Billionaires in Space: What It Says About Our Tax System

As I write this in July of 2021, Amazon founder and billionaire Jeff Bezos has just returned from his 11-minute joy ride to the edge of space, just nine days after fellow billionaire Richard Branson did the same on his VSS Unity. (The stickler in me wants to point out that by one common definition of "space," Bezos is still the first and only billionaire to accomplish this feat, since Branson only went up about 80 kilometers, while Bezos hit 100.)

I have always been a space enthusiast. Attending the Space Symposium in 2012 was one of the biggest thrills of my life. And full disclosure: if I had $20-$30 million lying around the house, I wouldn't hesitate to spend it on a trip to space. I would go in a heartbeat.

So I don't begrudge these men their trips, and I salute the courage it took to complete them.

And, generally speaking, I am a free-market capitalist, and believe that your money is yours to do with as you please. 

But therein lies the rub: much of these billionaires' money isn't rightfully theirs. 

And that's how billionaires in space got me thinking about our tax system. 

In my system of ethics, your money is yours to do with as you please only after you have paid your debt to the society that enabled your wealth to begin with, and by debt I mean taxes, the "price...for civilized society," as Oliver Wendell Holmes called them. 

In the United States, the average worker pays an effective net average tax rate of 22.4% according to the OECD.  According to Forbes, meanwhile, Bezos pays a net effective rate of 0.98%. So Bezos has not paid his fair share to a country that has given him everything. To paraphrase Barack Obama, "Jeff didn't build this:" his company employs workers educated on our dime in our public schools; his trucks deliver goods that drive on roads built and maintained by the American taxpayer; he is protected by law enforcement funded by those drivers' taxes; his business enjoys a stable regulatory structure and transparent business environment thanks to the laws and protections of a system to which he contributes such a small share of his wealth.

This is normally where people on the Left start chanting slogans like “Tax the Rich!” and as a liberal, I agree with the sentiment. 

But the underlying problem here is not merely one of tax rates. The problem is the entire structure of our tax system and what we choose to tax: in short, we're taxing all the wrong things, because we’re stuck in a 19th-century mindset while struggling to compete in a globalized, 21st-century economy in which wealth can be shifted and hidden and protected from taxes all over the world.

I don't want to turn this into a history lesson on taxation, but the bottom line is this: we have inherited a federal tax system that primarily focuses on two things, labor and capital. Classic 19th-century thinking: labor v. the means of production. And this isn't just theoretical: because of this mindset, we make artificial distinctions between different types of income (income from labor v income from investments, etc.), and these distinctions lead to bad policy. 

And the challenges of our century are not those our ancestors faced two centuries ago: climate change, increasing inequality*, accelerating automation and artificial intelligence, the 'gig economy,' and a highly globalized marketplace with relatively few restrictions on the movement of capital, mean that we need to rethink how we tax and redistribute wealth.

Uh oh! There's the R word our conservative friends hate so much: redistribution. But it is far from being anti-capitalist; in fact, redistribution is essential to functional capitalism. When too much wealth gets too concentrated into too few hands, bubbles burst and catastrophe ensues for all. The last two peaks of such hoarded wealth coincided with disastrous economic collapses. 

Think of wealth as the lubricant that keeps the machinery of the economy moving: if it pools in one place and fails to reach others, sooner or later the whole machine grinds to a halt.

So how do we keep the gears moving in this new world? By focusing not on labor and capital but on negative externalities, and by choosing taxation that cannot be evaded by shifting and hiding resources all over the the globe.

For those who slept through their econ 101 class in college, a reminder: externalities are essentially the unintended byproducts of production, be they good or bad, that do not directly benefit or hurt the producer of the good or service associated with its production. 

Negative externalities are very common in the modern economy: the car manufacturer isn't in the business of producing or selling pollution, but that is a negative externality associated with their product, and it is one all of society must pay for. Yet in the production of that smog machine, we tax the labor of the worker who built it and the profit of the manufacturer. (Well, we try to tax the profit of the manufacturer, but we often fail. See above: capital is easily moved and concealed these days.)

