What the next President of the United States ought to do

Introduction
 
As I write this in March, 2016, this is the most "interesting" presidential race that I've witnessed. I'm not going to get into the candidates, or the political parties, mostly because both of the major political parties are corrupt, and because they tend to polarize our country. So this post will deal with the issues and not politics, thank God. 

No matter how you feel about the particular candidates, there is a hopeful sign during this election season. And that sign is that people are tired of politics as usual. Amen to that. Go USA.

That said, what would I like to see our next President focus on, in order to keep our country as the best country in the world? And further, what should the next President do to improve our country so that we can be a good model for all other countries? 

1) Allowing all parents to choose their children's school
 
This is really a state issue, but it's so important that I'm including it here. Certainly, the President can lead the charge to encourage the states to adopt school choice.
 
Currently, if you are well-to-do, you can send your child to whatever school you wish, public, private or parochial, if that school is willing to enroll your child. 

If you are not well off, you must send your child to the local public school, or possibly a public charter school. We've been trying for decades to improve public education, and everyone knows how that has gone. If you don't know, go see the documentary, Waiting for Superman.
 
The documentary shows the plight of the poor and how desperate they are to get into good schools. The writer suggests having more charter schools, which is fine. But the only sustainable answer is to have school choice for all parents, rich or poor. There is no doubt that it will eventually happen, so why not start doing it now? If we are going to subsidize education, then allow the parents the freedom to decide how their children are to be educated.
 
It's simple to do. Each state should take whatever it now spends on K-12 education. (In Texas it's about $10,000 per student per year). Then put this amount into an Educational Benefit Account for each child. The child's parents can then use this money to send their child to whatever public, private or parochial school that they feel will best suit their child. And they can change schools whenever they wish.
 
School's will crop up all over the place. Some will be bad and some will be good. But the bad ones will eventually go out of business, since parents will stop sending their children there. And that's what will lead to educational improvement in our country. Why? Because every system improves when people have a choice.

2) Pass a balanced-budget amendment
 
Year after year of budget deficits tells us that Congress cannot balance a budget. As of March, 2016, the national debt is $19 trillion. This is the same as $19 million million. This comes out to over $152,000 of national debt per family. Did you know that you had that debt on top of whatever personal debts you have? And you're paying the interest on it. 

It's time for a balanced-budget amendment that requires Congress to pass only balanced budgets. The amendment should have an exception that allows for Congress to vote to deficit spend for a given year is 2/3rds of both houses of Congress vote to do so. (This might be needed in times of war, or a large natural disaster). The amendment should allow 10 years for Congress to balance the budget.

3) Real health care reform
 
Medicare, Medicaid, and Veterans' health care are underfunded by over $60 trillion. And they don't provide health care for everyone, they don't remove the pre-existing condition problem that everyone hates, and they still tie much of health care with employment. Yet we spend about 16% of our Gross Domestic Product (GDP) on health care, more than most developed countries.
 
Here's a simple solution that provides health care to all Americans, would be completely funded, would eliminate the pre-existing condition problem, and would de-couple health care with employment. 

The solution is for the federal government to take 10% of Gross Domestic Product (GDP), about $1.8 trillion, and put an equal amount of this into a Health Care Account (HCA) for each American adult. This would be about $7300 per year per adult. About half of this would be used to buy a high-deductible health insurance policy, and the other half to pay for medical expenses incurred before the deductible kicks in (and in most years, it wouldn't).
 
Insurance companies that grant policies under this plan must agree to cover any children the adult might have.

This plan would also replace all other health care subsidies.

This amount would be pretty good coverage and would include, medical, dental, and vision care. The most expensive procedures, such as a heart transplant, wouldn't be covered because there must a limit to keep coverage affordable.
 
Everyone would be covered, everyone could still choose whatever doctor or hospital they wished, and we'd save money all at the same time.
 
4) Bring our troops home
 
It's hard to believe but we have more than 350,000 troops deployed overseas in over 150 countries. I want the US to always have the best military in the world, yet I see no reason to have troops deployed overseas unless we are at war. Iraq didn't attack us, and Afghanistan didn't attack us. Osama bin Laden and Al Qaeda did. And ISIS is attempting to do so. So the only troops we should have overseas right now would be those who go after those who are planning to attack us. And most of this can be done with our Special Forces and our intelligence apparatus, which have been especially effective since 9/11 in thwarting attacks against us.
 
