The Byzantine Pineapple (Revision 5; Part 5)
9) The Federal Budget
The current budget proposals put forth by both political parties repeat the same budget practices that have put the USA in the financial situation that the country is in. Both plans only work until the next election or the next budget crisis…whichever comes first.
The right says cut taxes and less government which is an interesting slogan but this is not a plan. How far should taxes be cut? Will the loopholes and deductions and favoritism of the tax code be addressed? How does the party establish how small government should be? The right may temporarily accomplish some of their stated goals but….because of the Byzantine construct of the system….it is only a matter of time before any cost cutting measures are somehow undone.
The left says provide all citizens (and possibly non-citizens in the country) with enough public dole to not live in poverty as well as mandating Health Insurance be purchased by all citizens. The left bandies that the USA is wealthy enough to achieve this without ever actually stating what the total cost would be, and while also creating class warfare and an unwieldy bureaucracy. This, coupled with a notion that the Federal Government’s purpose is to insure that wealthy citizens never endure economic loss for horrendous business decisions, is bankrupting America.
To achieve equitable collection and redistribution of wealth via the Federal Government that does not lead to divisiveness but rather provides an equal opportunity for all means that the collection and redistribution of wealth must be equitable for all. The collection and redistribution of wealth must be done via a new budget system construct.
The key to addressing both the tax code and the need for social welfare systems is to simplify the design and stated purpose of both needs. This simplification needs to be accomplished in a non punitive measure against the citizens who, for the most part, just want to enjoy life in their own manner without their government both taking their money and telling them what horrible citizens they are for just minding their own business.
The three biggest social welfare needs of the population that the Federal Government should address are the needs of capital, health care and shelter. The problem is that unless there is an equitable solution that is based upon the blind baby test the end result will be the situation that exists today: inequitable collection and distribution of tax receipts. This leads to the fracturing of society via segregation along various class or social or economic lines.
The way the system needs to work to place all citizens on the same footing is that current social welfare programs are eliminated over time and are replaced with a couple of programs where all citizens get an equal share of the public dole regardless of any factor. This is what equal opportunity in the eyes of the law should provide. The Federal Budget should be simplified for the collection and redistribution of tax receipts to achieve the equal opportunity.
The way to achieve the simplification of the budgeting process for not only the Federal Government but also for the citizens and the corporations is to move to a flat tax that is comprised of a series of flooring levels. Each flooring level is comprised of the tax rate that is applied to pay for the budget of each individual government entity. The total of all the flooring levels is the annual flat tax rate. Any changes to the tax rate must be explained in relation to the relevant flooring rate.
A transition period of five years to such a taxation and budgeting methodology would undoubtedly provide initial spikes before settling into a rate defining normal. Such a taxation and budgeting methodology would provide factual data beyond the fog of controversy. For example:
a) Progressive\Social Agenda special interests state that the USA is wealthy enough to meet the sustenance, medical and housing needs of the citizens of the USA. This cannot be proved unless there is a clear picture of the Population Tax Dollars (PTD) available as well as a clear definition of the amount of Tax Dollars applied not only to social issues but also to military meet the needs of the Military.
b) Public Statements are that the Wars in Iraq and Afghanistan have cost society too many tax dollars relative to the other needs of society. In the context of a Flooring Level the prosecution of a War requires a Flooring Level tax amount to be spent on the War. The tax effect can be seen and is measurable. If Operations wind down and less funding is required the Flooring Level is reduced.
10) Population Tax Dollars
GNP is a measure of an economy’s productivity but GNP is not a measure of the population tax dollars (PTD) available within a country. Under the current Federal Government construct it is difficult to determine PTD for there is no universal agreement about what defines tax dollars to be used in a budget construct. Is PTD only Income Tax or are taxes such as gasoline and tobacco included? Is PTD defined as total tax dollars before deductions and credits issued to the population are applied?
The Congressional Budget Office publishes National Income and Product Accounts (NIPA) data in conjunction with economic reporting. A 2005 NIPA subsection is posted below.
Table A. Summary National Income and Product Accounts, 2005
[Billions of dollars]
Account 1. Domestic Income and Product Account
1 Compensation of employees, paid ......................................................................... 7,036.6 15 Personal consumption expenditures (3–3) ............................................................
2 Wage and salary accruals.................................................................................. 5,671.1 16 Durable goods ...................................................................................................
The compensation of all employees in 2005 was just over $7 Trillion. There is also other income that is earned in the Country not the least of which is Investment income.The compensation of all employees in 2005 was just over $7 Trillion.There is also other income that is earned in the Country not the least of which is Investment income.
Using a 30% flat tax rate against the 2005 compensation = a PTD of $2.1 Trillion. Investment Income raises this value for the PTD. If there is $3 Trillion in Investment income then at a 30% flat tax rate that would = $.9 Trillion of PTD. The Total PTD in this example is $3 Trillion in 2005 dollars. This value is close to the value of the current Administration’s initial proposed 2012 Budget.
