Refueling the US Economy

by: Russ Russler, CFO, NCR [retired]
and David G. Kamper, MD, Business Owner [retired]
(click to respond)

Part I: Adverse Economic Policies

The USA economy is troubled by the following government policies as reflected by the persistently low USA Gross Domestic Product (GDP). The GDP, in its fluctuating up and down course 6.5 years after designated "recession recovery" in 2009, is lower than all prior recoveries. In 2015 the latest GDP is $2.3 trillion.

The uncertainty of the future has made financial planning and expenditures very hesitant to proceed for businesses and individuals.

The fluctuating provisions of the Patient Affordability Act, whether done executively by the Administration or by the Supreme Court by-passing required Congressional involvement with its attendant Constitutional violations, make businesses and individual proprietors uneasy about hiring workers.

Likewise the Dodd-Frank Banking Act has restricted the lending of money for large banks and especially Community banks which lend money to entrepreneurs and small businesses thereby limiting hiring and GDP growth.

The economy is wary of the Environment Protection Agency [EPA] setting policies that by-pass Congress regarding proposed Carbon Tax and limiting hydrocarbons as energy fuels as well as Atomic Energy.

The economy is fearful of the Internal Revenue Service [IRS] of being used politically by the Administration to impede the Conservative 501 [C] [4] political action groups from attaining tax exempt status in order to function. In addition the IRS has taken to acting as investigator, judge, and leaking tax information regarding 100,000 tax payers in May, 2015 over two election cycles with the
FBI investigation finding no actionable findings per the Administration Justice Department. IRS has paid $50,000 to National Organization for Marriage [NOM] for public leakage of Private Tax Data.

The problem of the unresolved immigration situation with about 11.7 M. illegals according to Pew Research Center without any action of increasing visas for agricultural workers and restriction of Foreign STEM immigrants to 85,000 is an embarrassment and an economic annoyance to all USA citizens. The problem is ready made for insightful bi-partisan working out suitable compromises such
as increasing the number of agricultural visas with individual markers to permit complete harvesting of crops. Also to be provided are more skilled technical, engineering and mathematical visas to more fully fulfill the needs of Bill Gates of Microsoft and other Silicon Valley businesses and university research positions.

The economy does not like the intrusion of government in the country's private affairs such as what to eat and what not to ingest, renewable fuels with questionable damage to car engines [Coordinating Research Counsel, January, 2013], high fuel and food prices [USA Today, August 8,2013 and as per Petroleum Ad in USA Today June 23,2015].

In summary the people do not like the Greed of Government, Business, and Individuals for more money and power with its concomitant Cronyism as manifested in the recent recession. The Government Agencies promoted looser lending policies to foster more home ownership. The Banks accommodated
the looser lending standards per Government pressures and without good judgment nor ethics. Then came the bundling of mortgages. This was designed to maximize banking activities and reduce risk. Thus the selling for bonus monies very iffy sub prime mortgages in bundles known as Mortgage Derivatives destabilized the mortgage and financial sectors contributing to the depression.

Part II: Siphoning Money Out of the Economy by the Government

The Federal Government has prolonged the recovery of the recession from the usual 12 to 18 months to 6.5 years by siphoning money out of the economy by diverse means.

Firstly there were the TARPS [Troubled Asset Relief Programs] $757 billion dollars that were started in 2008 for banks "too big to fail " i.e. Lehman Brothers bankruptcy started this panic policy.

Fannie Mae, Freddie Mac and American Insurance Group all initially posted
profits of $ 20,206,000,000, $20,470,000,000, and $5,025,967,492 respectively in 2008.

However the two GSO's, Fannie and Freddie, were taken over by the Federal
Government and AIG was restricted in its activities in 2009.The Government
bought 90% of AIG's shares after 2009 selling the final shares in 2012 for a profit. General Motors posted a loss of $11,406,657, 128 in 2008 so that, in response to UAW labor lobbying, it was bailed out in 2009 along with Chrysler Motors which had a loss of $1,373,061,737 billion dollars in 2008.

JP Morgan Chase posted $ 1,731,202,357 profit as did Bank of America with
$4,566, 851,694 profit and Citi Group at $13,494,572,616 profit in 2008. Another three large banks included Goldman Sachs which posted a profit of $1,416,055,565 as did Morgan at $1,268,655,526 and Wells Fargo at $2,281,347 in 2008. None of the TOO BIG to FAIL banks required bailouts.

Even a smaller Wisconsin M & I Bank, despite having bought failing savings and
loans in Arizona and Nevada, posted a profit of $229,772,916 in 2008.

The following smaller banks posted losses: Anchor Bank Corp of Wisconsin at
$104,002,003, First Bank Corp Puerto Rico at $250,528,531, UNBH Holding
[Bank] at $281,227,080, and First Bank Inc of Mo at $175,186,740 in 2008. The smaller banks and savings and loans had small losses. That did not prevent the Treasury and the Federal Reserve from intruding into the mix to" SAVE" the USA's financial system from freezing into inactivity.

Beside the financial company bailouts With Troubled Asset Relief Programs [TARP] there were the Stimulus Programs or the cronyism spread of money to Solyndra of $500 million and the myriad of solar panel companies many of which did not stay in business.

Adding to the distribution of Government Funds were several sizable rises in Unemployment Benefits, Food Stamps, and subsidies such as Trade Adjustment Assistance and TARP. These are spending programs without economic gains nor productive assets. Other such programs are Quantitative Easing Programs [QEP] of humongous proportions as QE1 at $1.75 trillion in 2009, followed by QE2 at $500 Billion, and in 2012 as QE3 $4.5 Trillion. These funds were attained by the Federal Reserve by printing the money to buy Toxic Debts which did not produce economic gains but added to the Debt not to the Gross Domestic Product [GDP] and devalues the worth of the dollar.