What if we took an entirely different approach? What if we told the worker that her hours of labor are all tax-free and the manufacturer that they are free to keep every penny of profit, assuming all parties cover the cost of the negative impact their work and product have on the rest of us? And what if we did so in a way that the manufacturer could not avoid taxation, because the taxes were collected in the process of creating the end product?

And instead of taxing the return on capital for the shareholders, what if we instead imposed a simple yearly wealth tax on the net worth in excess of $4,400,000 per member per household (a threshold automatically increased by the lagging yearly CPI, to avoid having to revisit the cut-off periodically as inflation devalues that amount)?

Two simple forms of taxes for everyone: 1) pay a portion of your accumulated wealth to help fund the society that made your wealth possible and 2) pay the cost to cover your harm to society.

The first is straightforward enough, but current proposals do not go far enough to prevent the pooling and stagnation of wealth. If we exempted the first $4,400,000 per household member of net worth for all households, an annual wealth tax of 14.84% would raise about $4 trillion dollars per annum from the top 1% of households. More importantly, it would prevent so much wealth from sitting idly on the sidelines and pump it back through the economy. It would not raise a dime from anyone under the top 1% of households, and more than enough wealth would be exempted per household to prevent it from even knocking a household out of the top 1%. 

The second comes down to just two areas of negative externalities associated with consumption: we stop taxing all labor (work is supposed to be GOOD, right, so why punish it?) and focus on consumption's principal negative externalities:

1) Pollution and water waste. $3 trillion a year could be raised from simply making all of us pay for the pollution we create and the water we use. Two trillion dollars is the estimated current cost of climate change to our economy, and we are also depleting our supply of freshwater sources at an unsustainable rate. 

So let's just agree that if you pollute and use water (both of which we all do), you pay. And keep it simple and impossible to evade: 1) $4.83 a gallon tax on all diesel, ethanol, kerosene, and gasoline production; 2) a $0.468 federal tax on every kilowatt hour of electricity produced by non-renewable means (set to automatically increase to account for declining use of non-renewables); and 3) a federal tax of $.00825 on every gallon of water used (by both residents and industry).

Now, if you know anything about power and water consumption in the US, you might be losing your mind right now. And if you don't, let me help set your hair on fire: an average household would spend over a thousand dollars a month on energy, fuel, and water, not including the indirect cost of higher prices of goods and services tied to higher fuel prices, about a threefold increase. But households can control their energy and water use and thus their tax rate, and keep in mind that in this world, there is no income tax at all, because we aren't taxing labor anymore. 

Still, poorer households would struggle, so I would propose a straightforward energy/fuel/water subsidy averaging** $462 per member per household per month to the lowest quintile of earners, $303 for the second-lowest, $145 for the middle quintile, and $70 for the top two quintiles (all amounts adjusted by the CPI every year automatically). This means a net (after subsidy) of about $1.28 trillion would be collected. And since recipients could spend this money on anything, they could keep more of it by conserving energy, so there is a strong incentive for everyone to think about energy consumption.

2) Preventable healthcare costs. Most of the money we spend on healthcare is a reaction to illnesses caused by the use of substances that destroy our health. If you cut through all the noise and outliers, these substances are primarily saturated fat, sugar, tobacco, and alcohol. I am not suggesting we outlaw any of these. I believe in freedom of choice. But I am suggesting that we should all pay our fair share if we contribute to higher healthcare costs by using them. 

Isn't taking responsibility for our actions supposed to be a trait all Americans embrace? Every cigarette consumed in the US generates an annual cost of about $1.20 in healthcare costs. Should non-smokers pay for all that? Every dollar spent on alcohol generates about $0.704 in healthcare and other costs associated with drinking. Should non-drinkers pay for all that? Obesity and diabetes cost us trillions. Should healthy eaters pay for all that? A federal tax of $12.00 per pack of cigarettes produced, a $38.38 federal tax per equivalent of one liter of pure alcohol production, and a $8.28 federal tax on every kilogram of ingredients classified as 'added sugars' or 'saturated fat' by the FDA would shift more of the burden to those who choose to use these products. 

