OMB: Owner-Managed Business

Since the government's whole "recovery" plan is to restimulate the excessive spending, lending, and borrowing that caused the collapse in the first place, this indicates that the so-called recovery doesn't really exist. But on a longer-term basis, this is positive news, or at least it could be.

What is not clear is whether declining borrowing is due more to consumers switching from consumption to debt-reduction and saving versus banks deciding to reduce or restrict lending activities. Over the past year or two, a number of credit card holders, for example, found that their accounts were being cancelled--not just past-due accounts, either--which reduced the amount of credit that was available for them to utilize. If the reduction in lending is the primary driver of the reduction in borrowing, then the insanity of the past twenty years, going back at least to the time of the Clinton White House, will be repeated, with similar (but even more intense) results in the future.

Please, Mr. President, listen. You cannot build a sustainable economy on consuming all your income and borrowing to fund even more consumption. Back when political conservatives still had some principles, they tried to convince President Clinton of this. (When President Bush came in and conservatives blindly supported him even though he violated the very principles they stood for, they lost those principles.) The only way to have a sustainable and growing economy is to set things back on an even keel. My suggestions:

• Stop mollycoddling banks and other financial industries. The key to protecting Americans from the same sort of financial shenanigans that brought about the current recession is to make sure that banks and their executives face strong and quick financial penalties for dishonest or overly-risky acts. For financial corporations, this would be involuntary dissolution and bankruptcy. For the execs, this would be asset forfeitures, passport seizure, and getting one's picture on national television wearing a government-provided orange jumpsuits and jailhouse fraternity bracelets.


• Stop protecting large out-of-area corporations (LOOACs), whether banks, for-profit entities, non-profits, or advocacy groups. As groups of "natural persons", they should have few special rights as organizations. Instead, they should get most of their rights through the cooperative actions of their investors, employees, board members, managers, donors, and other "members". For example, there is no constitutional reason why a corporation (and that means any of the above-listed entities) should be able to lobby either Congress or the executive branch, because their members already have said power. If this had been in place, Ms. Clinton and Mr. Biden could not have been influenced to take away consumers' bankruptcy protections against abusive lenders.


• Loudly, publicly, and frequently, you need to make the case that buying products and services overseas means thirty year-olds living at home because they cannot get a decent-paying job. Start by requiring that all military and government purchases shall utilize domestic¹ labor, under locally-based management. This means that buying a new computer system will not be sending even more money to China, but instead into the pockets of American taxpayers.


• Seeing that small, locally-owned businesses (SLOBs) create the majority of new jobs in this country, fund a small business initiative that will help potential owner-managers to obtain the skills (training, education), finances, and contacts / contracts they need to get started. This would be similar to what the SBA is doing with their SBDCs, but on a larger scale.


• Restructure the tax system to make it simpler and easier to comply with.
  
  
  
  1. For a start, get rid of ALL special-interest deductions and credits, including the mortgage interest deduction, because these distort the market, complicate the tax code, and enable deceptive financial industry companies to push otherwise inferior products with "tax advantages".
  
  
  2. There are or were companies selling "tax loss" investments, so that buyers can use this loss to offset earnings from other activities. Bzzzt! Wrong answer. If you cannot reasonably expect a profit, taxpayers shouldn't subsidize your investments.
  
  
  3. The mortgage interest deduction is particularly odious, because it inadvertently steers people toward bad loans by making them less likely to quibble over terms like interest rates. (The reporter should know this or should be assigned to another beat... like fashion or celebrities.)
  
  
  4. This would include making sure that capital investments (buildings, computers, etc) are deducted over their realistic expected lifetimes rather than some out-of-thin-air term created via IRS rules. For a company buying standard Windows computers, for example, they are outdated in two years and nearly unusable by the fourth year.
  
  
  5. The home office deduction should consider how you would utilize the space if you were not running a business there. I realize that most such deductions would be disallowed under that standard, but we want the tax code to encourage people to make realistic business decisions, not make otherwise bad decisions for the sake of tax benefits.
  
  
  6. There should be three tax rates, and only three: the first $20,000 of income should be taxed at 0%. Income between $20,001 and $50,000 should be taxed at 20%. Income above $50,000 should be taxed at 35%. These rates assume zero deductions or special tax credits and a government that doesn't continue taxing its citizens to pay for the unsupervised and irresponsible investments of the financial industry.
  
  
  
  


• Work toward stopping the collecting federal taxes to give to state and local governments. They have their own taxing powers. Let them use their powers to raise enough funds for their needs. This includes schools: let each state figure out how to adequately fund its schools, without relying upon Uncle Sam's wallet to do so. This primarily affects two kinds of communities. The first is the one where they don't do any extra taxing, because everything they do is covered by federal transfers. They'll have to raise taxes to cover the costs of their communities' needs. The second kind of community has an already-high tax structure, and utilizes federal transfers to prevent their citizens from slashing their budgets. This kind of community will have to decide whether to chase its citizens away or thin out its workforce.

Incidentally, has anyone else noticed telemarketers claiming to represent some unit Bank of America have been making a lot of calls to residences lately? I believe these are scammers, because I am sure that no one at BoA is stupid enough to train the public to give private financial information to callers who may or may not be whom they claim to be. I recently spent several months working out of state and our office's phones got dozens of "important information for homeowners" recorded solicitations each day. Let me make it clear: you do not know who it is on the other end of an incoming call (caller identification is of little use with telemarketers) nor do you know whether they represent the company they tell you they represent. Therefore, you should never give any kind of financial or payment information to such callers.

¹ I would assume that we would use North America (USA, Canada, Mexico, the Caribbean, Greenland, and the Central American countries) as our "domestic" zone.