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.

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