It's not about controlling people's choices, but about making sure we all accept responsibility for our choices and compensate society for the damage our choices inflict. 

In short, it's all about personal responsibility.

After using the same formula above to create a food subsidy to offset higher grocery costs ($462 per member per household per month for the lowest quintile of households by earnings, $303 for the second, $145 for the middle, and $70 for the top two quintiles), these taxes would net approximately $560 billion a year for the federal government. And households would determine their own tax rates through their eating and other consumption habits.  

Annual wealth tax, energy/water tax, and consumption tax. With just three sources of federal tax collection (not including usage, application, leasing and other fees the government charges us for particular services), we have eliminated all income tax and completely ended the game of cat and mouse we constantly play to get corporations to pay their fair share.

And just think about how much more transparent and simple this system is: no deductions, no tax havens, no tax credits, no shady accounting. The vast majority of corporations would not even have to file taxes! Why? Because in order to capture the tax revenue in a way that neither corporations nor consumers can avoid taxes, we would choose only a few strategic points in the supply chain to collect it. 

For all the pollution taxes, we would charge those only to the energy companies who produce the fuels and electricity supply. For any fuels/energy imported, we would collect the tax from the US importers or distributors. They in turn just pass along the costs through the rest of the supply chain. The Treasury has no need to track it from that point because the tax has been paid and we don't want to double tax. And water taxes are simple, since the tax would be applied to all metered water usage in the US, making the tax easy to calculate and collect.

For the food, alcohol, and tobacco taxes, the taxes would be collected from the distributors. Why not the manufacturers? Simple: all these products can and often are manufactured overseas, and one of the major goals of this system is to stop having to chase money all over the globe. But regardless of where, say, a bottle of wine is produced, it needs a distributor in the US to get it to our consumers. So we collect the tax there. Manufacturers would only be charged in cases where they themselves handle distribution for their products.      

Suddenly, offshoring corporations and setting up foreign tax shelters and all the other dodges lose all value overnight. Why? Because we aren't taxing profits anymore.

And did you notice something else that happened in those numbers above? We completely eliminated all welfare and food assistance programs in our federal budget in favor of direct transfers and a modified system of universal basic income. No more food stamps, no more unemployment benefits (since your monthly payment isn't tied to your employment anyway), no other transfers of any kind. Which makes the whole system easier and more transparent. And since it involves payments to all households, no one can say they're being left out.*** The only other government-run income program would be Social Security, which would remain in place as-is (and become sustainable by removing the contribution cap).  

What else got simplified? Regulation. For example, wasting energy is no longer economically practical at these levels, so who needs greenhouse gas regulations? All manufacturers will be tripping over themselves in a desperate dash to become as energy-efficient as humanly possible in order to remain competitive. We wouldn't need tax credits for solar panels or rules about emissions for cars: a marketplace operating in this tax environment would immediately create all the incentives we need to solve these problems.

We have also created enough federal revenue for offering Medicare to all uninsured Americans and universal TK/K education and two years of free community college or trade school for all Americans. By adding in that elimination of the Social Security contribution cut-off, we also guarantee our retirement system's solvency for decades to come.   

Of course, all these NETs (Negative Externality Taxes) would immediately start changing patterns of consumption**** throughout the economy, so the rates would have to be revisited frequently until the system stabilized. 

Better yet, we could implement a system of DTRs (Dynamic Tax Rates) that automatically reset tax rates every year based on new trailing year data. For example, we could set a target of four trillion 2021 dollars, automatically adjusted by the CPI every year, as our goal to collect from top 1% of households by net worth, automatically adjusting exemptions and thresholds to meet that goal. And pollution, water, and consumption taxes should be automatically recalculated each year based on the updated cost estimates of the associated negative externalities, total usage, revenue goals, etc., as long as transparent formulas are used to arrive at the numbers.

Imagine a world in which, 30 years from now, we have to explain to college students what 'tax shelters' and 'tax loopholes' and 'tax deductions' were, because they are no longer used to avoid responsibility.