Instead of decreasing or limiting the Federal Debt the Federal Government continues to borrow money for these non asset producing projects because the USA country's earnings or GDP revenues have not matched its spending. As a consequence the non productive uses of borrowed money has increased the Federal Debt from $10.6 Trillion in 2008 to $ 18.7 Trillion in 2015.

The Debt of $18.7 Trillion sucks money from the economy in several measures. The interest on such a humongous Debt has forced the Government to utilize the very low interest rates of less than 1% which costs the Government $186.87 Billion Dollars in interest rather than $748. Billion Dollars at 4% interest rate. The hidden costs fall on the citizens. Their saving's interest earnings and bond earnings are very low, lower than the rate oflnflation of the magical
Federal Reserve golden level of2 %. The Federal Government loses tax revenue on its Tax Payer interest earnings but not to the proportional extent of the Tax Payer. The Government also loses revenue from the Country's contracted GDP rather than a higher GDP from the expansion of economic growth. The Government and the Citizemy therefore have less money to spend.

When the DEBT/ GDP RATIO reaches 100% or greater as it has since 2014, it impedes the USA's economic revenues and thus it limits internal projects and Military aid to our allies under duress from Russia, China, North Korea, and Islamic State. The Administration does not acknowledge this.

Taxes have increased but less so than the Spending. Marginal tax rates on ordinary income are up 24% assumed from 2008 and tends to fall directly on small businesses per Phil Gramm in "What's Wrong with the Golden Goose", Wall Street Joumal 4-21-2015. Mr. Gramm adds that Tax Rates on capital gains and dividends are up 59% and estate tax rate is up 14% [ibid]. All this squeezes middle class, not business CEOs, but also small business and entrepreneurs which do most of the job hiring.

Another economic significant impediment of Stagnation is Government curtailment of coal mining and use to provide reliable and cheaper energy rather than renewable sources. Likewise, limiting drilling and use of gas and oil and the curtailment of use of atomic energy all contribute to lost revenue for Government and higher costs for all citizens and businesses and STAGNANT GDP.

Currently as of 2013 the United States spends per " Just Facts" 60 % of its Revenues on Entitlements or Wealth Distribution activities while Defense spending decreased to 20% per Congressional and Administration Compromise i.e. Sequestration. The general and Debt service is now 13% per James D. Agresti in" Just Facts". Thus the economy has been operating hesitantly due to diminished Direction and Rule of Law, Uncertainty from ever changing Government Edicts, Increased Taxes, Misuse of Capital, loss of Ethical Governmental and Business practices, the Burden of Overwhelming DEBT, and
more and more Intrusive Governmental REGULATION.

Part III: Solutions to the Refueling the Economy

The leaking of funds out of the economy is no different than starting to solve the immigration problems by their circumscription i.e. secure the country's borders and revamping the work visas to significantly increase the number and ease of obtaining agricultural work visas with identifying markers and increase the number of visas beyond 85,000 for skilled STEM workers [scientists, technicians, engineers, and mathematicians].

There are similar simple solutions to refueling the economy but also require bipartisan compromises:

• Do not Spend more than the Tax Revenues except under extreme Emergencies.
• Adhere to the Budget.
• Do not Borrow Money to spend on endless Entitlements.
• Include Debt Payments in the Budget except under extreme Emergencies.
• Avoid Inflation.
• Stabilize the Value ofthe Dollar.
• Permit Tax Payers to earn Just Interest Money on Savings and Bonds with Raising Interest Rates by the Federal Reserve.

A similar such solution that just worked, especially with the interest rates at less 1%, is putting money in the freezer, a secure place, such as Mother was wont to do to have cold cash readily on hand for emergencies -post thawing of course.

The first step in reducing spending is to shorten the duration of entitlements [unemployment benefits, food stamps, Trade Adjustment Assistance-TAA] and by producing JOBS which will not squeeze the Workers but will squeeze out the borrowing of money that enlarges the Debt $506.1 Billion Dollars a year. Just as the Sequestration reigned in the deficit financing by reducing spending a second reduction in spending will stimulate the economy again.

Reforming the tax code to 4 Levels [the first tax rate level is 0 % ] and the Reduction of TAX RATES by at least 12% for each of the other 3 Levels. There should also be 15 to 20% Reduction from current levels being taxed on Dividends, Interest, and Capital Gains and Elimination of Alternative Minimal Tax which will infuse vigor and enthusiasm into the economy as well as into the tax payers to Work, to Save and to Invest. Likewise the discontinuation of Double Taxation of foreign earnings by companies and individuals will stimulate Investment in the USA producing Jobs and increased Productivity and thus Higher Wages.

The discontinuation of Government Cronyism epitomized in the Renewable Energy Industry, and the Financial Sector namely Wall Street, will be favorably received by workers and managers for its breath of freshness and cleanness and better economic opportunities.

Improved Education providing society's needed skills will build a coterie of top notch workers and managers that will add to the nation's productivity, wages, and GDP.

Decreased Government hostility to business, business managers, and individuals working to add to their skills and thus earnings will promote added Vigor to the economy.

In short freeing the economy from Government Regulations will have businesses, managers and individuals all responding positively with ardor to the loosening of Government Shackles and Drag on the Economy, reminiscent of past days of Liberty and Greater Opportunities.