What is currently going on in the Middle East is a terrible tragedy. But there are more than 400 million people in Arab League countries. They can get rid of ISIS and other terrorist groups if they truly desire to.
 
If we minded our own business, and stopped being policemen of the world, we'd need fewer troops, we'd have less hostility directed at us, and we could use some of the troops brought home to protect our borders and ports. I think we would actually have fewer attacks directed against us without troops stationed overseas.
 
And the US Navy still dominates the oceans. We can defend the US from attacks from just about anywhere in the world.
 
5) Transform Social Security into a sustainable retirement plan
 
Social Security was started by FDR in 1935 and the tax rate was 2%. It was meant to be a supplement to one's retirement income. Now the Social Security tax rate is 12.4%, and it is still only a supplement to one's income. And it's underfunded. Anyone saving 12.4% of their income should be able to retire on that alone. Instead, to retire gracefully, we need to have another retirement plan and save 10% in that. This is an incredible waste.
 
Transition to a system in which individuals are required to save 15% for their retirement. No more under-funding. And if I told you that most people would be millionaires when they retired, you wouldn't believe me, but it's true.  The transition might take decades, but the sooner we start, the better off we'll be.
 
Every month each of us would have much more money to spend because we wouldn't have to put money into both Social Security and another retirement plan.
 
6) Replace the income tax with a Natural Resource and Pollution tax
 
We currently waste between $200 - $600 billion per year just because there's an income tax. This is money spent on tax attorneys, tax accountants, tax software, etc., just to pay income taxes. Furthermore, there is no rational basis for a tax on income. If a person earns X amount of money, then that money is theirs and belongs to no one else.
 
On the other hand the natural resources of a country weren't created by anyone, so they can only be considered to belong to all of us. The best way to handle the natural resources is to allow individuals or companies who own them to pay a monthly tax on those resources that are not used up (mostly land) or to pay a one-time tax on resources that are used up, such as oil, gas, aluminum, and minerals.
 
This would eliminate the IRS and all the problems created by having an income tax, and replace it with a tax that would have many beneficial side effects, such as encouraging conservation in order to minimize taxes.
 
7) Start building nuclear reactors now
 
We need inexpensive, reliable energy to be prosperous. Inexpensive energy is one of the single most important items that help the poor get out of poverty, because inexpensive energy reduces the cost of everything. Currently, there is only one source of non-polluting, reliable energy that can provide a steady base load of energy for our country. And that is energy generated from nuclear power. President Obama is providing loan guarantees to investors who provide money to build nuclear reactors. The Nuclear Regulatory Commission has already approved two very good and very safe nuclear reactor designs. Congress just needs to remove any other remaining barriers to building them now.
 
In a decade or so, we'll have better battery-powered cars, and these can be charged with electricity generated by nuclear-powered plants. We'll then have most of of our energy be clean and safe. They also give off no CO2, and will make us independent of foreign oil.
 
If you're worried about radiation from them, don't be. In over 50 years, there has not been even a single death due to radiation in the United States as a result of commercial nuclear power plants.

If France can get, inexpensively, 75% of its electricity from nuclear power, so can we. And we'll be able to get the rest from solar, wind, and other non-polluting sources. 

Conclusion 

If our next President would do the above items, our country would once again be leading the way to making a better world for all.
 
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Tim Farage is a Senior Lecturer in the Computer Science Department at The University of Texas at Dallas. The views expressed here are his own. You are welcome to comment upon this blog entry and/or to contact him at tfarage@hotmail.com.
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Government Based Upon Natural Law - (Part 13) - Retirement and Social Security

The History and Future of Social Security

Social Security is a poorly planned system that is not economically sound, and is unfunded.  The current Social Security tax rate is 12.5% and this money is used to pay current retirees; thus none of the Social Security taxes paid by an individual are actually invested for that individual.  This is why it is considered unfunded.  Because of this and because of the aging population that is occurring all over the world, Social Security benefits are becoming an increasingly large inhibitor of economic growth, and are taking up a larger and larger share of federal spending. In 2009, it has been estimated that Social Security and Medicare are underfunded by around $50 trillion.  This means that if the benefits remain the same, and the FICA (Social Security and Medicare) tax rate remains the same, an additional $50 trillion would still be needed.  Any company that had such a retirement program would rightly be prosecuted.

