A Blueprint for Prosperity: Market-based Alternatives to the Obama Blueprint for Change

By Robert Donovan

The U.S. Budget Deficit and national debt are skyrocketing. The U.S. income tax system is incomprehensible, tends to concentrate wealth in the hands of the rich in spite of heavily progressive marginal tax rates, and is broken beyond all repair. Social Security, Medicaid, Medicare and Welfare entitlement costs are out of control and threatening bankruptcy. The U.S has problems, but none of them are insoluble. This book is a set of inexpensive, free-market action plans to do the following:
Get the federal budget into surplus and keep it there.
Abolish the U.S. income tax system, without replacing it with any other new taxes.
Avoid the coming meltdown in Social Security, provide workers and seniors with a stable safety net, lower payroll taxes, and provide ongoing, debt-free stimulus to the economy.
Put capital into the hands of workers and allow them to amass their own personal, income-producing nest egg.
Put the consumer back in charge of the cost of healthcare, and make health insurance more affordable, portable, without the need of socializing huge swaths of the economy.
Create a performance-based welfare system that doesn't depend on means testing for continued receipt of benefits.

• Language: English
• Publisher: Robert Donovan
• Release date: Nov 18, 2011
• ISBN: 9780978669522

Robert Donovan

Mr. Donovan is a former Navy nuclear electrician who has made a living since doing everything from bagging groceries to trading stocks, futures, and currencies, whereby he gained much of his knowledge of economics and finance, to working as a BPI building analyst. He is the founder of the Worker-Capitalist Society(WCS), which works to teach people of all income levels and backgrounds the basic principles of economic self-sufficiency and risk management. He currently divides his time betweeen hs work in IT/energy consulting, his WCS activities, his Forex trading, writing, and trying not to hurt himself too badly at parkour, his chosen form of exercise to stay in shape.

Book preview

A Blueprint for Prosperity

Market-based Alternatives to the Obama Blueprint for Change

By Robert Donovan

Smashwords Edition

Copyright 2009 – 2011 Robert Donovan

ISBN: 978-0-9786695-2-2

Version 1.0.4

This ebook is licensed for your personal enjoyment only. This ebook may not be re-sold or given away to other people. If you would like to share this book with another person, please purchase an additional copy for each recipient. If you’re reading this book and did not purchase it, or it was not purchased for your use only, then please return to Smashwords.com and purchase your own copy. Thank you for respecting the hard work of this author.

This book was created entirely using open source software. The book block text was written using Fedora 13 Linux running Openoffice.org 3.2. The cover was designed using Inkscape 0.47 and Scribus 1.3.9.

Check out the author's web site at http://tradecraftsolutions.com.

Contents

i.0 Introduction

i.1 So Who the Hell Am I?

