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Free Liberal: Coordinating towards higher values

Free Liberal

Coordinating towards higher values

How Obama could be the Greatest President Ever

Help make his changes matter

by Fred E. Foldvary

A crisis is an opportunity for revolutionary change. Obama could become the greatest president ever, and fulfill the hopes he inspired, by making radical changes. He could put the economy on track to prosperity, reorient American foreign policy towards harmony, and refresh the American spirit of liberty.

The government could end the recession within three months with “money to the people.” Congress would authorize the US Treasury to print thousand-dollar bills, and give every US resident six of them. That would be debt-free and would end the negative-feedback loop of higher unemployment creating ever less demand for goods, which then makes companies shut down and lay off workers. The recession creates economic lockjaw: banks fear to lend because companies are shutting down and workers are losing their jobs. Cash is the ultimate credit and the antidote to credit freeze. “Money to the people” is almost a free lunch, because the recession is causing deflation and fear of further price declines. Monetary expansion is bad medicine except in an economic depression with deflation, when it is a good tonic if given directly to the people, not to the risk-fearing banks.

For long-run prosperity, Obama should promote radical changes in taxation. Don’t tax the rich just because they have wealth. Instead, tax subsidies so that they are no longer subsidies. Polluters are subsidized if they do not pay the social cost of their emissions, so tax pollution. Landowners are subsidized from the increase in their rent and land value due to public works and civic services. Tax land value to eliminate this subsidy. A land value tax will make the economy more productive, as the land-value subsidy promotes inefficient uses of land and the excessive speculation that results in the boom-bust sequence we are suffering from now.

In foreign policy, Obama is confronted by the unsolved conflict over Palestine and the wars in Afghanistan and Iraq. Besides bringing home the US troops, Obama could promote a lasting democracy in Iraq by promoting an equal sharing of the oil profits, decentralized governance and voting, and protection for persecuted minorities. In Afghanistan, pay the farmers to grow alternatives to opium, and decentralize democracy to bring political power to the people.

Restore trade with Cuba. Stop promoting the war on drugs that is tearing Latin America apart with violence. Apologize for having overthrown the government of Iran in 1953. For the Arab-Israeli conflict, recognize an independent Palestinian state in which the Israeli settlers of the West Bank pay rent for the lands they hold. Most important, declare that American foreign policy will henceforth avoid interfering in the domestic affairs of other countries. Declare also that Americans are willing to talk to and negotiate with all adversaries.

Strengthen American freedom by promoting a constitutional liberty amendment: “Congress shall make no law restricting any peaceful and honest adult human action, not involving force or fraud, any state interest to the contrary notwithstanding.” A first step would to be to legalize medical marijuana.

Obama has said he would confront the growing under-funded liabilities such as for Medicare and Social Security. A greater government takeover of medical services would compound the problem. The reason folks cannot afford medical care is because the money to pay for it has been take from them in the first place. Obama should separate the poverty problem from the medical problem. Make medical payments tax deductible, to unlock insurance from employment. Reform the legal system to having the loser in medical civil lawsuits pay all the legal costs. Then allow workers to opt out of Medicare and provide their own medical care.

Obama could be truly great by getting welfare-state liberals to understand that state socialism cannot improve on the choice and productivity provided by a free market. Allow workers to switch from Social Security to individual accounts funded at first by US Treasury bonds. That would replace the current Ponzi scheme with accounts that finance retirement from the worker’s own wages.

The global economy will recover from the Crash of 2008, but the massive bailouts and greater debt will cause problems far into the future. Where will the money come from for the coming trillion-dollar deficits? If it comes from money creation, the result will be inflation much worse than during the 1970s, and a global flight from the US dollar.

There is a way out, but it requires the greatness of economic enlightenment. Establish sound money with free-market banking: stop the expansion of money by the Federal Reserve, and instead let banks issue private currency redeemable into Federal-Reserve-note money.

The US can reduce its trade deficit and borrowing from abroad with a radical tax shift that reduces the cost of exports, stops economic waste, and induces high economic growth. That is the tax shift described above. Stop taxing labor, goods, production, and investment. Instead, just remove all the subsidies, such as to pollution, to farmers, and to land holding.

Taxing land value and pollution, plus user fees, could provide sufficient revenue while eliminating the need to compensate people for denying them economic opportunity. That implies that there would be no more transfer payments: no more governmental payments for medical care and retirement. That cuts the budget in half while raising wages and reducing the cost of living.

These are the radical steps that could make Obama the greatest US president ever. If not, small change will be ineffective, hope will be lost, and America will continue on the path towards self-destruction. Can Americans make the revolutionary changes needed to avoid disaster? Obama has inspired many us with the answer. Yes we can! However pessimistic we feel, we can yet remain hopeful. That is the real audacity of hope.

This article first appeared in the Progress Report, www.progress.org. Reprinted with permission.

Dr. Fred Foldvary teaches economics at Santa Clara University and is the author of several books: The Soul of Liberty, Public Goods and Private Communities, and the Dictionary of Free-Market Economics.


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Comments

It's been a while since I've commented, but this piece provoked a few thoughts.

> The government could end the recession within
> three months with “money to the people.”
> Congress would authorize the US Treasury to
> print thousand-dollar bills, and give every US
> resident six of them. (etc.)

While I fear that this could potentially open up that intellectual Pandora's Box of just printing money because of the mistaken equivalence of money and wealth, in the short run it amounts to little more than giving back to the people (in a somewhat sloppy fashion) what was taken through inflation-fueled speculation. And I know I could use an extra $6000. :p I just hope that, were it implemented, it wouldn't be confused for a long term strategy in the "class war": moving the inflation machine away from The Wealthy and toward The People. (However, I am not against a rule saying that, given a just tax system, any surplus should be distributed to the people on a per-capita or per-household basis, which bears resemblance to "just give money", but is subtly different.)

