American Solutions, in partnership with the Nationwide Tea Party Coalition, is sponsoring nationwide Tax Day Tea Parties for April 15, 2009. The purpose is to “communicate our anger and opposition to the irresponsible policies of politicians in Washington who have failed to solve problems.” American Solutions continues: “More importantly however, this is our opportunity to clearly define a bold, new agenda and to tell our elected officials that they can either work with us, or find new jobs.”

I’m very concerned about our incredible national borrowing and spending. I’ve been concerned for decades about the size of the national debt; however, the almost exponential rate of increase seen over the past few weeks is staggering and unsustainable. We cannot spend our way out of debt but we can spend our way into slavery.  We’re rapidly approaching the point of national bankruptcy with debt accumulation patterns that resemble a third world dictatorship. This simply must stop.

I’m also very concerned about the erosion of our rights. Companies are being nationalized. Private corporate leaders replaced. Banks have been forced to take federal money and then not allowed to pay it back (which allows the federal government to exercise direct control).

As for my reaction, I’m slow to anger and don’t want to knee-jerk into protest mode. However, I’m not sure what else will get our leaders attention in Washington. I smell a rat when they pass legislation without allowing anyone to read it first. When they ignore minority party input and play hardball even with dissenting members of their own party, I know something is wrong. When our tax cheating Treasury Secretary and bowing to the king of Saudi Arabia President force businesses to remove their own leaders and nationalize banks, I know we’re losing our freedoms quickly.

The bottom line is something needs to be done while we still have the resources and freedom to do something. After studying the successes of the Civil Rights Movement, I feel that non-violent protests are in order. In any protest, though, I feel it is wise to offer a clear and reasonable alternative to the situation being protested.

So, with that in mind, I offer some solutions for the American Economy in 2009.  I first share the 12 American Solutions for Jobs & Prosperity offered by American Solutions as a start and then add 8 more of my own (which in a few cases somewhat overlap with the first 12).

1. Payroll Tax Stimulus. With a temporary new tax credit to offset 50% of the payroll tax, every small business would have more money, and all Americans would take home more of what they earn.

2. Real Middle-Income Tax Relief. Reduce the marginal tax rate of 25% down to 15%, in effect establishing a flat-rate tax of 15% for close to 9 out of 10 American workers.

3. Reduce the Business Tax Rate. Match Ireland’s rate of 12.5% to keep more jobs in America.

4. Homeowner’s Assistance. Provide tax credit incentives to responsible home buyers so they can keep their homes.

5. Control Spending So We Can Move to a Balanced Budget. This begins with eliminating Congressional earmarks and wasteful pork-barrel spending.

6. No State Aid Without Protection From Fraud. Require state governments to adopt anti-fraud and anti-theft policies before giving them more money.

7. More American Energy Now. Explore for more American oil and gas and invest in affordable energy for the future, including clean coal, ethanol, nuclear power and renewable fuels.

8. Abolish Taxes on Capital Gains. Match China, Singapore and many other competitors. More investment in America means more jobs in America.

9. Protect the Rights of American Workers. We must protect a worker’s right to decide by secret ballot whether to join a union, and the worker’s right to freely negotiate. Forced unionism will kill jobs in America at a time when we can’t afford to lose them.

10. Replace Sarbanes-Oxley. This failed law is crippling entrepreneurial startups. Replace it with affordable rules that help create jobs, not destroy them.

11. Abolish the Death Tax. Americans should work for their families, not for Washington.

12. Invest in Energy and Transportation Infrastructure. This includes a new, expanded electric power grid and a 21st century air traffic control system that will reduce delays in air travel and save passengers, employees and airlines billions of dollars per year.

In addition to the above 12 solutions, I offer the following:

13. Cut payroll taxes now. To provide immediate relief to working Americans, I propose immediate payroll tax cuts. On their very next paycheck Americans would receive tax relief. Additionally, tax relief should be available to all employers paying additional taxes on behalf of their employees (which, on top of withholding taxes, amounts to additional tax payments of more than 7% of most employee’s wages — if an employer pays an employee $2000, it really costs the employer more than $2140 for that employee). Cut both of their taxes and there’s more left for both to spend and stimulate the economy.