i.2 Full Disclosure: My Biases

i.2.1 My Religious Beliefs

i.2.2 My Political Leanings

i.2.3 My Economic Leanings

i.3 Why I Wrote This Book

1.0 Getting Past Partisanship

1.1 Political Parties, Who Needs Them?

1.2 Non-partisanship and Compromise

1.3 Conclusion

2.0 Keep the Federal Budget in Surplus

2.1 Budgeting Methods

2.1.1 Line-item Budgeting

2.1.2 Program Budgeting

2.1.3 Performance Budgeting

2.1.4 Incremental Budgeting

2.1.5 Zero-based Budgeting(ZBB)

2.2 The Flaws in All of These Approaches

2.2.1 No Spending Cap

2.2.2 What Congress Calls a Spending Cut

2.2.3 No Reference to Revenue

2.2.4 Bad Accounting

2.2.5 Surpluses Belong to Congress, Not You

2.2.6 Non-discretionary and Off-budget Spending

2.2.7 Long-term obligations Are Ignored

2.3 How to Fix This Mess

2.3.1 Receipt-based Budgeting(RBB)

2.3.2 Getting to a Receipt-based Budget: Avoiding Downside Risk

2.3.3 Don't Spend Based on Projected Future Revenue

2.3.4 Base Current-year Spending on Prior-year Receipts

2.3.5 All Spending Must Be On-budget and Discretionary

2.4 90% of Prior-year Receipts Spending Cap

2.4.1 What We Know

2.4.2 Creating Regular Surpluses

2.4.3 Why 90 Percent?

2.4.4 Dealing with unfunded Future Obligations

2.4.5 Federal Balance Sheet and Unfunded Liabilities

2.5 Do the Biggest Spending Cuts in the First Year

2.6 Cap Emergency Spending At 15% of Current Outlays

2.7 Disburse Surpluses Immediately Upon Receipt

2.8 At the State Level – Financing Federalism

2.9 Conclusion

3.0 Generating Revenue

3.1 What's So Bad About the Current Tax System?

3.2 Fixing the Income Tax System

3.2.1 Use the Tax System to Generate Revenue

3.2.2 Replace, Don't Reform, the Current Tax System

3.2.3 The Tax Rate Should Be Low

3.2.4 The Tax System Should Be Simple to Understand

3.2.5 The Tax System Should Be Fair

3.2.6 There Should Be a Single, Progressive, Flat Rate

3.3 Tax Consumption Only

3.3.1 Straight Expenditure Taxes

3.3.2 Value-added Tax(VAT)

3.3.3 National Retail Sales Tax(Fair Tax)

3.3.4 Flat-rate Income Tax(Flat Tax)

3.3.4.1 Flat-rate Individual Income Tax Form Example

3.3.4.2 Flat-rate Business Tax Form Example

3.3.4.3 2007 Busines Tax Revenue

3.3.4.4 2007 Wages, Salaries, and Pensions Revenue

3.4 Reduce the Income Tax to Zero

3.5 Getting To the Flat Tax

3.6 Conclusion

4.0 Fixing Social Security – Spread Capital, Not Wealth

4.1 Social Security to PIRAs

4.2 Abolish the Social Security Trust Fund

4.3 Allow Workers Legal Title to Their PIRAs

4.4 Make the Program Optional

4.5 Allow Workers to Contribute Pre-tax Savings

4.6 Allow Workers 2.5% for Health Insurance

4.7 Minimize Payroll Tax Increases

4.7.1 PIRA Bonds

4.7.2 Require PIRAs to Buy Treasury Bonds Initially

4.7.3 Tax-free Account Consolidation Option

4.7.4 Set a Minimum Benefit, and Subtract PIRA Income

4.7.5 Increase Retirement Age Limits

4.8 Define a Set of Allowable, Low-risk Investments

4.9 Contract Out Management of PIRA Funds

4.10 PIRA Withdrawals

4.11 PIRAs Under Receipt-based Budgeting

4.12 PIRA Funding Options

4.13 Financial Self-sufficiency is the Key

4.14 Conclusion

5.0 Fixing Healthcare – How Patients Got Left Behind

5.1 The Provider-driven Era

5.2 Insurance: Rise of the Middlemen

5.3 World War II and FDR

5.4 The McCarran-Ferguson Act

5.5 Looming Nationalized Healthcare

5.6 Creating The Right Kind of Competition

5.7 Putting Patients First

5.7.1 Require Healthcare Providers to Take Cash First

5.7.2 Require All Providers to Disclose Prices

5.7.3 Allow the Interstate Purchase of Health Insurance

5.7.4 End Buying Healthcare at the Company Store

5.7.4.1 Higher Prices

5.7.4.2 Leatherman Syndrome – Reduced Choice

5.7.4.3 Job Lock

5.8 End Preferential Markets

5.8.1 Outlaw Third-party Payers for Health Insurance

5.8.2 Allow Deductions for In-cash Health Benefits Only

5.8.3 End the Healthcare Deduction, Cut Taxes

5.8.4 Extend the Healthcare Deduction to Employees

5.8.4.1 PIRAs and Healthcare

5.9 Forbid All In-kind Benefit Payments to Employees

5.10 Forbid Exclusive Insurance Arrangements

5.11 Limit Denial of Coverage for Preexisting Conditions

5.12 Create Medicare Vouchers

5.13 Establish a Loser-pays System for Lawsuits

5.14 Conclusion

6.0 Making Welfare Work Better

6.1 Steps in the Right Direction

6.2 Performance-based Reform

6.2.1 Use Block Grants Based On Welfare Population

6.2.2 Combine All Means-tested Stipend Programs Into One

6.2.3 Demonstrate Need to Start Welfare

6.2.4 Give States Flexibility

6.2.5 Demonstrate Improvement to Stay On Welfare

6.2.6 Tax Welfare As Ordinary Income

6.2.7 Expulsion for Multiple Minor or Any Serious Crimes

