How to fix the Economy

George Bush really, really, really wanted to attack Iraq.  Fortunately for him 9/11 gave him an excuse to ramp up the “war on terror” and go marching in, guns blazing.  The situation gave him the “reason” to do what he wanted to do anyway.

Democrats really, really, really like screwing around with the economy.  Fortunately for them, the meltdown gives them a good excuse to do what they’ve wanted to do all along.   And considering the history of such screwing around the result will be making the depression much longer and more painful than it should be, which will, of course, give them an excuse to screw around with it more. 

The US is like a family who, finding themselves deeply in debt, tries to correct the problem by borrowing their way to prosperity.   It won’t work.  It can’t work.  It can only make the problem worse. 

The cure for an indebted family is the same as the cure for the nation.  Reduce spending.  Sell off assets we can do without.  Find a way to increase income, but not one that will make the problem worse.  

We should start with the Department of Education.  It’s useless, it’s counterproductive, it’s 80 billion dollars a year, and if we eliminate it we’ll not only save the money, but improve the quality of education, something they have been unable to do. 

As the number of American farms dropped the Department of Agriculture grew.  And grew.  And grew.   We spend tens of billons of dollars paying farmers not to grow food.  We have thousands of stupid rules and regulations in place.  Recently the DoA prohibited  a small farm from advertising that all their beef was tested for mad cow, because big farms were afraid of the competition.  Does any of this make any sense?  Getting rid of most of the DoA (we could keep the meat inspectors) would save 90 billion a year and dramatically lower our food costs.  How’s that for a painless way to improve the economy? 

Spending on infrastructure is a good idea – we’ve got a lot of things that need fixing – but it is a repair bill, not an economic stimulus package.   Let’s not pretend otherwise. 

Obama talks about government creating jobs.   Just what we need, more government workers.  I’d like to offer a very simple alternative.  It wouldn’t require any government outlay.  It would result in a slightly reduced government income at first, but in the long term it would create so many jobs, real jobs, that the net effect would be many more people working and paying taxes than we have now. 

Small business are the best source of new job creation.  Sure, big businesses hire people too, but growing big business isn’t the answer.  The equations are simple: more new small businesses = more new, real jobs.  Lots of new small business = lots more new, real jobs.  If you want people to start new businesses, you need to increase their incentive.

Enterpenures not only take big risks, but face huge obstacles put in place by the government.  Every dollar of profit earned by the self-employed is not only subject to state and federal income tax, but also a 15% self-employment tax, which is their social security payment.   That doesn’t leave much for the person doing the work.  It makes it nearly impossible to save for retirement and makes it hard for them to grow their business to the point where they have to hire more people.   It is a huge disincentive to even staring your own business.

So here’s the simple, two point plan:

The first $25,000 earned by a small business owner is tax free.  No federal income tax, no self employment tax.  States would be encouraged to follow suit with state income tax.  Every dollar after that is taxed normally. 

Instead of paying a 15% SS tax, they can put half of it in their own 401k. 

That’s it.  No complex bail out, no iffy screwing around with the economy, no need to raise taxes.  Given these two simple incentives millions of people will start new businesses.  Many will fail, many will succeed and grow.   Those who grow will have to hire more people, who will be paying income tax at the regular rate. 

How about it, Obama?