A Real Pro-Growth Policy with Strategic Outcomes

A Real Pro-Growth Policy with Strategic Outcomes

Bethke’s Proposals - [Long]

Whether you are progressive, or conservative, there is general agreement that the United States of America has lost its money mojo.

A) Conservatives generally call for lowered taxes to send more money into the economy and less money through the government.

B) Progressives generally call for higher taxes to send more money through the government.

A or B, which is the correct path? This is the Keynesian vs. Chicago School debate.

This goes back and forth in the media and the political pundit industry every day for the last 30 years, and the anger and violence behind this discussion is getting worse and worse by the day. (It is very profitable to sell products into the emotions of fear and anger.)

The reason why this is so difficult to discuss is because we have not even agreed on our strategic goal in the first place. Keynesian is the correct school of economics for certain outcomes and Chicago is the correct school for other outcomes. Debating Keynesian vs Chicago is pointless - it is like debating which is better - AC or DC power? They are two different tools for two different outcomes.

What? Don’t both schools of economics want us all to prosper and be rich? Actually, no. No they do not.

Keynesians believe the correct role for the central government is to manage the economy for greatest employment.

The Chicago School believes that the central government should remove as many barriers as possible for economic competition and carefully control inflation to be as small as possible.

In short, the Chicago system is the best if you are talented, intelligent or fortunate to amass a pile of wealth and want to protect that pile of wealth from being eroded away to dust by inflation.

And the Keynesians, want to make sure that the great majority of the citizens have work to perform that produces strong enough wages to stimulate a robust economy based on demand, and make sure that dreaded recessions and depressions do not unleash the spectre of civil unrest that could lead to political upheaval.

Do you see that these are two different tools? Do you see now why hardworking entrepreneurs that have worked their ass off are so frustrated when they pay 47% income taxes (me: Fed + Ca last year) before even getting to sales, gas, telecommunications, vehicle, and property taxes? Despite a payoff last year that represented the first material liquidity event in my 20 years in the game industry, greater than 50% of my income last year went to taxes last year. So, please be clear, I do not enjoy high taxes.

When debating policy and economics online, I am often in the arch-liberal camp which is well aligned with Keynesian economics. This surprises some of my friends, especially as I have lived overseas for 6 years, I have developed many friendships with very financially sophisticated entrepreneurs. So, I confuse them from time to time on why am I behind “socialist” policies, when I work so hard to provide for my family.

I feel I owe an answer to my friends. I also apologize to anyone who is reading this admittedly not well organized essay.

Economic policy is simply a tool to help shape the future. So to answer the question of why I am behind any sort of policies, it would be more correct to take a moment to stand back and describe the future I am working to influence.

#1 - Climate before Money:

It doesn’t matter how much money you have, if your planet is so toxic, violent and chaotic that you cannot live with security.

A core driving assumption of mine, is that humanity will not learn how to live a “green” sustainable lifestyle within 100 years. While I believe that we are capable of great change, and anyone who knows me, would readily agree that I am an optimist that is willing to sign up for any challenge. But when it comes to humans living sustainably, I call bullshit. This is not a problem of evil capitalist swine. Humans have *never*, lived sustainably. Native Americans have killed off all of the lions, camels, woolly mammoths in North America. Aboriginals in Australia have killed off all their megafauna, the earliest civilizations have created the deserts in the middle east and North Africa from over-grazing goats. And most stark, the assholes of Easter Island ate everything and cut down every tree until they all died out.

So, do I drive a Hummer? No. But I do own a Prius and a Pathfinder. While the Pathfinder might be an SUV, it is a 1997 with 200k+ miles on it and I have no plans on upgrading my vehicle. I will just keep repairing it. The CO2 burden of creating a new vehicle for me would outstrip the CO2 from my use of the Pathfinder. I restrict its use to driving with several people and carrying large loads. I pay an extra $50 a month on my power bill to source my electricity from green sources. I eat local as much as possible, drinking Texas beer over California beer, or brew my own. I garden, and buy my vegetables from farmer’s markets or from local sources at our super market. Why do I do this? To save a little CO2. Will it help? Not much by myself. But if we all did a little to save the CO2 output, it would help delay the some of the effects of climate change for a little more time.

More time? For what?

CO2 is currently at 400 ppm and we are actually accelerating our CO2 output and will reach 1000 ppm between 2060 and 2080. I do not believe we will come together as a one-world government and close down ALL coal plants, eliminate all gasoline and diesel vehicles, and convert to an all-renewable based energy economy before the year 2050. 2050 sounds like it is a long way off, but it is just 37 years from now, about as much time as Reagan began to campaign for his presidency.