6.2.8 Lifetime Limit of 60 Months to Receive Aid

6.3 Conclusion

7.0. Putting it All Together

7.1 Budget: Where to Cut?

7.2 Receipt-based Budget Tables

7.2.1 Table 7-1-1 – Receipt-based Budgeting: 1947 – 1959

7.2.2 Table 7-1-2– Receipt-based Budgeting: 1960 – 1987

7.2.3 Table 7-1-3– Receipt-based Budgeting: 1988 – 2014

7.2.4 Table 7-1a– Receipt-based Budgeting: 1998 – 2014

7.3 Starting in Deficit

7.3.1 Table 7-2: The Painful Budget Cuts

7.4 The Effects of the Flat Tax

7.4.1 Table 7-3: Business As Usual

7.4.2 Table 7-4: Business As Usual, Lower Growth

7.5 The Flat Tax Alone Won't Help

7.5.1 Table 7-5: Flat Tax, Mild Growth, No Spending Restraint

7.6 It's the Spending, Stupid

7.6.1 Table 7-6: Controlling Spending, No Tax Reform

7.6.2 Table 7-7: 90%RBB and Flat Tax

7.7 PIRAs As Economic Stimulus

7.7.1 Table 7-8: RBB, Flat Tax, PIRA Effects 2010 – 2025

7.7.2Table 7-9: GDP Growth Assumptions

7.8 PIRAs and Unfunded Liabilities

7.8.1 Table 7-10 Estimated PIRA Benefits, Surpluses 2014 to 2025

7.9 PIRA Income Levels

7.9.1 Table 7-11 – Comparison: Monthly PIRA and Annuity

7.10 Final Thoughts

8.0 References

i.0 Introduction

i.1 So Who the Hell Am I?

Short Answer, nobody, at least, nobody important. Long and tedious answer, I'm an ex-Navy, nuclear electrician who has made a living since doing everything from bagging groceries to trading commodities and currencies for his own private account. I currently run my own computer consulting business, and I am a part-time computer repair instructor. I made some stupid financial decisions while I was in the Navy and wound up homeless for four years. I saved enough to open a commodities account and made part of my living trading my own account––albeit, an under capitalized account––during that time. It enabled me to go to school, get my Cisco CCNA Certification, and teach myself Linux. I made extra money repairing personal computers and became a network consultant shortly after getting certified. I also acquired a vocational teaching credential, and taught computer repair, part time. Until recently, I taught a Linux networking class at an adult school in National City, a suburb of San Diego. Unfortunately, the atrocious lack of any financial discipline by the people in the state legislature required the class to be canceled due to lack of funds. That's it. I'm about as Joe Average as you can get. I'm not rich, but I very much aspire to be, and am always working in that direction.

So what makes me think I am in any way qualified to talk about reforming the federal budget, healthcare reform, Social Security, and welfare? First, I reject the premise of the question: that one must be a learned economist, scholar, or government official to be able to figure out how to solve these problems. If you've ever had to budget your own salary or paycheck and can add, subtract, multiply, and divide, you know all you need to know to balance the federal budget or any other budget for that matter. All the necessary information is available on the various government web sites. As to healthcare, welfare, and Social Security reform, these are all accounts with a source of money coming in and an ongoing expense going out. Anyone who has run a business and understands the basic principles involved in budgeting, retirement and investment, or insurance, probably knows enough to fix all of these.

Second, could we, as average citizens, do any worse taking a stab at coming up with, or at least evaluating and selecting, solutions on our own? The learned experts have been devising answers to these problems for decades now, and look at what it got us. The deficit is higher than it has ever been and going higher. The Social Security Trust Fund is seven years, at most, away from going into deficit as I write this(Sept. 2009). Healthcare costs continue to be out of control. The same people who gave us the credit crunch in the name of affordable housing and the financial meltdown of 2008 now want to run the health insurance system too. These are the folks who told Fannie Mae and Freddie Mac to guarantee trillions in loans to high-default-risk borrowers, and it never occurred to them that this might become a problem if real estate prices fell at some point. The same people who thought they could make money buying troubled assets––assets the very people who sold them were calling toxic––would now have us believe they can add millions of people into the healthcare system and save money. Passage of the latest economic stimulus bill has seen welfare reform undermined and unemployment go from 8.4% to 9.7% with no relief in sight.

