No tax rate increases, no Medicare cuts and pay off $5 trillion in 10 years

July 15, 2011

Could the Solution to Solving our National Debt Crisis come down to one word? ? ?

Derivatives.

Most Americans have never heard of the “secret” $600 trillion Derivatives market. Since most of these contracts cost over a billion dollars most people do not know anyone who gets to play in this casino for great wealth. And no one is mentioning this option for paying down our National Debt in the biggest debate raging this year about our Country’s value choices.

We are ignoring the herd of elephants in the living room. Try Googling “$600 trillion.” You will get over a hundred thousand responses. All about Derivatives. That is because the Derivatives market is the only thing that big in the world. It boggles the mind.

A small transfer fee of 0.5% on both the buyer and seller each time one of these contracts executes in the United States would raise over a half trillion dollars of revenue for the country. It should be tied by law to paying off the National Debt.  When a consumer buys a suit or a television they pay a transfer fee called sales tax in a range about 5 – 10% in most states.  When a hedge fund or investment bank trades a billion dollar Derivative contract there is no such transaction fee. Why not?

This is not a tax rate increase on rich people. It is a cost of business for those who choose to gamble in this highly lucrative market where fortunes of immense proportions are possible. Anyone who does not want to be subject to this tax can opt to not play in the game.  But if you want to earn profits by trading in this market then there is a fee you should pay.

One of the many root causes of the Financial Crisis of 2008 was Derivatives. There is a cost to our society from the beneficiaries of this system profiting in these high-risk financial instruments. But the players are not required to share in the costs of playing that game right now. That is not fair. A tax on Derivatives trades should be earmarked for paying off our National Debt to compensate the public for the risk we take in backing up those deemed “Too Big To Fail.”

A pamphlet titled How to Pay Off the National Debt by James F Kainz is available on http://www.amazon.com or http://www.barnesandnoble.com for $9.95. It is available at http://www.lulu.com by download for $2.95. Most people can read it in less than an hour. It proposes a 19-point plan to pay off the Debt and stimulate the economic growth of our nation. Only 1 point is essential – taxing Derivatives. The rest of the plan is icing on the cake. A website will be coming soon.

This pamphlet proposes the creation of a Federal Assets and Liabilities Board to collect the tax and apply 98% of the proceeds to the debt. It is self-financing from a 2% operations fund generated by the tax. It is a private company for the public good. It is not a part of the government, not subject to government control other than obeying the law, and free from political tampering. The Board would be elected by the whole country and accountable directly to the people.

That way the Derivatives tax would be removed from the partisan politics aspects that most people despise in the operation of our government. Ideology which poisons the discussion would be displaced by bean counting precission in a simple transfer of money locked in to the single purpose of paying off our liabilities.

A huge conflict has been generated in dealing with this problem. It could all be diffused by taxing Derivatives. Addressing alternatives is the appropiate subject of political discourse. Which will the public choose? Cuts to Medicare, Social Security and Medicaid or a tax on Derivatives?

Let the discussion begin.


Do you want to change the world?

November 28, 2010

How to Pay Off the National Debt

© 2010 James F. Kainz

Within Ten Years:
(1) Pay off $4 trillion of the national debt.
(2) Have consumers choosing electric/hybrid E85 passenger vehicles that get 100 miles per gallon of E85 fuel and 700 or more miles per gallon of gasoline.
(3) Be free of dependence on foreign sources of fuel.

Solutions

1. Begin to pay down the national debt by taxing derivatives. A 0.5% tax on the buyer and seller of each transaction would raise substantial revenue. There are over $600 trillion of derivatives in circulation currently, and the tax could pay off the existing $13 trillion national debt within the lifetime of most people alive today. This would avoid passing the debt on to future generations.

2. Initiate a 5% stake for the federal government in companies accepting Small Business Administration loans for new business start-ups. In addition to paying back the full amount of the loans, the businesses would grant a 5% ownership interest to the Small Business Administration (SBA) as compensation for providing the venture capital. The program is already a success at creating employment and tax revenues for the country. It should be significantly expanded, and retaining a piece of the new company would contribute to the social benefit of the operation.

3. Loss of freedom is a fair sanction for criminal behavior. Warehousing humans is a societal waste of resources. Prisoners should be offered the opportunity of doing community service while doing their time. It would be administered by prison personnel and selectively granted to some prisoners at the discretion of the authorities. Reduction of the cost of incarceration should be one of the objectives.

4. End the oil depletion allowance. It is an accounting lie. No out of pocket expenditure is incurred, and it constitutes a double charge off for tax purposes. Not only are true costs being deducted, a fictional phantom is engendered by legal definition. It was created during World War I to stimulate exploration at a time of national emergency—an emergency that no longer exists. Now it destructively diverts market resources to oil away from alternative energy sources, which are disadvantaged by this subsidy. Renewable energy does not enjoy a level playing field against this institutionalized bonus for petroleum because of the preferential tax treatment.

5. Federal budgets should be in surplus four years out of every five. The only exceptions should be for recession, war, or disaster. Deficit spending should be rare and only used when truly justified. This principle should not be enshrined as a constitutional amendment; but, rather, as a pledge to voters signed by candidates to elective federal public office.

6. American military troops based overseas should be reduced by 75% within five years to reduce expenses. Staffing fixed bases in Germany, Japan, and South Korea with tens of thousands of soldiers is an outmoded method of exercising power. Those expenditures could be better used for communications, mobility, new weapons systems, and readiness. Better to keep those forces within the United States, ensure that the money contributes to our economy, and make the troops available for use in potential conflicts.

7. Cheap transportation is essential to economic prosperity. The target for miles per gallon of gasoline on new cars sold in the United States should be raised from 25 in 2010 to a range approaching 700–1000 by 2020. This is achievable if consumers stop buying gasoline-only powered vehicles and buy electric/hybrid engines that utilize E85 for fuel. Most trips are shorter than forty miles and could be completed on battery power alone. For longer distances, the fuel would be mostly non-corn ethanol with a small percentage derived from oil. A forty-fold increase in miles per gallon of gasoline would reduce our dependence on oil, free us from foreign suppliers, and stimulate the economy simultaneously.


Break the Back of Big Oil

July 9, 2012
 
 
I am about to publish a 50 page pamphlet on substituting alcohol for gasoline in the United States in very short order.  It is more about the economics of how we pay for it rather than the technology of how we do it. 
 
I am attempting to gain support on kickstarter.com at the following link:
 
 

 


Follow

Get every new post delivered to your Inbox.