> For long-run prosperity, Obama should promote
> radical changes in taxation. Don’t tax the rich
> just because they have wealth. Instead, tax
> subsidies so that they are no longer subsidies.
> Polluters are subsidized if they do not pay the
> social cost of their emissions, so tax
> pollution. Landowners are subsidized from the
> increase in their rent and land value due to
> public works and civic services. Tax land value
> to eliminate this subsidy. (etc.)

Absolutely no argument here.

> Obama could promote a lasting democracy in Iraq
> by promoting an equal sharing of the oil
> profits, decentralized governance and voting,
> and protection for persecuted minorities.

In general, I dislike the notion of taxing oil revenues as such. I prefer the idea of taxing landholding in general, and taking mineral deposits into account when figuring the amount to be taxed... in a fashion that accounts the value of a shaft or well already sunk as capital, not land. But I suppose taxing oil revenues is popular enough for a variety of reasons that it is a more politically expedient way to get a bit closer to the Geoist ideal.

> In Afghanistan, pay the farmers to grow
> alternatives to opium, and decentralize
> democracy to bring political power to the
> people.

I have to disagree with this. First off, I do not see the President as having the authority to decide the ultimate shape of the government in Afghanistan (though I do agree with the notion of promoting, in principle, decentralized government). As to paying farmers to grow alternatives? Why? As you say later on in your article:

> Stop promoting the war on drugs that is tearing
> Latin America apart with violence.

I'd say ending the War on Drugs would benefit Afghanis as well as Latin Americans, and in the short term, opium farming could serve as a wonderfully decentralized means of bringing capital into the country (provided the actual farmers are permitted to keep the revenues, rather than having them taken away either in taxation or unreturned rent). We want to stop US farm subsidies; why get Afghani farmers addicted to subsidies?

> Restore trade with Cuba.

Definitely.

> Apologize for having overthrown the government
> of Iran in 1953.

If Obama would do this, I would love him forever.

> For the Arab-Israeli conflict,
> recognize an independent Palestinian state in
> which the Israeli settlers of the West Bank pay
> rent for the lands they hold.

This is a wonderful idea which I've read before, but I have a feeling neither the Israelis nor the Palestinians would go for it in any appreciable numbers. For the Israelis occupying the land (and their sympathizers), I think that would be like being expected to pay rent for "their" land. For the Palestinians, it'd be like being forced to take a payoff while the thief gets to keep what he took... something which has a sentimental value as well as a practical one. (I understand it's not *actually* like this, since everybody lives on stolen land in one form or another. I simply think the educational groundwork hasn't even begun to be laid... though I suppose I could be wrong, knowing nothing about the intellectual culture in that land. Then again, I suppose my objections here go for EVERY possibility on this list, though Obama, if he actually accepted them, could go far in promoting them to a likely reluctant Congress.)

> Strengthen American freedom by promoting a
> constitutional liberty amendment: “Congress
> shall make no law restricting any peaceful and
> honest adult human action, not involving force
> or fraud, any state interest to the contrary
> notwithstanding.”

A mere parchment barrier. However, if taxes could be shifted from productivity to externalities and rent recovery, it could be given economic teeth. (And if George's predicted elimination of poverty manifested from tax changes, concomitant reduced fear of the Second Amendment could provide the necessary military teeth.)

> A first step would to be to legalize medical
> marijuana.

Even without the rest, this would be a good thing.

> Obama could be truly great by getting
> welfare-state liberals to understand that state
> socialism cannot improve on the choice and
> productivity provided by a free market.

I doubt he's the man to do this. I certainly haven't seen anything to indicate he has any background in economic policy beyond "take from one group, give to another." If I'm totally off base on this, let me know. I'd really like to believe Obama is potentially of the old/new sort of Liberalism we're promoting here.

> Allow workers to switch from Social Security to
> individual accounts funded at first by US
> Treasury bonds. That would replace the current
> Ponzi scheme with accounts that finance
> retirement from the worker’s own wages.

I want a third option here, the Ron Paul option: allow people to opt out of government managed retirement altogether, and make up the shortfall for those to whom promises are yet owed from the general fund.

> Make medical payments tax deductible, to unlock
> insurance from employment.

A good idea, given a tax system that continues to tax productivity. If your tax shift were implemented, this would be not only unnecessary, but possibly even counterproductive.

> Reform the legal system to having the loser in
> medical civil lawsuits pay all the legal costs.

Meh, this is a band-aid I am unenthusiastic about. The problem is wider than medicine alone: our tort structure in general encourages frivolous complaints in general. I just tried to express my thoughts on the root of the problem, but was unable to. My thinking on the subject is, as yet, unclear. But the wealth gap in general (that portion which is created by the division of society into rent payers and rent collectors, anyway) perverts every interaction between the great and the small. I believe that solving that problem would help in the area of torts, as well as other areas.

i'm pretty sure that Madelaine Albright DID apologize for 1953, btw.

# posted at by Robert Capozzi

A cursory search has brought nothing to light. The closest thing I found was a 1998 speech to the Asia Society, in which she used the words, "The exigencies of the Cold War also generated US policies and activities that were resented by many Iranians. In retrospect, it is possible to understand their reaction, but the Cold War is now over and it is time to put that period behind us", which is anything but an apology. If she did apologize, it didn't get much press... and such an apology must be very public for it to actually mean anything.

It would be acceptable, coming from the Secretary of State... but I honestly don't expect Hillary Clinton to do any such thing, or to be remotely credible in the event she did do so.


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