The U.S Constitution has, as its most basic, foundational principle, the idea of people's law, that average citizens are the ones best suited to solve these problems. There is little reason to create a democratic, representative republic otherwise. A long succession of Presidents, members of Congress, and Senators have had their chance at finding answers to these problems; they've done abominably in my opinion. They have either failed to articulate their solutions clearly, or have just plain gotten it wrong. I think I can do better. I leave it to the reader to decide whether I have, based on the merit of the ideas and arguments I present. In the end, I do not insist, or even ask, that anyone agree with the ideas I will present here, only that you consider them in the light of your own judgment and experience.

i.2 Full Disclosure: My Biases

This book presents my adaptations of various ideas for fixing the federal budget, tax, Social Security, healthcare, and welfare systems. These are inherently political problems. I have tried to present my views as objectively as possible. However, no mater how hard one tries for total objectivity, any discussion of these topics will inevitably be colored, to some extent, by the author's personal experiences and core beliefs. I have done my best to remove as much of their influence as I can, but one can't remain entirely neutral. Here then, is where I'm coming from.

i.2.1 My Religious Beliefs

I was raised a Roman Catholic, but have called myself an agnostic Theist, or agnostic Deist, for the last fourteen years and ceased to be a practicing Catholic long before that. That doesn't mean I have rejected religion entirely. I choose to believe that there is a God but that His existence or nonexistence is unknowable until you die, and I accept the possibility that He may not exist at all. I also believe that stories of miracles, divine intervention, and supernatural influences are allegory, not fact. I believe that God, whatever his true nature and however he wants us to live, should be acknowledged and worshiped by each of us as we see fit. I believe that any God worth worshiping must consider doing good for our fellow beings the greatest service we can render Him, and any moral code that accomplishes this is pleasing to Him, even if such a code is not religiously inspired. I believe we will pay for our transgressions against our fellow men, if not in this life, then the next, and, even if this is not true, it is worthwhile to proceed as if it was when dealing with others. It encourages self-restraint and helps one to form the habit of considering the consequences of your actions to yourself and others before you act, which I find highly useful.

Religion, like anything else, can be made into an awful force for oppression, tyranny, and destruction. The Inquisition, burning witches at the stake, and the house arrest of Galileo for heresy are historical examples. The Catholic pedophile priest scandal in modern times, and, of course, 9/11 and the horrific homicide bombings in the name of Islam are more recent. For all that, it must be remembered that religion has also been a force for great good and that we can't hold all members of a religion responsible for the actions of a few. Schools, hospitals, and religious charities of all faiths provide valuable, often lifesaving, assistance and inspiration to millions worldwide to better themselves and others.

Truth be told, I take seriously much of what the late George Carlin said as a joke about the Ten Commandments. In what I think is one of his best monologues, Carlin reduced the Ten Commandments down to two. Carlin added a third one. Since Carlin was an atheist and I am not, I choose to add one more. The list is below, and I'm paraphrasing Carlin on two through four.

1. Worship God in any way you choose so long as you do not, in any way, forcibly interfere with the ability of others to worship as they see fit.

2. Always be honest and faithful to yourself and others.

3. Always try very hard not to kill people, and then, only as a last resort.

4. Mind the state of your own soul and leave others to mind theirs.

I do not claim that I have anything infallibly right as far as my religious beliefs, merely that they are right for me. I do not demand that others agree with these beliefs, but I do demand to be left alone to practice them. In return, I will do the same for others. The solutions I present are secular, based on rational analysis, not religiously inspired or motivated.

i.2.2 My Political Leanings

If you must classify me in terms of political parties, I have called myself a Reagan Republican for the last twenty-five years. However, after watching the Republicans in Congress, mostly through laziness or political expediency, compromise, undermine, and all but entirely abandon the principles of individual freedom, faith in the individual, and economic self-sufficiency championed by Ronald Reagan, I am now calling myself an extreme nonpartisan. I focus on solutions to problems and not which party came up with them. You should realize that to define one's governmental preferences in terms of political party is largely meaningless and one of the biggest reasons that we can't get past partisanship in this country. We need to adopt a better standard of measurement. I shall expound in more detail on that point in Chapter One.

i.2.3 My Economic Leanings

I am a capitalist, straight up. It is the only economic system that has successfully and repeatably created from scratch a sustainable middle class powerful enough to challenge the ruling hierarchy. It is the system that allows for the most individual freedom. I believe in using free-market solutions to solve problems. All the solutions I present are free-market based. I believe that economic freedom, the freedom to try, fail, buy, and sell, as we see fit, is indispensable to the support of all the other freedoms and that promoting economic self-sufficiency, and not merely real property ownership, from the lowest income levels up, is the key to ensuring each of these freedoms. That theme runs through everything I write on these subjects, in this book or elsewhere. I also believe that economic freedom requires the willingness to accept the responsibility for the consequences of your actions, financial and otherwise, good and bad. With regard to that, here is a list of principles that I work under. I first wrote about them in my book, How to Shop for A Vocational School or College, but they are apropos here as well. You might call them my working credo. Any prosperity I have enjoyed is due to its application, less than consistent though that has been at times. Perhaps you might find this of use as well. The action plans in this book are all inspired by them directly or indirectly.

