Private investment is not working. It doesn’t matter why it is not. It could be a conspiracy. It could be cowardice. It could simply be sloth. It may be easier right now to sit on some favorable derivatives than to help move industry and jobs forward. Whatever the reason…banks and financial institutions have had long enough to get their jobs done. Now it is time for the People to act.
Some people have been advocating for a long time now that the United States government step up and make a large investment…$200 to $400 billion in the American jobs market. This would create a minimum of 5 million jobs for a year. More importantly, it would tighten up the investment market. Some capital firms would be forced into the investment capital market or risk sitting on the sidelines.
What would pry them away from the financial vehicles that are so profitable? Number one: they are going to be blindsided by heavy regulation while right in the middle of transactions, if the financial markets should falter again. Second: the mood of the country is changing, but it is not changing the way the fools and the greedy Right Wing manipulators would have you think. For every Sarah Palin and Erik Erickson, a hundred unemployed people are looking around for help because they see unemployment running out.
In the meantime, two Republican Senators have already made serious misjudgments about holding up unemployment insurance. Behind the scenes their fellow Republicans are giving them a warning that unemployed people do not care suddenly about deficits when billionaires are again making fortunes on the very same kinds of financial paper that caused the Recession. And, by the way, the definition of a Depression is that it is a Recession that is happening to you. Is the national debt more important than jobs? Let’s take a look at the debt.
Where is all the government debt right now? Why should we be worried? We have about $11 trillion in debt, of which the U.S. government owns about $4.8 trillion. That part is less a worry. The remainder is held by U.S. mutual funds, which has about $770 billion, China which has $740 billion, Japan with $630 billion, and U.S. state and local governments with about $500 billion. Pension funds, both public and private, hold another $450 billion. The balance is held by a wide variety of institutional investors and banks, both here and abroad. So it is a problem and a serious problem. But it is a problem that really only requires two things. First…a long range plan. Second…some serious bi-partisan legislation. We need to tax to get more revenue and we need to cut spending to spend less of those revenues.
If we look at the external debt, which, right now, is about $5 trillion and growing—which is, by the way, the amount George W. Bush created from the year 2001 to 2008, with a special gift of $1.3 trillion, plus a Recession left to us as a gift in 2009—then we could probably re-arrange things to pay it off in 20 years. But it will require several things. First of all, it will require…and this is a shock…jobs. People need domestic jobs to create income to pay taxes. Second it will, in fact, require taxes. Half the people in the country do not pay taxes, thanks to Reagan and Bush, and the half that do pay so much less than we need to run the country, that we create huge deficits.
We need to cut government spending. We can cut Social Security and Medicare by only so much. These are programs that help people who are at an age when they can no longer work. But Social Security and Medicare do not provide enough income to live on except barely survive. And if Medicare goes up, it will put even more pressure on those who cannot afford it. We can means test Medicare at a relatively high level. We could cut every thing by 5% on an income of over $50,000 total. Somewhere in that range.
But if we do that we must restore two things. First, we must restore pre-Reagan tax rates. We must see to it that those who have made billions now pay a share of income that will enable us to end out debt. Second, we need to restore the United States domestic manufacturing marketplace. We need Americans jobs and American products sold in the American marketplace. Not exclusively, but we need to triple current manufacturing units from roughly 130,000 nationwide to over 450,000 and we will begin to correct the imbalance. Finally, we need to charge American companies manufacturing abroad some penalty for both taking manufacturing abroad and jobs abroad. A simple 3% tax on manufactured products re-imported to this country by American firms should do it.
We need to reduce the military budget to about 30% of the budget and keep it there. We need to close down our war in Iraq and spend that money on restoring our country, not Iraq. If we do that, increase taxes and create incentives for domestic investment as an alternative by keeping capital gains low, we can create an economy that will pay down our debt, maintain all social services, including an eventual expansion and improvement of Medicare to cover about 75% of all Americans, leaving 25% with a private health care system at a lower cost than they pay now.
This is all quite reasonable and possible, although it will require political will. Americans must realize that the country is now in the hands of very wealthy individuals, making tens of millions of dollars in personal income each year, some in the hundreds of million a year. They now pay only about 25% maximum in income tax, whereas their fathers paid 75% in income tax. So why didn’t their fathers secede or leave the country or create huge demonstrations. Well, first, not too many people who were making $20,000 per year would have been eager to march for someone, who, with tax deductions, was taking home about $500,000 per year.
Moreover, in those days…40 to 60 years ago…there were strong incentives for investment. That meant that you could invest half of that $1,000,000, create a business and then sell that $500,000 in stock which would have grown to about $800,000 at least, and paid only 15% capital gains and be left with $680,000, not zero. But the advantage to the country was that the $500,000 invested would have leveraged a business that would eventually create 100 or 200 jobs. In addition to the $4,000,000 in revenue to the economy, those jobs would bring in $800,000 in revenue to the country every year.
But the brilliant economists at Reaganomics, Inc. and Busholunacy.com decided that the best thing we could do would be to cut taxes so that there was no incentive to invest. Then take jobs abroad so that there were no taxes on workers…because there were no workers. Cut incomes. Cut social services. Create a Latin American oligarchy with only a few very wealthy people and a mass of poor and desperate people.
If you haven’t looked at the unemployment and underemployment figures then you may not know it….but that is where they have left us right now. We already have a definite 15 million out of work. We have another 10 million who are either in and out of work or are employed only part time. And finally we have about 50 million people who are looking over their shoulders every day wondering if the pink slip is going to come because of the economy or because their jobs are being shipped overseas.
And Glenn Beck made $32 million last year, working for the big corporate interests telling the hicks that it is Obama’s fault. Obama pushed for inexpensive, reliable health care. He would have pushed for a single payer system but Beck and the rich Republicans and their health industry sponsors forced us into a much less efficient system. It was the only one that had any teeth to it at all that we could get passed…thanks to Beck and Limbaugh and Gingrich and Armey and 40 Republican Senators paid $400 million by the health insurance industry.
While firms like KKR and the Blackstone Group were talking about favorable views of the 2010 economy for investment…this is now April…and nothing is happening. If Peter Peterson of the Blackstone Group wanted to save the world…as he seems to want to do for the U.S. by cutting social services to curtail the deficits, then he might consider investing in his own economy. The first thing this country needs in order to start to cut the national debt is to get people back to work and paying taxes. If Mr. Peterson and Mr. Kravis of KKR think that billions may be in the offing this year, then perhaps they should get moving. The longer private investment stays on the sidelines, the longer people will remain unemployed and the larger our deficits will become.
Everyone knows what the problem with the economy is but no one but a few commentators and economists are talking about it. The Obama Administration poured well over a trillion dollars, after TARP was mostly repaid and after the stimulus program was well underway, into public-private guarantees for the banks to get back in the game. But nothing is happening. The banks have been receiving a great deal of money to begin reinvesting. The banks are guaranteed solvent. So where is the investment in the economy and jobs? It is not happening.
It is time we had a new system of banking in which the government participates to a far greater degree in venture capital management and large capital investment, with $5 to $10 billion IPOs being guaranteed. If the banks won’t do it, then let’s get the government involved. We have and can hire some of the best minds in the investment community to come in and begin to eliminate much of our national debt through very large equity investments. Let’s invest in this country, in domestic jobs, energy, and domestic manufacture of exportable products. We can compete. We need to tell Congress to act now for jobs and for the future of the country.