Imagine a world where corporations are powerless to hide their wealth from the society that makes them rich, and they actually thank us for that, because we've simplified their tax structure to such a degree that most do not even file returns, and they save billions of dollars in accounting and administrative costs.

This is the tax structure for the 21st century. It's time to create an economy that works for every American and that prepares us for the challenges of a new reality. So let's stop punishing people for working and stop playing an endless game of global cat-and-mouse with billionaires and create a simple, effective tax system that moves us forward into a brighter and more sustainable future.

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Footnotes:

*Obviously the 19th and 20th centuries were also marked by extreme inequality, but the trend was towards greater wealth being accumulated by the working classes, even in the face of extraordinary personal fortunes starting in the Gilded Age. That trend ended two generations ago and the working classes have stagnated ever since.

**I say "averaging" in these cases for each quintile, because you want a smooth progression at a much more granular level than quintiles to avoid steep cut-offs that can create disincentives to work. We don't want scenarios where, for example, someone turns down a job because it would mean a steep and sudden reduction in her monthly subsidy. And to ensure no one lives in abject poverty, the lowest 1% of income earners would get a total combined monthly subsidy of $1073.33 per month (in 2021 dollars).

***This is a lesson I learned when studying Scandinavian politics as an undergrad: by giving at least some level of almost all benefits to all classes, regardless of their need, you co-opt class resentment and division. 

****Not to mention wealth management. We would need to clearly define what constitutes taxable net worth. As one of the few countries on Earth to tax its citizens based on their citizenship versus place of residency, inevitably more citizens will choose to renounce their citizenship if they are sufficiently adamant about evading taxation. We cannot stop that and shouldn't try. Let them leave....and deny them entry visas/green cards.

The Capitalist Case for Government

Libertarians are an interesting lot. They espouse the idea that almost any government is bad government, that the role of the state should be limited to national defense and a select few other tasks. To the extent they are talking about civil liberties, I tend to agree with them: I see no reason for any Leviathan to tell me whom to marry, what drugs I am permitted to ingest, what I can or can’t say, what a woman chooses to do with her body, etc.

But when it comes to what the government should do, what role it should play in the economy and infrastructure, I become confused. As you delve deeper into libertarian beliefs (and on this subject they are joined by right-wing Republican beliefs), you soon learn that they are rooted in a deep faith in capitalism and the wisdom of the markets, in the benevolent guidance of the ‘invisible hand’. But the idea that the state has no role to play in the economy is in fact quite anti-capitalist because it ignores a fundamental underpinning of capitalism, something so basic that it is really part of the definition of capitalism: comparative advantage.

The concept of comparative advantage was first described by the father of economics himself, Adam Smith. I’ll let Mr. Smith sum it up in his own words: "If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage." Of course, it doesn’t have to be a foreign country: it can be any entity that has an advantage over you in how efficiently or cheaply it produces a good or service. This isn’t just a principle or an abstract idea: it’s a mathematically provable fact. If you take two goods (or services) and I produce one well and you produce another well, protectionism or any other means of excluding you from production or market participation makes no sense as we are both materially better off if we trade. In fact, it goes even further: even if I am better at both of these things than you are, we are still both materially better off if I perform the task where my skill most exceeds yours and you perform the other.

So what does all this have to do with why libertarians, and right-wing Republicans who claim to be capitalists, shouldn’t object to the many things modern governments do? It’s because with quite a lot of the tasks required to survive and thrive in modern life, governments enjoy a distinct comparative advantage over individuals and even corporations and other organizations. Let’s take safety inspections as an example. A strict libertarian says that safety of the food supply should be left to producers, because it is in their best interest not to poison their customers, who, if so poisoned, would punish them by not buying their products.* A single, centralized governmental food safety organization enjoys a distinct comparative advantage over private industry here, and certainly over individuals. The collective cost of all Americans being responsible for their own food safety testing is ridiculously higher than what a single agency would cost to perform this task for us all. Even when compared to industry doing the testing (assuming we were foolish enough to trust them to do so), government still enjoys the cost advantage through economies of scale and centralization that help avoid redundant costs and resources. So why not be good capitalists and pay them to do it through our taxes?

