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

Acronym Time! The SOTU and Q&A

I have been called a "glass half full" person, and I rather like that. But perhaps what I am even more is a devil's advocate. When liberals were dumping on Obama, I pointed out reasons to support him. Now in the wake of a powerful SOTU speech and wrangling of House Republicans, while we're still high on the fumes....

...I'm going to address some things I wanted to see in the speech and didn't.

--What he said: "...each time a CEO rewards himself for failure, or a banker puts the rest of us at risk for his own selfish gain, people's doubts grow. Each time lobbyists game the system or politicians tear each other down instead of lifting this country up, we lose faith." He also tied much of his agenda to elevating or keeping the U.S. in a world-leading position.

In addition, I wanted to hear him say he was willing to get personal, something like, "if you or your hired lobbyists are standing in the way of progress, then you are an anchor holding America back from being great, and I will call you out. Coal, oil, health insurers, I don't care how long you have been in business or how much money you have, if you are not helping us build the future, if you are fixated on keeping things the way they were, then you are a problem for all Americans, and I will identify you by name."

In other words, I want to bring more public pressure on the obstructionists as a tool to divide and conquer the opposition. Friday was a good start in doing this. I love seeing people reap the full benefit of their own words and actions, good or bad. But so many of the people who need to see this kind of exchange can't be bothered to watch it. How will he reach them?

--In talking about financial reform, Obama said he doesn't want to punish banks. Ok. But right after that, he says that the House has already passed reform and the lobbyists are trying to kill it. So, who does he think is paying the lobbyists? And by saying he doesn't want to punish banks, isn't he tying his own hands to fight back, or at least arming the other side for retaliation against whatever he does?

--He takes "his share of the blame" for not explaining health care, then asks for support for "the plan we've proposed" - never explaining what that is or how he wants it passed. So if people want to support his plan, what do they do? Demand passage of the House bill? The Senate bill? A patch? Something new in reconciliation? Some combination? You see the problem. He had our attention. This was the time to hit the bullet points.

--His call to action on national security was "...let's put aside the schoolyard taunts about who's tough. Let's reject the false choice between protecting our people and upholding our values." Again, long on rhetoric, short on actual action items.


In this speech, and especially in the Q and A with Republicans on Friday, the word "parental" kept appearing to describe his demeanor (though on Friday he was more Father Flanagan than Ward Cleaver). One of the best parenting tips I ever heard says that parents spend too much time dwelling on the bad and not enough time turning kids toward good behavior. So instead of yelling "don't" or "stop," a parent should say "here, try it this way instead."

This "try it this way instead" is what I don't see enough of as he addresses Congress. As he addressed the Republicans Friday, I heard something like, "no, that's not what I'm thinking, but keep guessing." That just sounds like game-playing. Is he trying to wear them down? Tame them? Or just annoy them?

Don't get me wrong. Overall, I love his tough tone and the relentless refusal to pander, either to Republicans or to voters. I love the call to progress and rational problem-solving. I love the direction this is going. I just wish we had some clearer signposts.