A guy named Charles Hugh-Smith has a book called Why Our Status Quo Failed and Is Beyond Reform and has a thesis: There are perverse incentives in the economy and each has a beneficiary whose benefits oppose the general good. That probably is not news to many. But his solutions...they are pretty tough.
Here are some of his "perverse incentives:"
High-frequency traders and financiers with the ready ear of well-paid political lackeys, stooges, toadies and sycophants run never-lose skimming operations and pay lower tax rates than self-employed and small business owners.
Corporations have increased their share prices not by earning more money by producing more goods and services but by borrowing cheap money from the Federal Reserve and buying back outstanding shares.
Corporations pay less tax if they move production overseas and keep their profits in other countries.
If I wreck one vehicle after another due to reckless irresponsibility, what happens to my insurance premiums? They skyrocket, of course, reflecting the higher risks that result from my behavior and poor choices. Nobody thinks safe drivers should subsidize irresponsible drivers.
But if I wreck my health by recklessly pursuing risky behaviors, I pay the same as people who are careful "drivers" of their health. What sort of incentives does this system generate?
If I want to buy an over-priced home, the system is loaded with incentives to encourage that potentially poor financial decision. But if I want to launch a small enterprise, the incentives are all perverse: steep upfront fees, taxes from the first dollar, and in many cases, fees and taxes on revenues, regardless of whether I am making a profit or losing my shirt.
Corporate profits have soared as financialization and rigging the system have paid much higher returns than risking capital in new goods and services.
The incentives for home ownership have turned the bottom 90% into debt-serfs in servitude to banks while the top 5% own income-producing assets and businesses.
His solutions:
1. Make preventative care essentially free to everyone ($5 co-pay) but weight the risks and costs created by irresponsible behaviors that ruin health. Reward those who take responsibility for their health by reducing the premiums they pay.
2. Tax all profits on securities held less than a day at 95%. Raise corporate taxes generated by financial activities to 50%, and lower the corporate tax rate on profits earned from producing domestic goods and services to zero.
3. Lower the tax for the first $25,000 earned by small enterprises to zero. Limit total government fees to 5% of revenues for all businesses up to $10 million in annual revenues.
4. Phase out the mortgage interest deduction. Limit mortgage interest deductions to the first $100,000 of mortgage debt.
5. Eliminate the personal income tax (and the need to file a return) for every household with income of $100,000 or less.
6. Automatically sunset every government regulation. Make city, county, state and federal governments renew every regulation every few years via a majority vote or it vanishes from the law books.
7. Make every politician wear a NASCAR-style jacket plastered with the names and logos of their corporate, union and financier contributors.
8. Treat drug abuse and addiction as medical conditions rather than crimes.
9. Eliminate the Federal Reserve and its free-money for financiers perverse incentives for debt-serfdom and financial plundering.
10. Eliminate all student loans and debts. Make colleges compete for students on a cash-only basis.
As you no doubt noticed, every perverse incentive is the cash cow for a vested interest or cartel. And one can only imagine the unintended impact of each "good idea" to fix them.
Here are some of his "perverse incentives:"
High-frequency traders and financiers with the ready ear of well-paid political lackeys, stooges, toadies and sycophants run never-lose skimming operations and pay lower tax rates than self-employed and small business owners.
Corporations have increased their share prices not by earning more money by producing more goods and services but by borrowing cheap money from the Federal Reserve and buying back outstanding shares.
Corporations pay less tax if they move production overseas and keep their profits in other countries.
If I wreck one vehicle after another due to reckless irresponsibility, what happens to my insurance premiums? They skyrocket, of course, reflecting the higher risks that result from my behavior and poor choices. Nobody thinks safe drivers should subsidize irresponsible drivers.
But if I wreck my health by recklessly pursuing risky behaviors, I pay the same as people who are careful "drivers" of their health. What sort of incentives does this system generate?
If I want to buy an over-priced home, the system is loaded with incentives to encourage that potentially poor financial decision. But if I want to launch a small enterprise, the incentives are all perverse: steep upfront fees, taxes from the first dollar, and in many cases, fees and taxes on revenues, regardless of whether I am making a profit or losing my shirt.
Corporate profits have soared as financialization and rigging the system have paid much higher returns than risking capital in new goods and services.
The incentives for home ownership have turned the bottom 90% into debt-serfs in servitude to banks while the top 5% own income-producing assets and businesses.
His solutions:
1. Make preventative care essentially free to everyone ($5 co-pay) but weight the risks and costs created by irresponsible behaviors that ruin health. Reward those who take responsibility for their health by reducing the premiums they pay.
2. Tax all profits on securities held less than a day at 95%. Raise corporate taxes generated by financial activities to 50%, and lower the corporate tax rate on profits earned from producing domestic goods and services to zero.
3. Lower the tax for the first $25,000 earned by small enterprises to zero. Limit total government fees to 5% of revenues for all businesses up to $10 million in annual revenues.
4. Phase out the mortgage interest deduction. Limit mortgage interest deductions to the first $100,000 of mortgage debt.
5. Eliminate the personal income tax (and the need to file a return) for every household with income of $100,000 or less.
6. Automatically sunset every government regulation. Make city, county, state and federal governments renew every regulation every few years via a majority vote or it vanishes from the law books.
7. Make every politician wear a NASCAR-style jacket plastered with the names and logos of their corporate, union and financier contributors.
8. Treat drug abuse and addiction as medical conditions rather than crimes.
9. Eliminate the Federal Reserve and its free-money for financiers perverse incentives for debt-serfdom and financial plundering.
10. Eliminate all student loans and debts. Make colleges compete for students on a cash-only basis.
As you no doubt noticed, every perverse incentive is the cash cow for a vested interest or cartel. And one can only imagine the unintended impact of each "good idea" to fix them.
No comments:
Post a Comment