GETTING TO BALANCE

"Action is at bottom a swinging and flailing of the arms to regain one's balance and keep afloat." ~ Eric Hoffer

What actions can we take to get the Bottom 50% (or even up to 80%) of our citizens back afloat and to put our nation more in balance?

The dictionary defines balance as: a state in which various parts form a satisfying and harmonious whole and nothing is out of proportion or unduly emphasized at the expense of the rest. Sign me up for balance. It seems like a utopian goal, and totally divorced from what has been and still is happening in our political realm.

A Greek citizen was recently quoted as saying, "The politicians are playing games with the people." This applies to us as well. Our politicians are not telling us the truth about the current and future state of our economy – that due to too slow growth, our aging population and crony capitalism, soon we won't be able to afford the fiscal commitments we've promised ourselves and others. It's not just the politicians though; it's us as well who refuse to acknowledge (and accept) these eventualities. We seem all too content to keep treading in the river of denial. What we need is more balance, perspective and unselfish action.

Although it seems next to impossible now, what can we do to renew and regain balance? Could each side – the Distracted Democrats and Ranting Republicans –come in from the cold and somehow cast aside their narrow, petty vituperativeness and become harmonious enough to create economic policies designed to move the nation forward towards higher growth with more genuine opportunity for 100% of US citizens? Impossible? Hopefully not.

Here's my suggestion for how this could happen with the following 6 actionable steps.

1.      Each political party and its members agree to behave reasonably with each other. This represents a colossal change from current manners, I admit. Why would they change their negative behavior? Because we would have the nation's political leaders be required to meet with their young children under 12 years old (or their grandkids). The children, having purer hearts and minds than their parents/grandparents, would look them straight in the eye and demand the leaders (the dads/moms and grand-fathers/grand-mothers) pledge, promise and cross their hearts to start acting as responsible grown-ups, be nice to everyone and don't hold grudges or pick fights. In other words, stop throwing sand in the sandbox making life difficult for others, and start doing their jobs (making difficult decisions to serve the broad, long-term public interest). Am I being woefully naive that our politicians would lie to their own children or grandkids? I hope not. In this sense, our leaders need to be K-5 children-like humans with a natural, unadorned sense of fairness and cooperation. They immediately need to stop acting like feckless, self-righteous middle-school bullies. As re-emerged children, Congressional leaders and the President agree to be bound by the decisions made in the following 5 sets of activities. If they don't agree to be harmonious to each other and pass the 2012 New Balance Act (see below), they will receive the following "fiscal timeout": salaries of Congress members and the President will be immediately reduced by 6.4% (the same reduction that US median household income has fallen since 2007). In the future, these leaders' salaries will continue to be adjusted yearly by the change in median household income, not the cost of living.

2.      Both political parties each agree to provide numeric values for three macroeconomic objectives; (1) the US's nominal GDP growth rate for 2012Q4 (It should higher than this past quarter's 2.5% rate), (2) the overall unemployment rate for 2012Q4 (Hint: it should be lower than October's 9.0%), and (3) FY2013 federal deficit, as a percent of expected 2013Q4 GDP, (Hint: it should be no higher than the 8.6% level, now estimated by the Congressional Budget Office - CBO). A 5-person Panel of Expert Economists (PEEs) – 2 named by each party, 1 by the CBO – will "arbitrate" these GDP growth, unemployment and deficit numbers and will decide the numeric value of these 3 objectives within 2 weeks (after all these people are practicing, knowledgeable economists; they've been thinking about this for a long time).

3.      The PEEs decision about these 3 objectives will be submitted to a 12-member Jury of Citizens (JoCs), picked at random from people who voted in the 2008 Presidential election (with 3 members from each of the 4 Census regions and an equal over-all balance between registered Republicans, Democrats and Independents/Other parties), for their review. The JoCs will meet with the PEEs in either Winnemucca, NV or Weed, CA [Because they're way far away from Washington, DC, have cool names and (based on personal experience visiting and/or staying in each) are typical, small (less than 10,000 population) American cities where real folks live.]. The JoCs will have 1 week to prepare their review comments to the PEEs, the Congress, the President and the public.

4.      After receiving the JoCs review at the retreat's conclusion and within 1 week, the PEEs will provide their concluding decisions regarding their final assigned growth rate, unemployment rate and deficit objectives to the President, the Congressional leaders, both political parties, the JoCs and the public.

5.      Once these objectives have been specified, the PEEs will utilize the nonpartisan CBO's macroeconomic forecasting model to run a series of simulations assessing annual forecasts over the next 3 years for GDP, unemployment and deficit and related parameters. The PEEs will report within 2 weeks describing these detailed results. Their final report will be submitted to Congressional leaders, the President, both political parties, the JoCs and the public within 2 weeks.

6.      Within 2 weeks, the Congressional leaders from both parties will jointly submit for passage the 2012 New Balance Act, which presents economic policies to achieve the agreed-upon economic objectives consistent with more balanced growth.

I would hope Congress (with the President's active support) will include at least the following 9 initial actions within the 2012 New Balance Act. These actions will get the US moving in the "right direction" and will spread the pain sufficiently broadly so no germane interested groups are excluded from realizing that moving together towards balance means everyone must make changes and sacrifices.
1. The Bush income tax cuts will be ended; on Dec. 31,, 2011 (as now planned) for folks making more than $200,000, and on Dec. 31, 2012 for the rest of us. The social security (FICA) tax will apply to all earned income, not capped at $106,800 as it is now. The carried-interest loophole will be closed, effective Jan 1st, 2012. Other tax loophole closings are welcome, as long as income tax progressivity is strengthened.	2. Medicare/Medicaid and Social Security benefits-payments beginning in December 2012 will be reduced by 4% for all people earning more than $70,000, by 2% for people earning less than $70,000. Qualifying retirement age will be increased to 67. These entitlements will become fully means-tested in 2013. State and local governments will re-balance their under-funded pension and health-care programs (by reducing benefits, increasing employee contributions and raising the qualifying age), if they want to continue receiving federal funds for other programs.
3. Investment tax credits will be increased by 10% for firms who have 500 or less than employees and 5% for firms who have more than 500 employees, provided each firm increases its full-time work force by at least 3%.	4. The Dept of Defense budget will be reduced by 8% each year beginning in Oct 2012 for 3 years.
5. The Food Stamp program benefits will be increased by 5% for qualifying participants for up to 2 years.	6. Federal subsidies to the private sector (e.g., agriculture subsidies, energy company subsidies) will be cut 8%. Any other cuts in government spending (beyond DOD and subsidies) cited in the Act will require an 8% cut in Congress' operating costs (including staff salaries) and an 8% cut in the Office of the President's expenses (including staff salaries).
7. Payroll taxes for employees and independent contractors with incomes less than $70,000 will be cut by 4% for up to 2 years.	8. Home-owners with "underwater" mortgages will be allowed to reduce their outstanding principal by up to 25%.
9. All financial institutions with more than $500M in assets and/or have received government bailout funds (even if they've "paid" them off) will be required to increase personal and small business loans by 10% at non-usurious rates within 2 months, and will reduce yearly total bonuses and deferred compensation to no more than 2% of deposits for "small-ish" banks (less than $500M in assets) and 0.02% of deposits for larger banks.

After passage, the President will execute the Act into Law within 24 hours of receiving it.

Will passage of such an Act cause concern and upset? Certainly. Nevertheless, our fingers will be collectively crossed in hopes of a more balanced, productive, and growing future. Onward…