The same principle applies to a vast array of goods and services. Health insurance is another, much as American Republicans and libertarians deny it. The verifiable fact is that programs like Medicare and Medicaid have far less costly overhead and operating expenses than do private insurance companies, who must pay for things like marketing and who of course must make a profit. At the other end of the spectrum is something like manufacturing, a task government is quite ill-suited to perform because, due to elasticity of demand, competition is key to (and effective at) driving efficiency and innovation, and a government take-over of such a task would by definition eliminate such competition. And therein lies one of the keys to deciding what government should and shouldn’t do: price elasticity of demand. That’s just a fancy way of saying that people will demand something like healthcare service at roughly the same level regardless of price (so it is quite inelastic). You don’t say, ‘no thanks, I’ll just leave that arm broken or let that cancer grow because the price is too high’ the way you would decide to walk or take the bus if car prices went up too much. That’s why it does make sense for healthcare insurance to be a government task while car manufacturing is best left to the private sector: prices for cars are quite elastic since people have many options, thus ensuring that there will be fierce competition among makers to innovate and keep costs low through efficiency as otherwise they lose business either to competitors or to alternative means of transportation. The list of examples could go on and on: roads, emergency services, schools on the one side; manufactured goods and value-added professional services on the other side.

So if our libertarian and conservative friends want to be good little capitalists, let them prove their understanding of capitalism by applying a reasoned, rational test - versus an emotional, irrational and ideological one - when deciding what the government should and shouldn't do. If government enjoys a comparative advantage, and especially if the good or service in question suffers from highly inelastic demand, then let them do it and pay them a fair price (through reasonable taxation) to do so; else, leave it to the private sector.

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*Let’s put aside for the moment the absurdity of allowing people to die in order to allow the market to adjust itself. Let’s also put aside the fact that poisoning with chemicals and impurities can take years if not decades, thus leaving companies with a profit motive to continue poisoning in the short to medium term with no fear of retribution from the marketplace during the lifetime of current management.

Unexpected Things from the Left

People whose political leanings are obvious, tend to be equally obvious in their proclamations. Republicans talk about tax cuts, deregulation, God and the flag. Liberals like me talk about regulation, fair taxation, effective government programs, freedom of speech, etc. So every once in a while I think it's a good idea for people from one side of the aisle to talk about ideas they like from the other side. Here are a few of mine.

Corporate taxation. Liberals love the idea of taxing corporations, because many on the left see it as some sort of punishment to inflict on institutions we see as inherently evil. I couldn't disagree more. First of all, corporations aren't evil: corporations are simply abstract legal entities devoid of any human qualities, and as such, they are incapable of evil. The humans who run them, on the other hand ARE capable of evil, but they are not directly impacted by how much or little their corporations are taxed, as evidenced by the out-sized pay-packets they receive regardless of corporate performance. Where corporations excel, however, is creating jobs. So why do we want to tax them at all? Every dollar they keep is a dollar that can go towards job creation, while every dollar that goes to the wealthiest people who invest in them, is a dollar towards idle capital that does little for the country. This is what Republicans like Eisenhower knew, which is why the marginal tax rates on personal income were so high. So, leave corporations alone and raise the marginal tax rate on personal incomes. In other words, tax the hell out of the people behind the corporations, but leave the real job creators, the corporations themselves, alone.

Foreign policy: Contrary to expectations, many (most?) liberals are not anti-war; just anti-stupid-war. This is clearly seen in the way many of my fellow liberals and I distinguish between the Iraq and Afghanistan wars: we opposed the former because the intelligence was flaky at best and anyway Saddam wasn't involved with 9/11; we supported the latter because the Taliban proved themselves to be an actual threat to the US and as such were fair game.

