Monday, August 16, 2010

Big Ideas

Once in a blue moon, these pages diverge from local topics to discuss national issues. This is one of those times.

Any economic recovery is going to have very strong headwinds - higher taxes, more regulations, unsustainable debt, and rising interest rates. Given the uncertain economic outlook, companies are reluctant to expand. Here are some ideas to give the economy an immediate boost.

Make mortgage interest tax free
Mortgages are already at their lowest rates in history and people are still having a hard time refinancing. By giving mortgage interest on primary residences the same tax-free status as municipal bonds, rates will drop even more. Lower rates should help the banks through another wave of refinancing and support home prices through lower monthly payments. This will also help counteract the imminent rise in interest rates.

Facilitate short sales by extending pre-existing government guarantees to personal loans
Banks are forcing people to stay in homes they can no longer afford by making short sales extremely difficult and often requiring homeowners to first destroy their credit history through missed payments. However, if mortgages already have government guarantees (i.e. Fannie Mae, Freddie Mac, FHA, etc.), we can extend that protection to any personal loans to cover a short sale. The personal loans will be levied additional fees and interest charges to cover the added risk but the home seller will be spared the crushing expense of owning a home he no longer wants and the risks to Fannie Mae will be reduced since the house is already underwater.

Place all major tax increases and burdensome regulations on hiatus until after the unemployment rate drops below 6%
Considering Obamacare, cap and trade, card check, designating carbon dioxide as a pollutant, financial reform, liability reform, protectionist trade policies, an unsustainable deficit, and rising taxes, all during a sputtering economy with high unemployment, businesses are understandably reluctant to expand when they can’t calculate the future cost of labor and capital. Let’s place all anti-growth policies on hold until after the economy recovers.

Eliminate minimum wage laws
The overwhelming majority of minimum wage jobs are entry-level positions, exactly the type of job people grab to get their feet in the door. With young adult unemployment at 25%, any job is better than no job. Minimum wage laws price people out of jobs and deny them the opportunity to acquire valuable skills. The fear that companies will start paying their workers only pennies a day is unfounded for the simple reason that people won’t work for pennies a day.

Hold a monthly auction for corporation-sponsored work visas
Within highly-skilled industries (i.e. technology, financial services, engineering, etc.), companies often outsource because they can’t find the skilled labor domestically. A monthly auction for work-visas would become a welcome revenue source and enable companies to employ more people locally. The increased employment would have lots of side benefits for local businesses.

Green cards for all doctorate recipients from American university programs with nationally recognized professional accreditation
We want the world’s best and brightest working in our country. When foreigners spend several years in our country’s best schools pursuing doctorate degrees, we should be encouraging them to stay, not forcing them to leave. These are the people who will create opportunities and jobs for the rest of us.

New Jersey
We’re in competition with every other state in the union. Let’s compete for those people and companies most likely to contribute to our local economies.

Cap on income taxes
The most economically desirable people are the wealthy and the well-to-do elderly. They bring much to the state and cost us relatively little compared to households with children. The simplest way to make our state more attractive is by capping their taxes. For the wealthy, let’s cap state income tax payments at $50,000 a year. (This would kick in around $750,000 of income after deductions.) Eliminate the death tax so that the rich don’t move to Florida when they get old. And limit taxes on retirement income to 5% with a maximum of $5,000 per person.

Remember, if we’re going to keep spending over $15,000 per child in the public schools, we’ll need to attract the rich and the elderly to help pay for it all.

Become a Right to Work state
We’d be the only right to work state in the northeast, giving us a major advantage in recruiting large employers, particularly those looking for easy water access and relatively close proximity to seven of the ten states with the highest population density.

Stick and carrot incentives toward merging municipalities
We have way too many governing bodies in New Jersey. The state could reduce the costs of merging municipalities by guaranteeing bond issues associated with any mergers. Another incentive would be to have separate tier funding according to a municipality’s land area and population. We could also make the change easier by making policing a county responsibility, thereby eliminating the single largest department of any municipality.

Replace all stop signs with yield signs

Why not? Yield signs are more energy efficient and possibly safer than stop signs. No need to change the signs. Just change state law to treat stop signs the same as yield signs.
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Anonymous said...

You are clearly an idiot. Death tax? What percentage of the State's population is affected by this? Seems to me you think trickle down works. It doesn't. The rich hide their money and don't use it to create jobs. Get rid of all stop signs? You are right. A 4 way intersection with yield signs sounds great. I hope when your kids go to school their bus stop is at a yield sign.

Anonymous said...

