If you want to understand why so many houses are in foreclosure, you have to understand a highly complex financial instrument called a “derivative.”
There will be action to take before Mitt Romney assumes office, and all eyes will be on the Bush Tax Cut expiration and the sequestration agreement to enact massive cuts in defense spending. But as important as these moments in time will be, it all pales in comparison to President Romney’s legislative agenda.
And these political issues, sadly, have an impact on your investments. Rectifying the “fiscal cliff” that we are facing is crucial if our markets, and therefore our investment strategies, are to function properly.
Historically, political observers have referred to a President’s first 100 days as his “honeymoon period.” This is a President’s best opportunity to get his agenda through the Congress, or moving through the Executive branch. In 2012, this cannot be squandered.
Not to presume that I should know better, but as a wealth manager concerned for the country’s future, I am offering in my blog today a 4-point plan for “American Renewal.” As an outline, I would offer to Candidate Romney that he is welcome to steal it. Here it goes:
1) Pass through Congress the “Reform Government Act” This would include the following sub points:
A) Freeze all governmental salaries.
B) Reduce salaries above $100K to below $100K except for Cabinet level positions.
C) Congress does not receive pay unless they pass a budget. Congress cannot get an increase in pay until they leave office – in other words, if they vote for it, it is for the next person to get elected to that seat.
D) Pass a balanced budget amendment.
F) Close all vacancies with no new hires.
G) Ban all department spending on conferences and conventions. Make it a federal crime to spend taxpayer money on such an event.
H) Ban all non-military advertising on behalf of government.
I) Rescind all regulations and executive orders passed since 2008.
J) Return welfare to workfare; reduce unemployment benefits from 79 weeks to 90 days.
K) No speculative investing in private companies by government.
M) Reduce Congressional staff by 10%.
N) Reduce executive branch staff by 10%, but for law enforcement and military. How many six figure “special assistants” or “speech writers” do we need?
2) Tax Reform Act I would prefer no taxes on labor or investment, but rather generate revenue from a VAT or national sales tax, and repeal the income tax. Sadly, that probably has little chance of passage at this time. Realistically, flat taxes on all income is “fair,” to borrow President Obama’s favorite word. Reforming the tax code to make a balanced, and fair, tax collection system should be a top administration priority. Ironically, President Obama had a bipartisan deficit reduction commission that most people supported. He ignored their findings. Flat taxes are the path to prosperity, and therefore – more tax revenue.
A) Flat income tax of 10% on all income, regardless of the income level.
B) Reform Social Security – increase retirement age to 70.
C) Remove all deductions and exemptions.
D) Reform the tax code across the Board. Don’t pass it on to another commission – send your bill up to Congress and get them to send you something to sign by the end of the month. Then take the lead. Explain to the American people why tax reform is necessary. Here is a hint: most Americans will agree with you.
3) Jobs Creation ActThere is more to job creation than just energy, but job creation occurs when the entire 4 point plan is enacted. By removing the regulatory barriers, tax barriers, and uncertainty of the market will spur job creation as fast as it always has in the past. However, a great place to start to insure blue collar jobs are available, and that jobs are a priority to this administration, is to get behind expanding our energy production here in the US.
A) Build Keystone XL Pipeline
B) Cut the EPA staff and budget by 50%.
C) Eliminate entire agencies that stifle job creation, such as the NLRB.
D) Rescind ban on off-shore drilling
E) Allow for oil drilling in Pacific, Atlantic, ANWR, as well as the Gulf.
F) Approve new nuclear facilities.
G) Remove EPA restrictions on current Coal plants, and the construction of new ones.
H) Repeal and replace Dodd-Frank with Glass-Steagall. This would be the compromise piece for liberals – meaning we won’t totally unregulate the financial services industry.
4) Health Care Reform Act. No other issue galvanized the Tea Party into action like the President’s health care law. If not overturned, in total, by the Supreme Court, then the next President must repeal the law. Even if you agree with government intrusion in to health care, this piece of legislation is proving to be the most poorly conceived, poorly written, and poorly executed law this country has ever enacted.
“Obamacare” has already proven to cost more than projected, and serve only the interest of political partisans. That is a toxic mix. And those who oppose “Obamacare” do so across multiple spectrums: seniors afraid to lose Medicare, businessmen afraid of the penalties, all citizens worried about the encroachment on their freedoms….for all of these reasons, the law should be repealed.
But most importantly, it represents one of the four planks of the next President’s first 100 Days because we need health care to be addressed in a positive, pro-market reform manner. Therefore, here are some modest starting points:
A) Repeal and replace Obamacare with market driven policies for health care.
B) Pass the Medicare Reform Act as the Paul Ryan plan.
C) Enact Tort reform.
D) Encourage group health access for independent contractors, etc. through Associational membership.
E) Expand tax benefits of health savings accounts.
F) Move Medicaid to the states.
This is just the beginning of the American Renewal Project. We need state and local governments to reform. We need to educate the public on the role of government, on the importance of freedom and freedom of action. We need education reform. There are no equal outcomes, only equal opportunity. That man is unique in every respect, from their talent, desire, motivation, intellect and much more, and therefore the outcomes will be unique as well.
The President will need to lead in this respect as well. Therefore, a series of speeches and public comment, a televised Presidential address, and much more, needs to help drive public opinion. This would include:
1) Give speeches on what this 4-part plan does, including a televised national address.
2) Tour the country and explain what we are doing.
3) Go to conservative Democrats’ districts and give speeches to get the people to support the plan. You won’t convert most, but you will convert some, and you will move opinion within the Congressman’s district.
4) Explain that in a free society there are varying philosophies and beliefs on what government should do, but certain American principles must remain constant.
5) Tell people to give it 4 years, if it doesn’t work, vote in a new president and congress to change course.
6) It should be the next great American challenge to get our fiscal house in order. Debt reduction may not be as inspiring as going to the moon, but it is certainly more important.
7) This effort, as the 100 day plan suggests, will require sacrifice for all Americans.
8) But it will also foster new opportunities that we don’t know of yet. This plan will unleash the American entrepreneurial spirit, and the wealth holders will spur job creation!
9) The President’s intent is to have the deficit down substantially in his first budget year. He can then say “…If I am re-elected, I will eliminate the deficit by my 6th budget, and we will create a plan for surplus in the first 100 days of my second administration.”
This is ambitious, and no doubt will face stiff, stiff opposition. For that reason alone a President Romney MUST be prepared with this agenda on day one! Past the 100 day mark, and the lobbying against these changes could possibly overwhelm it.
In my opinion, these ideas do not go far enough! It does not address more of the bloat of government that it could, and it does not deal with a myriad of foreign policy concerns.
But it is a starting point. We have to start somewhere. And the key is starting before it is too late.