Illegal immigration: I part company with many of my fellow liberals on this issue. I have nothing against immigrants and certainly nothing against the many ethnic minorities who make up the immigrant population. I think it's foolish and hypocritical of anyone of non-Native American descent to oppose immigration, since such people wouldn't be here without it. But immigration can't be a free-for-all and turning a blind eye to illegal immigration isn't fair to the people who wait patiently to come to this country legally. There's also the question of rule of law: we take our strong institutions and rule of law for granted here, but there's nothing inevitable about them and they can be weakened over time if as a country we routinely allow large groups of people to ignore laws just so we can either assuage our liberal guilt (on the left) or pander to business's need for cheap labor (on the right). Soon we will start to flout other laws as expediency demands it. Soon thereafter, corruption overtakes the system and the country we love is gone, destroyed not at the hands of the immigrants, but at the hands of the citizens who neglected rule of law.

I am in favor of something pretty shocking: taxing the poor and giving to the rich. OK, it's not actually as bombastic as it sounds. I am actually in favor of equalizing wealth disparities through greater net redistribution towards the poor. But one thing I learned when living in Norway is that for such equalizing policy to work, all members of society have to be seen as contributing, just as all must benefit. If only one segment of the population contributes (those making over a certain amount) while it is only those below them economically who benefit, resentment and bitter division are inevitable. We see this all too vividly in our current political and social discourse. The poor resent the rich and the rich resent what they see as subsidizing the poor, who pay no net income tax. So bring everyone into both the giving and receiving. Everyone who earns anything, even one penny, should have to pay some of that in tax, however small the amount may be. In this way they have the self-respect of knowing they are contributors and the wealthy can't claim that only they are giving. On the other side of the economic spectrum, we should oppose attempts to introduce means-testing for Social Security. Do the rich NEED that extra money? No. But does society need all contributors to be beneficiaries to maintain the social contract? Absolutely. So by all means cap Social Security, but don't eliminate it for the rich, or we will suffer even more division. Having said that, though, this also justifies removing the income contribution cap: the wealthy should have to pay their percentage of Social Security contributions on ALL income, with no limit.

Simple Math

A lot of people are talking about Herman Cain's elegantly simple '9-9-9' plan. For the uninitiated, '9-9-9' refers to an easy, straightforward taxation plan to replace the current, extremely complex US tax code, with a flat 9% tax on corporate earnings, personal income and sales. Republicans love it. And well they should: it would constitute a huge shift in the tax burden from their constituency (the rich) to everyone else (the other 90% of America). When asked about this fact on NPR today, Cain dismissed such questions as 'playing the class warfare card'. How is math playing any kind of card? If you lower the tax rate on the wealthiest Americans and partially fund that with a sales tax, that is a huge tax cut for the rich and a huge tax hike for everyone else. Why? Because everyone else has to spend a far greater share of their income on everyday needs that are (wait for it)...subject to the new sales tax. If you are wealthy, only a small portion of your income goes to things like food, shelter, clothing, dining, etc., so a sales tax doesn't hurt you as much. Most of your money goes into investments, real estate, savings, etc. And if you have a taste for something really expensive and want to duck the 9% sales tax, you could always get it overseas.

What frustrates me so much is that Americans have such short memories. Steve Forbes and the late Jack Kemp were always droning on about a flat income tax in the 1990s. It was the whole basis for Forbes's failed bid for the Republican presidential nomination in 1996, and Kemp picked up the banner soon thereafter. A scant 15 years later, we all act like this is some radical new idea and have completely forgotten why we rejected it to begin with. And it makes even less sense today, with the middle class squeezed even harder and poverty on the rise. The last thing we need in a country that is already seething with mass protests over inequality, is a mechanism to transfer even more wealth from the lower 90% to the upper 10%.

I concede our current personal income tax code is overly complex and in need of reform. And I have said before that we'd be better off completely getting rid of corporate taxes. But 9-9-9 is not the answer. Its a recipe for an even more unequal America.

The Case of the Disappearing Money

If Republicans, conservatives and many Americans of any political stripe are to be believed, the single greatest and most urgent mystery in modern times is this: where is all the money disappearing to?! If we believe them, every dime you pay in taxes, every penny that goes into a government job or contract, every nickel paid to fund anything done by the government, simply vanishes. That's why, by their reasoning, taxes should be as low as possible: every dollar not paid in taxes goes to the economy, while every dollar paid to the government simply vanishes into thin air, never to be seen again.