We already the same CO2 in the atmosphere now as 15 million years ago when the temperature was 14 degrees higher, and there were no ice caps. No Arctic, Greenland or Antarctic Ice. When this ice melts the oceans will rise 200 feet. The world’s maps would not be recognizable with 200 feet higher oceans. Well before we lose Florida, the great lakes states, and the gulf coast states, Category 5 Hurricanes will be commonplace. Force 5 Tornadoes, flooding and drought and all other forms of unpredictable weather will be increasingly common. In short, long before the oceans rise up and drown the world’s great cities, the storms will trash them first.

So, if we cannot live sustainably, and we cannot stop the storms and the ocean’s rising - let alone the biodiversity loss, and widespread starvation, where is the hope?

We are smart, we have resources, and we have an incredible will to survive. I am sure we will find a way to survive. Heck, we could just go ahead and launch a preemptive nuclear war and wipe out 85% of humanity and trigger a nuclear winter. Seems like overkill, but it would prevent runaway greenhouse warming.

The rest of this essay is an effort to make survival not only more comfortable than a thermonuclear holocaust, but we should be able to prosper, grow and have good times!

My basic strategy is to manage the economy for robust growth driven by a middle-class demand driven economy, while investing heavily in renewable energy, energy and space development:

#2 - End the Political Drama in the USA and add value to the planet:

Strategy: Balance the budget WITHOUT Austerity:

a1) Eliminate and close down tax loopholes for the top 2% (incomes greater than 450k)

a2) Close down the Fortune 100’s use of fraudulent offshore tax haven structures

a3) These two changes would net over 1T of federal revenues without taking a single dime

out of the economy by slowing down middle class consumption

a4) The federal budget is projected to be in deficit by 635B this coming year, so 1T - 635B, would leave a SURPLUS of 365B, again without slowing down the economy at all, nor curbing any wealthy individual or corporation from amassing more wealth

a5) Redirect $200B of the military’s $700B budget to create the “War on CO2” and have the military partner with the military industrial complex to put up solar panels and windmills everywhere.

a6) With $200B we could build 1 GW of wind power a year which would equal 4% of our electricity, going fully green, zero CO2 and renewable for electricity in 25 years - by 2038, simply by declaring a “War on CO2”

a7) We *still* have a surplus of 365B a year to pay off our 16T of national debt. Let’s target a very low 40% of GDP as our goal on debt. (Going to zero debt does not lead to the most robust growth, and the reasons are beyond the scope of this essay. Most economists target a modern democracy to go for 60-75% of GDP, so 40% is a comfortably low #.) Let’s assume that the growth of the economy offsets the interest rates, so we just have to pay down 16T-6T = 10T of debt at 0.37T per year. Bang! in 27 years we have our national debt well below the target of 75%, and we would be at 75% in 10 years.

a8) Overturn citizens united and make it a constitutional amendment to ban corporate political speech. Political speech can only be paid for by real humans and limited to $3k per year. This is not a fairness issue, corporate political speech if left unchecked will rationally distort public policy to enrichen the corporation in the short term at the expense of all long-term outcomes - including the same corporation. See travesty of the commons.

a9) Nationalize the health insurance industry and drive costs down from 20% of GDP to be in-line with the rest of the modern world at 10% of GDP. The wealth will still be able to retain premium health care privately. This would free up 1.5T of consumer spending into the economy causing a long lasting boost to growth, initially in the red-hot 8% range over 20 years as the economy absorbs this now-found source of consumption in the economy.

a10) increase the minimum national minimum wage $0.75 per quarter until it matches where it should be inflation adjusted since it was introduced in the 1970s. This will cause a net gain of jobs as wages rises, more consumption will occur, creating more jobs. The smart wealthy corporations will capitalize on this increasing demand and become even more wealthy, the crappy ones will lose ground, but in the end the economy would grow. At $0.75 per quarter it would still take the minimum wage 5 years to catch up to where it should be to keep up with inflation. This would allow the mediocre companies 5 years to adjust at the expense of all of us waiting for that economic activity to come online.

a11) Shift tax revenues back from the payroll taxes of 15.3% now to 6% that we had in 1960. This is common sense to increase middle class consumption by putting 9.3% more cash back into workers and employers to spend more and hire more workers to meet that demand.

a12) Use the Sherman Act to break up any too-big to fail monopolistic financial entity, until it is small enough to fail. Any further federal bailouts and the taxpayer should be the shareholder that wipes out bondholders and shareholders. No more promotion of “Moral Hazard”.

a13) Increase the salary of Congressmen, Senators and the Executive branch to be competitive with private industry. This will promote better candidates and greatly alleviate corruption. Prosecute corruption conspicuously - capital crimes for fraudulent use of more than $10m of public money.

#3 - Develop Space

To be Continued...

Originally posted on Facebook on May 31, 2013.