14. Require a two-thirds super-majority vote of Congress to borrow money (or deficit spend). To be safe, that would require a Constitutional amendment to institute since Congressional rules can be exempted and overturned easily. Such a requirement would go a long way towards the goal of a balanced budget while allowing emergency spending and borrowing for widely-accepted capital investments to proceed.

15. Strengthen our national currency. If we do not dilute our currency through inflationary expansion, then it will remain high and investments will flow into this country as other nations’ currencies weaken relative to ours.

16. Allow companies to fail and/or be reorganized through bankruptcy. Stop propping up failures and bad leadership. Instead of infusing failing companies with public money taken from taxpayers, let them suffer the consequences of their bad decisions and fail. Let the market innovate with new and better replacements. The assets don’t disappear with bankruptcy, the ownership of them changes. If there was demand for the product before bankruptcy, there will be demand after bankruptcy and somebody creative will meet that demand.

17. Overturn regulations and accounting rules that restrict innovative market solutions. I’m not an accountant but I know that most mortgages are sound. There is no reason for the massive declines in values that we’re seeing when only a single digit percentage of most assets are bad. There are billions of dollars to be made by creatively insuring “toxic assets.” The government needs to provide enough oversight to prevent fraud but not so much that creative solutions are stifled and rejected. Furthermore, the government should not nationalize companies, period.

18. Rebuild trust in the American people. Our leaders in Washington are largely responsible for this problem. For one, they set up the environmental parameters in which the problems occurred and they allowed it to happen under their watch. Most did nothing until it happened and their response has been to throw new money at the problem and into the hands of the same governmental and other entities that created the problem. That’s like paying the fox that ate the chickens to do a better job next time in guarding the hen house. Crazy!

19. Cut government spending. Everybody knows there’s so much waste. Yes, jobs are lost when government spending is cut but jobs are also lost when taxes are raised. Government does not have anything that it doesn’t take from somebody else first. If government takes money from employers, then they cannot hire as many workers or pay as high a wage. We’ve got to stop taking so much money out of the economy to “stimulate” the economy as the government sees fit. The best stimulus for the economy is the people. Let them keep their money and use it as they see fit.

20. Return power to the States. Many things are better done at the local level. Where the Federal government has encroached on the States’ Constitutional prerogatives, the Federal Government must be required to back down. The states provide 50 laboratories of innovation and competition. That’s good for our country and usually costs far less.

These 20 items would make a good start in addressing these trying economic times. There are many more items that could be added to this list and I invite your suggestions. In all, I argue that the principles of freedom, capitalism and individual responsibility should remain supreme and trump any attempt at collectivism, socialism and bailouts.

Note: Photo courtesy of http://patriotpost.us/images/broadcasts/humor/040609.htm

In my opinion, after the recent massive financial bailouts and other interventionist federal actions (and in some cases nationalizations) within our economy (i.e. the private sector), several pressing questions remain unanswered. I have been pondering on five of them for some time now. These are listed below in no apparent order.

1. If bad loans got us into this situation, then why is there so much effort to get banks to loan even more money?

If there is a dollar to be made and people are free to act in rational ways, then somebody creative will find a way to earn that dollar. My thinking is that in spite of the negative news regarding financial markets right now, there remains a market for loaning money to people with good credit. If this is the case, then there must be people willing to make a profit in such a market and so they will loan money to those with the means to pay them back. No crisis there.

On the other hand, the market for people with bad credit (i.e. people who you shouldn’t loan money to) has dried up and rightfully so. That should be a good thing. It made no sense to make risky loans but such actions were encouraged by foolish government policy that distorted reality and created an artificial market for bad loans. No loans to people who should not get loans means no crisis there either.