OK, they admit, the money doesn't disappear, but it isn't used as efficiently by the big, bad ol' government as it could be used by the Glorious and Patriotic, Wonderful PRIVATE SECTOR! (Cue marching band and fireworks! Serve the apple pie!) And everyone - and I do mean almost everyone, including most Democrats in this country - buys into this, to the point that it is simply a given in our national dialogue. President Obama, for example, takes it as the gospel truth that tax cuts=more prosperity.

And as we saw just this past week, this Mystery of the Disappearing Money also applies to the costs of conforming to regulations. President Obama did what he always does these days and caved to Republicans by withdrawing his administration's plan to tighten smog regulations because it would 'cost' tens of billions of dollars at a time when the economy needs the money to create jobs. So he has implicitly accepted that money spent on these measures just turns to dust and blows away.

Just one small problem with this reasoning: it makes no sense whatsoever and is not supported by facts or reality. (Other than that, though, it's perfectly reasonable.) Let's look at the cost of conforming to regulations that improve air quality, for example. Let's say it is the worst-case scenario and it's tens of billions of dollars. Do those tens of billions of dollars simply go into a giant paper-shredder? No, they go into contracts with other companies to implement particulate- and pollution-reduction measures, and those contracts create new jobs. They go into the purchase of new equipment to reduce pollution and waste, again creating jobs and making the polluters more efficient to boot (which has long-term economic benefits of its own). And on the savings side, the effects of lower levels of smog redirect billions away from healthcare costs and into sectors where the same money can create more new jobs.

And what about all that 'wasteful' government spending? It's certainly true that governments do have a talent for inefficiency and waste, as all large organizations do; but it's by no means true that the government is always worse than the private sector, and in many cases it is considerably better. For example, Medicare actually delivers healthcare at a more efficient rate than do private insurers. And as we have just seen very recently, when you compare the performance of government-run foreign aid, reconstruction and military support services and infrastructure to such programs carried out by private contractors, turns out big, bad ol' Uncle Sam is far more cost-effective and efficient than the private sector, where not only costs are higher but corruption and waste are rampant.

And one must distinguish between government spending and government investment. The former is expenditure on a short-term need that while important to meet, may not lead to any positive return down the road. But government investment is money spent by the government to ensure long-term needs - ones that can not be met by the private sector - are met in order to support the economy and society of our country. Those investments normally have positive returns on investment, returns that can and should be measured and made public to set them apart from mere 'spending'. Take roads and other infrastructure projects. The private sector is simply never going to step up and say, 'hey, let's pay billions of dollars to improve roads, rebuild bridges and replace our rotting, dangerous sewage, drainage and water management systems in this country.' But without that investment, the private sector will lose more and more money over the coming years due to everything from supply chain disruptions caused by poor roads to closures caused by preventable flooding and water-supply interruptions. Addressing those issues will save billions and create a lot of jobs in the process, while delaying them does us no favors anyway: a repair that might take $5,000 today may cost 2-3 times that much if we wait too long.

But wouldn’t raising taxes to balance the budget and repair our embarrassingly-poor infrastructure just make the wealthiest Americans scared to invest? After all, we keep hearing that trillions of dollars in cash are sitting on the sidelines due to investor skittishness. Republicans point to this huge cache and claim that its owners are just chomping at the bit to invest it, but alas, with so many regulations and taxes, what’s a billionaire to do? What utter and complete hogwash. These claims do not bear up under even modest scrutiny. In fact, the existence of all that sidelined money is an argument in favor of taking the opposite approach favored by Republicans: the wealthiest 5% of Americans, the ones who are sitting on these trillions, have absolutely no motivation whatsoever to invest it in jobs, even if conditions were ideal, so why keep their taxes low and allow them to accumulate even more money just to see it sidelined, too? With such vast wealth concentrated into so few hands, those people no longer need to invest to secure their financial futures. At some point, it is simply safer to live on that accumulated wealth, especially when the economy is uncertain. In short, they have no motivation to create jobs and add value for the economy. But if we taxed those wealthiest Americans and invested that money in the economy by funding things like sorely-needed infrastructure improvements, we could force that money off the sidelines and push it into the hands of the lower 95%, who simply have no choice but to spend and invest it, since they have unmet needs and must still work hard and invest to secure their futures.