It is very likely that anyone who has owned real estate, a farm or an investment property for a long period of time along with having saved some of their earnings over their lifetime could in fact be hit by the NJ Estate Tax. The threshold of which kicks in at $675,000. Many, if not all of these people would surely deny being rich. I would say this though - they have probably been much smarter than you have been with your money. As far as trickle down economics is concerned, the Congress never came through with the spending cuts at the time they passed legislation to reduce income tax rates. I suppose your solution to the current economic disaster area that we are experiencng would be to raise taxes even further. How much is enough? Income, social security, medicare, unemployment, disability, excise, cigarette, liquor, fuel, telecommunications, real estate, litter, tire, water, sales taxes, real estate transfer taxes, countless user fees, licenses and permits, etc etc etc are just a few of the taxes levied by government in the name of providing "Quality" services to the public. Government has been out of control for many years and this is a problem attributable to both parties. Bottom line - we have borrowed trillions of dollars and have little if anything at all to show for it. Go ahead and raise taxes further, and just watch how many more people wind up on the unemployment line.

Anonymous said...

Yeah well, like I said.

Naomi Klein wrote a book, Disaster Capitalism. In it she proposes the theory that society should beware during times of extreme stress, like natural disasters or economic recessions. Because profiteers exploit those times to usher in changes that they have wanted for decades. Changes like breaking unions and civil services, privatizing school services, and privatizing municipal services. The result, unfortunatley, will be the permanent lowering of the bar for ALL wages across the board in that effected society, the elimination of many jobs, the lessening of the middle class and the establishment of a sub class who never have permanent jobs. But, take heart! At least their children won't pay taxes on their estates!

Anonymous said...

I do not think anyone is intent on breaking up unions. I believe the motivation is trying to make NJ affordable again. Additionally, the idea that we provide our retiring workers with very rich pensions (up to 65% of their annual gross earnings) and free medical coverage for life after having worked for 25 years is unheard of today. And do not tell me about the employee having contributed towards their pension. The simple truth is that most, if not all retiree's will recover all of their pension contributions in under 3 years after retiring. As a matter of fact, the idea of retiring for most non-govermental workers has become a fantasy. By the way, I am not anti-union. I am pro-taxpayer. Our government has been spending dollars they never should have and have brought down the quality of life for all of New Jersey. So if your answer is simply to tax more, all i can say is for every dollar of revenue the goverment brings in, some elected official will find a way to spend $1.10. We have to reduce the overall size of government at all levels and demand greater accountability from all elected officials (Democrat and Republican). Drive around central NJ and look at what is happening. Roads and bridges are falling apart, graffiti is all over the place, litter is on the ground in parking lots and the sides of highways, large numbers of vacant buildings and homes for sale. Third world status, here we come. Although I suppose we can expect a lot a tax revenue on all those pension payments being received. Oh yeah, I forgot, most of them move out of NJ once they retire.

Aberdeener said...

Have a look at this report, published this past February. Below is a short overview.

If you raise taxes, people and jobs will simply move to lower taxed states.

What's your plan for attracting wealth and employment to our state to pay for all our state programs? (Notice how the federal government is already cutting the food stamps program because they can't find money anywhere else.)

1. From 1999 through 2003, there was a net influx of $98 billion (in 2009 dollars) in household wealth and concomitant net increase of $881 million in charitable capacity.

2. Most of the wealthy in-migrants came from the states of New York and Pennsylvania and from foreign countries.

3. In the subsequent five years from 2004 through 2008, New Jersey experienced a near total reversal of the flow. The inflow of wealth dropped from $300 billion to $117 billion – a difference of $183 billion while the outflow fell from $202 billion to $187 billion – a difference of slightly more than $15 billion before rounding (see Table 1). The result was a shift from a net inflow of $98 billion ($300 billion minus $202 billion) to a net outflow of $70 billion ($187 billion minus $117 billion) for a total decline in wealth of $168 billion ($70 billion plus $98 billion).

4. Charitable capacity or the expected giving pattern changed from a net inflow of $881 million to a net outflow of $1.132 billion. As a result of the wealth flow reversal New Jersey lost a total of $2 billion in the xpected giving or in charitable capacity.

Anonymous said...

Where are our wealthy moving? Hopefully, to states that won't tax their moats. Its all about Jersey Love and Light, People!

Anonymous said...

take your money out of the stock market. Deflation is coming and it exactly what we need.

Just think about it. What are Americans in need of most? Houses? Stocks? jewelery (aka gold and silver)? No! What people are in need of is US dollars. People are out of work, people have lost equity in their houses, their stocks, and the states and fed gov't is broke. No, The demand for US dollars is great and the US dollar right now is very under valued.

Get out of Stocks, and don't buy a house! Put your assets in US dollars! You will be able to get much more for your money in six months!

Anonymous said...

Where are you proposing that the rich and the corporations, who benefit the most from our system in general and from New Jersey's infrastructure, educated workforce, etc., should be paying their fair share? Nowhere. You want us to join a race to the bottom; not me. You've clearly become a right-wing ideologue. I thought you were an independent; you'll never get my vote again, you fraud.