The issue here is not to provide an exact value to be used as PTD. The issue here is to demonstrate that there should be enough PTD under a flat tax to cover the US Budget.
The concept is that the taxes for all various programs of the Government are eliminated and are replaced by flooring levels for each department. Each flooring level is a % of the PTD. The total PTD for the year is the sum of all flooring level percentages.
The concept is that the amount of money determined by the flooring level PTD dictates to Congress what the budget is for each department. The onus is upon the three branches of Government to meet the budget. When new programs or earmarks are proposed the costs must come from Flooring Level.
The concept is that Congress and the Executive Branch change from the Omnibus Bill process where horse trading occurs for political gain to get necessary legislation passed. The current method of operation in Washington, DC, is that, for example, Military Spending bills cannot be passed without amendments such as Education spending being attached as amendments to the spending legislation. Congress and the Executive Branch do NOT have to operate in this manner. The Republican and the Democratic parties CHOOSE to keep this outdated budgeting construct in place. Just because the parties have traditionally operated the nation’s funding this way does not mean that this method MUST continue.
Think of all the political gamesmanship that can be eliminated. The budget resolution for the Military, for example, is for the Military. The amount of the spending for the military is predetermined by the Flooring Level Military budget % applied against PTD. The question then is not how large the military budget is for the year. The question becomes how the military spends the money allocated to them by the PTD. This methodology can be used to eliminate a military spending bill morphing into a spending bill with twenty amendments for items such as student loans and buildings named for politicians and items that may be considered pork.
11) Military Budget
The Government requires a military. The amount to pay for the military budget is tax rate M.
For example, if the current budget for the military is 500 Billion Dollars then the funding for the military initially comprises Tax Rate M of the total taxed income of the corporate and personal income (PTD). The next year’s military budget value is then established by the prior taxable year income level of the population of tax dollars (PTD).
If the tax platform is 10% to cover the military then the amount of the succeeding year’s budget is the dollar amount of the value of 10% of PTD. Using this method the question then leaves three questions:
What are the fixed military costs?
What is the Residual Dollar Amount (RDA) left over after the fixed military costs?
How is the RDA spent?
This eliminates the Congressional budget wrangling over military spending. The public is not granting the military a blank check subject to Congressional manipulations to overpay. Nor is there a need to have Military spending bills held up by the attachment of non-military spending attachments being added to a military spending bill. The question is reduced to how to spend the money the public has assigned to the military complex.
12) Redistribution of wealth for the purpose of bill paying
The biggest stress factor in life that lower class individuals face is the question of how do I pay for the inevitable bills that must be paid? Society has evolved to a point where it is not feasible to expect that citizens can just go live in the wild and not have expenses on a monthly basis.
Economists like to assume things so let’s assume a tax base of $1 trillion for a population of 350 MM citizens. An equal distribution of the tax base means that each citizen would annually receive $2,857.14 in direct disbursement from the Federal Government, or $238.10\month. Now…while one may argue that no citizen can live off of such a small amount one must first visualize that this payment, this stipend, would be received by every citizen. Every child receives this stipend. Every prisoner who is a citizen receives this stipend. Every working citizen receives this stipend. There is a continuous cash flow that each citizen can use to exist with. How one chooses to exist is up to the individual.
This money goes to every corner of the country. It goes to every household and the larger the household then the larger the composite stipend to each household. So, while the stipend may not afford any one citizen the ability to purchase a house or a car or whatever this is an economic boost that every household will have to help survive. Every homeless person gets the same amount as every millionaire. The citizen gets the opportunity decide how to spend the money. Inherently the community will decide how to spend the money for the benefit of the community…and not via a Federal block grant to either the mayors of specific cities to politically decide how to dole out or to Wall Street to trickle down economically decide how use the capital or to etcetera to use in the manner that the special interest behind etcetera operates. The blind baby test is achieved.
The populace will learn to start to plan better for their future. Every person knows the economic redistribution of wealth that every other citizen is receiving so use and application of charity changes. Who cares if a Wall Street bank collapses? Although people may be affected and jobs will be lost every individual is receiving a monthly income. How well did the individual or the community plan for this possibility? In a sense the ability to live day-to-day is eased because each citizen has deposited into their government account the same amount every month.
The sense of community in any area would be strengthened. Every citizen who runs into hard time can seek assistance from their neighbors or relatives or the USA community. The community will always know one certain aspect of the citizen. There is monthly money available to at least feed the individual. The citizen decides how to spend the base capital allotted to them. Do they spend it at Starbucks or McDonald’s? Do they shop at lower cost grocery stores? Do they spend the capital on vices? If a citizen is panhandling the potential charity giver can reasonably ask why is this other citizen asking for charity from me?