So, we want to create millions of new jobs and get this country moving again? Then let’s do what past Republican and Democratic presidents alike have known to be the sensible thing: return to a tax policy that discourages the accumulation of idle capital and that uses a high marginal personal tax rate to keep funds flowing through the system. Use those high marginal tax rates on the wealthiest to balance the budget, cut corporate taxes and rebuild this country. Then step back and watch our America get back to work.

The Debt Deal: Three days old and already a failure....so let's fix it

Well, we got a deal. And what a deal it was. No new revenue, nothing to create (and a lot to kill) jobs, no reform of entitlements, no long-term solutions to the underlying debt issues. In short, the perfect Republican deal. Obama caved yet again. And three days later, it has already failed: S&P is cutting our rating anyway, claiming we still don't have our debt act together.

So why did we fail? It's because we accepted a false premise. Ever since Obama caved last year on Bush tax cuts for the wealthy – despite the fact that a huge majority of Americans supported his position that the wealthy shouldn’t get more tax breaks – the left has essentially ceded the point that lower taxes=more growth. This idea, which became popular under Reagan, persists to this day as the gospel truth. There's only one small little problem: it's never been supported by facts. But it is so appealing on an intuitive level that few people question it. It just makes sense: government takes less, people spend and invest more, more jobs are created. And if it weren't for the pesky little fact that there is no evidence to support this thesis (and plenty to refute it), I'd agree with it. But if you stop for a moment and give it further thought (something inconvenient in a world of sound-bites, I know), it really doesn't make all that much sense. Consider the reasoning more closely: if I raise taxes and leverage them to create a more redistributive system, lower, middle and upper-middle families get more, the wealthiest get less. Now consider what happens when I give an extra dollar to a wealthy family: they don't need this money to pay bills or even buy new things; their material needs are already met. So they can just put it aside and keep it on the side lines (along with the trillions in wealth already sidelined in this country). But a family lower down the scale will run out and spend it on all the things they need and/or want.

Ah, but the Republicans counter, it's the wealthy who create jobs! It will trickle down. Well, except they don't. Corporations create jobs; the wealthy just benefit from the profits of those corporations through their investments. So it's corporations we should stop taxing altogether and the wealthy we should tax more, to the degree necessary to balance the budget and give more to the lower classes who will actually go out and spend that money to create jobs. In short, it's the lower through upper-middle classes (through their spending) and the corporations (driven by that demand from said spending) who are creating jobs in this country, while the wealthiest simply reap the benefits. So why is it Republicans want to give the most to this class that needs the least and contributes the least? Because, as George Bush said in a rare moment of frankness, that's their base.

If Obama were miraculously to grow a spine, he should propose this to save our credit rating: 1) Eliminate the corporate tax entirely (leaving just the payroll tax). 2) Raise marginal income tax rates on all households whose annual income from all sources is greater than $200,000 (and include an automatic inflation index) so that it starts where it is now for $200,000 and ramps up slowly such that at the highest end of the margin, the rates are up to 75%. (Don’t panic! That’s the marginal rate, the rate you pay only on that part of the income that falls into that bracket, not on all your income once you enter that bracket.) Make the corresponding brackets for dividends and capital gains increase at the same brackets, but make them slightly lower, in order to encourage investment. 3) Raise the Social Security and Medicare retirement age to 70, with the change phased in over time, and introduce means-testing for families with net worth over $10 million (in 2011 dollars, pegged to CPI).

That would be sound fiscal policy and would not only eliminate the year-on-year deficits, but actually put us into a position to slowly eliminate the overall deficit. What's more, it would be pro-growth. In exchange for agreeing to this overhaul, Democrats could even agree to a balanced-budget amendment, assuming it contained responsible language to make exceptions under certain circumstances (e.g. war, certain economic conditions, etc.).