You don't get paid to be inspired by your dreams. You get paid to do something which enables whomever is paying you to make more money than the cost of hiring and paying you. Becoming able to do that takes creativity and perseverance. Those whose skills add little extra value tend to be constantly worried about not having enough money. Those whose skills enable them to add a lot of value tend to get paid a lot––not necessarily from the same employer. If you are ever at a loss as to why you make less money than you'd like, come back to that statement; you'll always know what you are doing wrong.

Inspiration, positive attitude, confidence, and self-esteem are not, in and of themselves, causes of success but are the outwardly visible results of being well trained, well practiced, and well prepared. Acquiring skills that add great value requires long, often painful, effort. Those who have put in the time to become well trained tend to be positive and optimistic because they are confident in their abilities and able to create and/or pursue opportunities that the untrained or badly trained can't. They don't depend on others for a safety net. They're careful to plan ahead, and prepare against most foreseeable contingencies when they take risks so as not to be easily derailed by them. This tends to lead to a pattern of success, which opens up further opportunities.

Nobody owes you a living but you, not your parents, your friends, or your employer. Harsh Truth#1, your employer owes you the value of your skills, nothing more, and there is no such thing as a living wage. Harsh Truth#2, your paycheck is not an act of alms given to you by your employer, and shopping is not an act of charity to those who work in the store. To put that another way, your employer doesn't pay you out of a desire to feed the hungry, shelter the homeless, and clothe the naked any more than you buy your clothes, cell phone, car, video games, or groceries because people working in the store need the money. Harsh Truth#3, your employer is the buyer of your skills and, therefore, is the final arbiter of value for your skills. If you try to charge more than an employer wants to pay, you'll ultimately price yourself out of the job market. Even if they might initially agree to your price, they'll be looking for ways to replace you, probably with a machine, certainly with cheaper labor, unless you can deliver added value for the higher wage you want. Many private sector unions have been learning this the hard way for decades.

All skills are commodities which can get devalued over time by obsolescence or abundance. That is not to state or imply that people are commodities. They are not, but their skills most certainly are. If your current skill set gets superseded by new skills or technologies, the demand for those skills is reduced. In the case of abundance, lucrative skills eventually attract more people into related fields than employer demand will support. This increases competition among potential workers possessing those skills and causes the price of those skills to diminish. Both of these processes are always occurring. No skill set remains uniformly lucrative forever, whether your field is buggy whips, horse shoes, computer programming, particle physics, or genetics. Ignore this at your extreme economic peril.

i.3. Why I Wrote This Book

Aside from the fact that getting laid off from teaching has left me with some time on my hands until the consulting picks up, I'm writing this book because all I see is political games and ongoing problems from those in power, and I'm fed up with it. Problems are simply left to fester amidst one party or the other jockeying to prove they are more compassionate, or diverse, or green, or some other damn thing. In the meantime, no real solutions, no real plan, other than more taxes or the government taking over more and more of the private sector. Nothing gets fixed. I want all law-abiding, freedom-loving people to have equal opportunity, regardless of race creed, origin, color, or gender and not be left holding the bag for trillions in debt or leave future generations to deal with it. I want to be allowed to get rich, if I can, without having to contend with confiscatory taxes if I succeed. I want a secure retirement for myself and to prevent Social Security from going bankrupt to protect our current seniors. I want healthcare to be run as any other service business, to be able to deal directly with my doctor without interference from the insurance company, and not to be dependent on my employer to pay for my health insurance. I want to help those who are down on their luck but not to enable them to live idly on the public dole.

Most of all, I want those in power to stop worrying about who is polling highest or which group they appeal to most and concentrate on finding solutions––the kind that don't involve spending more tax money when we're running trillion dollar deficits or more government involvement in everything. I want it burned indelibly into the mind of every Congressperson that it is not, and never was, the government's job to take care of the people. It is the job of government to make sure that people are free to earn the means to take care of themselves. That means people need to be as free to enjoy the benefits of their brilliant decisions as they are to suffer the the consequences of the bone-headed decisions. I saw little from Bush to accomplish this; I see nothing coming from Obama and his minions that can be expected to have anything but the opposite effect.

I want the U.S. economy to be the biggest, fastest-growing, most vibrant, free-market capitalist economy on Earth. Capitalism