So let’s fast forward to now. I want to know why there is all the fuss about banks not loaning money then? It’s good banks are not making more bad loans. To push them to loan on a large scale again seems to me to further push us into the mud. We’re supposed to be getting ourselves “unstuck” but loaning more would seem to do just the opposite and compound our already bad situation. That doesn’t make a bit of sense.

2. Bailouts rewards bad performance.

Corporate leaders are paid to lead. Part of leading means avoiding problems. It seems to me that we have a bunch of bad leaders at many financial institutions (and in government) since they led their companies (and federal policy) on a path of suicide. Why should the government reward these guys with a bailout? Seems to me that such actions simply reward their poor judgment and punish those who kept their companies out of trouble.

As for the auto industry in particular, I have some specific thoughts along these lines. They were on an unsustainable path by operating at a loss and piling up debt for so long. Instead of cutting back, rethinking, retooling, living within their means and building products that customers want (and will turn a profit), they were unwilling to change. A bailout will just put off the invevitable and reward their past negatives. Where is the incentive to adjust to market forces and make an honest profit by pleasing customers like all other businesses have to do? Furthermore, a bailout invites the government to meddle within an essential American industry. That’s an incredibly dangerous proposition.

3. Bankruptcy and subsequent restructuring allows serious change to occur quickly.

Bankruptcy can give a company temporary relief while forcing hard decisions to be made and implemented under court order. In some cases, ownership changes as assets are sold or even repossessed. Physical assets, however, don’t disappear just because ownership changes. In most cases of high profile companies, ownership changes don’t kill the company. Just because ownership or the company name changes doesn’t mean the demand for that type of product ends. Good news! That means, then, there is still a market for those products.

Think again of the American auto industry. If General Motors were to go bankrupt, the demand for vehicles would not cease. Somebody would still build cars in most of those General Motors factories. The other companies could not step in overnight and build enough cars, trucks and parts to meet consumer demand. That means there is still a huge market for, and thus incentive, to keep General Motors alive.

If left alone, I predict that instead of collapse, bankruptcy and much-needed restructuring would occur within the American auto industry. The result would be an industry that is much stronger and more competitive for the future after undergoing the tough decisions needed now.

4. We’re on a slippery slope to socialism and nationalization (i.e. communism).

I alluded to this thought above. I don’t like the federal government taking taxpayer money (or borrowing money that taxpayers will have to repay) and “buying” or assuming ownership of private companies or even parts of them. I see no Constitutional authority for such a move and it is highly contrary to the tenets of capitalism.

This economic downturn is not a problem with capitalism. Instead, it is a problem caused by government interference that distorted free markets by preventing them from properly regulating themselves and rooting out bad loans and risky behavior. In short, government created this problem and now we’re asking government to fix it? How foolish is that?

5. Finally, why have certain leaders not been fired for their incompetence?

We have a Treasury Secretary that serves at the will and pleasure of the President. There are leaders in Congress that oversee financial committees and other influential boards and administrative bodies. Corporations and banks have leaders. Surely these leaders should have seen this problem coming years ago. After all, they are paid to prevent problems such as this.

The very fact that so many of our leaders, from the Treasury Secretary down to corporate executives, either didn’t see the problems or failed to warn of them makes these individuals part of the problem. Instead, and making the case even worse, it seems many of these leaders contributed greatly to the problem. That scenario suggests they are guilty of inept leadership. Simply put, they are incompetent.

In short, those incompetent individuals who contributed to this problem should be fired and replaced with competent individuals who will work to get their companies and our country out of debt and on a solid financial footing. I’m troubled that I can think of nobody who has been fired for their part in creating this problem. Instead, they are awarded billions to spend and authorized with questionable powers to “fix” what they either helped create or failed to avert. That response seems about as reasonable as giving gas and matches to an arsonist.

So, in conclusion, these five ponderings have occupied a great deal of my thought (and frustration) over the past few months. Please share your ponderings below.