The money can be deposited monthly in an account with the Federal Reserve. The citizen can leave the money with the Federal Government or the citizen can withdraw the money and spend it elsewhere. This requires the building of this sort of banking system via ATM and requires citizens to learn to keep an ATM card and to plan and the citizen can opt out of the system if they don’t want to be identified as such. It can be mandated that ATM fees on the transactions are not to be applied. It can be mandated that each citizen must physically be accounted for every six months (or whatever) to continue to receive the stipend. These costs are part of the Administrative costs of the system. The citizen is not punitively required to be a part of the system. The system is voluntary.
The citizen can earn the prevailing rate of short term T-Bills while the money stays with the Federal Government. Some citizens may choose to donate the cash to the Federal Government to reduce the Federal Deficit. Some may choose to decide to donate the money to charity but the issue is that the citizen then has income coming in monthly and the choice of how to spend the income is in the hands of the citizen.
As with the Military Budget the Redistribution of wealth for the purpose of bill paying is a flooring level that is part of a flat rate to the population calculated upon the income of corporations and individuals. Assume that the goal is to provide $1,000,000,000 of income redistribution to all citizens. There is a flat tax % that can be applied to garner the tax receipts of the taxpaying public (which does include non-citizens) that will gather the desired amount of funds to redistribute to the citizenship in an equal manner on a monthly basis. This value can be labeled S for Stipend.
This provides an incentive to seeking citizenship via either birth or completing the naturalization process. If one wants to receive the monthly benefit then one needs to be a citizen. This should provide incentive for the illegal immigrant population to take steps to become citizens of the United States. If one wants the benefit one must be a citizen. It makes being a citizen much more important than being handled as an amnesty for millions of illegal immigrants.
The amount of tax funds gathered in year 0 can be redistributed in year 1. The year 1 tax receipts can be redistributed in year 2. Should there be a need to distribute more or less income then the flat rate can be altered to accomplish this.
The impact on the Social Security program would the elimination of the Social Security program over time. The current Social Security program can be grandfathered out and this becomes cost flat tax rate factor SS to pay for the current obligations.
This is a more equitable way than the current proposals of Means Testing to try and balance the Social Security obligations. The Means Testing Argument is Unconstitutional for it fails to meet the Blind Baby test. The Means testing argument is also another Travelers Insurance scam perpetrated upon select Americans. The money taken from select citizens with a bond being issued but the stability of the bond was worthless and the bond was called.
The Means Testing argument is also just flat out wrong for it sets the precedent of the United States defaulting on debt obligations. Whether the debt is owed to a foreign country or American citizens the American Government has always prided itself upon paying its debt. King George would be proud of the Means Testing argument.
Why was the Means Testing argument not applied to the bailouts of AIG and GM or the large banks? While some citizens would certainly have been affected the biggest losers would be those that have Means who made decisions about management, etc., which bankrupted the corporations. Wouldn’t the citizens who have wealth qualify as being able to absorb the losses that the Government bailed the investors out of?
Lastly, the Means Testing argument fails to consider the fact that citizens may become wealthy or poor in an instant. With capitalism risk is not eliminated. If means testing were applied to citizens who had money and were denied Social Security but then after a couple of years it is determined that the citizens income was “Madoff-ed” with then what recourse does the citizens who were denied Social Security due to Means Testing have?
13) Redistribution of Wealth to Pay for Health Care
In the same context there is no need for a Health Insurance system or the need to have the Health Insurance system to be based upon employment or run through the corporate system. The equitable way to pay for health needs of citizens is to have the Federal Government pay for necessary medical services as are required.
What is the difference between having an insurance system and having direct payment of medical expenses of the citizens versus paying for necessary medical expenses of the citizens as they occur? The fact is that the medical needs of citizens must be treated and paid for. In either case the medical need of the individual is current. The cost shall have to be paid for somehow.
What benefit is derived from having a system in place of a collection of insurance payments with co-pays that drives through the employment system of America? An insurance system that is contingent upon uncertain investment decisions to earn the capital necessary to cover the risk of projected medical expenses? An insurance system rewarding executives with platinum health care benefits while providing fewer health care benefits for the masses? An Insurance system where members of The Federal government get platinum health care benefits while providing fewer health care benefits for the masses?
The costs of most medical procedures and drugs are generally known. If a Pareto analysis is provided then probably 98% of all medical procedures are procedures that have been performed in the past. Paying costs out of tax dollars eliminates risk and costs associated with risk through a massive rebilling system that is subject to fraud.
A move to such a system moving medical issues and expenses off the books of the corporations should only increase taxable profits as well as removing the issue of whether an employee should or should not be employed due to the added burden of the medical cost of the employee. The Human Resource department of the corporation is simplified. The need for employers to even be concerned about the medical health of a new hire is minimized.
