the kudzu of the market. Give them room, and they will take over. Then the market will crash because no market can survive when speculation chokes off growth.

Congressional reform is about requiring speculators to be more transparent, have stricter accounting, and higher security standards. All that is good, but we also need to limit the actual volume of speculation, both in the market and in the unregulated areas that speculators naturally seek out.

We must start treating speculators like kudzu. You never get rid of kudzu completely. Cutting it back is an ongoing job.

It is the nature of speculators to seek out new things to bet on, and the less regulated, the better. Just this year, a market opened up to bet on box office grosses. After flooding the market with junk mortgages, speculators are now sweeping up the devalued mortgages and even the tax liens for another go-round.

The government, probably the SEC, has to take on the job of staying on top of speculators--not just in regulated areas or "the market" but wherever they go.

Everybody understands the principle behind regulating casino gambling (whether or not you agree). It's not just a moral objection; it's also about the economic health of individuals and the community.

We all must understand that our economic health--in the U.S. and the whole world--depends on limiting gambling disguised as speculation, and that means constantly watching for speculation in all the forms it can take.

Why We Need Consumer Protection From Banks (Chapter Elebenty)

We've all heard the stories. Here is one more.

I just got my Visa statement. Visa is my backup card, usually when I forget to put the other one back in my wallet. I didn't have any charges on it this month. However, I did in the previous month.

The current statement shows the payment made in full but also shows finance charges of $1.50 tacked on after the payment was received. When I called to inquire about this balance, I was told I had no balance. Why does my statement show a finance charge? It's a mystery.

It was easy for me to spot the extra charge because it was the only charge. How many people simply send off the check or use automatic bill pay without noticing extra charges?

If there were a consumer protection agency that covered banking and financial products, that would be my next call. As it is, the worst I can do is cancel my card and send a letter to the auto club, through whom I got the card, and explain how Bank of America lost them a credit customer.