If the Health Insurance costs are removed from American corporations the taxable income increases for the Federal government. There is no punitive mandate upon the populace to purchase a product; the populace receives a benefit for being a citizen. The Federal Government pays the bills of the employees and the tax rate upon corporations and individuals can be directly tied to government health care procedures of the prior year.
The Administration of a Health Insurance system is a cost that can be saved by the elimination of the Health Insurance system. If the Administrative costs of a Health Insurance system are eliminated and the insurance marketing costs are eliminated and the expenses regarding medical expenses are removed from the financial statements of corporations then there is a simplified and inherently cost effective system in place that can be used to treat patients rather than a continuous concern over what citizen gets what benefits versus the benefits another citizen receives.
An argument can be made that the tax receipts are not enough to cover the medical expenses of the citizens of the country. If this were true then how would all the Health Insurance of the country and all the funds collected under the new health care laws cover the medical expenses of the country where the tax receipts do not? Whether the cost of medical care is paid by Insurance companies or out of tax dollar receipts the costs for the medical products and services will still need to be paid. This argument fails a common sense test.
This system would not require government boards to make decisions about a patient’s life or lifestyle. The Government panels established in the Patient Protection and Affordable Care Act and also the Health Care Education and Reconciliation Act of 2010 are not necessary. The government can focus on the accounting and the search for the inevitable fraud.
The argument can be made that a citizen with medical issues who receives $100,000+ of medical treatment is not treated equitably with a citizen who receives no medical treatment. This issue is that equity is not determined by a direct cash outlay but rather by the opportunity to receive medical treatment as is necessary.
The flooring level for the tax can be labeled level H. The percent of the tax is determined by the prior year’s Health expense for the country in conjunction with the PTD of the prior year. Unless there is either a significant surge in medical costs or a significant drop in PTD (which obviously would raise questions of why the changes occurred) the percent should remain a fairly stable percent.
14) Redistribution of Wealth to Provide Living Quarters for Citizens
The political economic theory in the USA is that citizens need to own homes to drive the economy. To accomplish this drive the Federal Government passed legislation guaranteeing mortgages and also mandating the providing of sub-prime loans to individuals without necessary means to purchase housing. The results, couple with corporate fraud with the reselling of the mortgages, is obvious. The housing market in the USA and housing values in the USA collapsed. The legislation built in viruses that created economic bubbles that urst.
Providing shelter to citizens need not be the same as providing housing to citizens. Providing shelter means defining what constitutes a proper shelter arrangement for each individual or family unit and then providing the area required. For example, if the definition of a proper shelter may be:
i) A specific bedroom area
ii) A specific cooking and dining area
iii) A specific bathroom area
iv) A specific relaxation area
v) Utilities kept at constant temperatures that the resident cannot change.
vi) A TV and\or Internet feed
vii) An address
Once a definition of a “shelter” is determined then “shelter cities” can be built and provided for and funded by the government. The shelter areas won’t be high class but they will complete a life cycle scenario where citizens have a place to live, health care paid for, utilities paid for, and a small amount of capital with which to live monthly.
This obviously sounds more simplistic to create than the reality of execution. All through history there are litanies of issues with respect to people living in close quarters with each other. The big difference is that every individual is receiving modest revenue to go along with living quarters and health care paid for. Citizens may be in the village of “have less” but that is nature when you have the population the size of the human race.
All citizens now become treated equally by the Federal Government. If a citizen has earned the ability to own their own residence then they don’t need the Federal Housing assistance. Otherwise the citizen has a residence. The only thing a citizen has to do is to comply with simple housing rules about noise levels and keeping residences clean.
The flooring level for the tax can be labeled level L. The percent of the tax is determined by the prior year’s Living expense for the country in conjunction with the PTD of the prior year. Unless there is either a significant surge in Living costs or a significant drop in PTD (which obviously would raise questions of why the changes occurred) the percent should remain a fairly stable percent.
15) Interest and Debt Payments
The United States has both interest payment and debt payments that need to be addressed. The amount of interest is known and is, right now, continuously refinanced. At some point in time this must be stopped.
The current method of budgeting by both the Democratic and Republican parties is not addressing the debt issue. To pay down debt one needs a plan to pay down debt; not a hope that the economy will suddenly burst forth with enough tax revenue to cover expenses.
The answer is simple. Tax floor I is the % of PTD that is required to cover the next years interest payments. Tax floor D is the % of PTD dedicated to pay down the debt.
16) Other Government ExpensesThere are certainly other Government expenditures required to keep the Federal Government functioning but the key is that each defined department receives a flooring level % of PTD each year for the budget. This puts all revenue and expenditures in a format that the public can follow to make informed decisions about the effectiveness of government leadership.