To show how badly out-of-balance these programs have become, between 1966 and 2006, Medicare and Social Security grew from 16% of the federal budget to 40%. (Defense spending declined from 43% to 20% of the budget during that period.)  By 2050, spending on Social Security, Medicare, and Medicaid is estimated to take up the entire federal budget, if the budget were to remain the same proportion of Gross Domestic Product (GDP) as it is today.  (This does not even include the interest on the federal debt, which is increasing even more rapidly; it is projected to be three times the entire GDP by 2050.)  Obviously something will have to be done, and it will not be pretty.

Even worse, as of 2010 or so, people are paying more into Social Security than they, on average, will get out of it.  For instance, if a person turned 65 in 2010, they will have paid into Social Security about $588,000 and will only get $555,000 in benefits.  And these figures get worse every year.   Thus, people are getting a negative return on their 'investment'.

Most people are not aware that when Roosevelt and Congress started Social Security, the FICA tax rate was only 2%, and even then only those who earned over the median income paid into it.  Also, it was only intended to supplement one’s retirement.  Now, virtually everyone who works pays into Social Security at a rate of about 12% of income, and it still is only intended to supplement to one’s retirement.  This is truly pitiful and unbecoming of a great country. 

Retirement Planning

In a system based upon personal responsibility, individuals are responsible for their own retirement funds.  It would be wise to invest at least 10% of one’s income into a retirement plan.  I would recommend that children be taught in school the importance of saving for retirement from their very first paycheck.

To make the transition from our current system, we might require individuals to invest this money, although this would still slightly violate the premise of personal responsibility.

(As an aside, another 5% or so should be used to purchase long-term care insurance, and to purchase disability insurance as well.  Surprisingly often, many people will at some point become disabled, and/or need long-term care).

This 10% of one’s income would be invested in one of a number of government-approved investment companies.  Such companies would have to meet certain strict standards, as determined by the government.  These funds would be held in a segregated account in the individual’s name, so that such savings are immune from the solvency of an employer or the investment company.  This is similar to many retirement plans many States use for State employees.

To get an idea of how much money a person could have at retirement, let’s assume that the person works for 40 years, and has a starting salary of $36,000.  Let’s also assume that the person only gets a raise equal to the rate of inflation, so that they are essentially making $36,000 in today’s dollars for their entire working life.  This is a rather conservative assumption, since the median income of men who worked full time in the U.S. in 2007 was about $45,000.  The final assumption is that the entire amount is invested in a stock-index fund that mirrors that entire stock market.  Over any 40-year period since the modern stock market began in 1920, the stock market averaged a gain of at least 10% annually.

Whipping out my financial calculator, and investing $300 monthly (10% of the $3,000 monthly salary) for 40 years, earning 10% per year, gives almost $2 million in today’s dollars.  (The actual amount would be the value of $2 million of today’s dollars 40 years into the future, a much larger figure.)

Once you retire, you can safely take out 5% of this $2 million each year without reducing the principle, so this would give an income of $100,000 per year for the rest of your life!  And you would never have to worry about running out of money.  When you die, the $2 million could be willed to one’s spouse, children, charity, etc.

Imagine how much better this is than the current Social Security system, which takes over 12% of your income, and gives you about $25,000 per year for life at retirement.  This is what happens when government takes charge of your life.

Even better, we would no longer need to save additional money for retirement as we do now.  For instance, I work at the University of Texas at Dallas.  I pay 12.5% of my income (between me and my employer) into Social Security.  In addition, I am required to pay 15.5% into my retirement plan.  Under the plan I gave above, it would only cost 15% of one’s income (which includes long-term care and disability insurance as well as retirement).  That means I’d have an immediate additional 13% of income to spend.  Would you like a 13% raise?

Conclusion

We need to immediately implement a retirement program as described above.  At the same time, we need to phase out the fiscally irresponsible and damaging Social Security program.  But this needs to be done without harming those retired or near retirement.  This will be expensive to do, but will only get more expensive the longer we wait.  It is likely that the best way to make the transition is to require individuals to put 15% of their income into their own retirement/disability program, and yet still pay FICA taxes until almost everyone has their own well-funded retirement program.  This will take decades, but it took us decades to get to where we are now.  As usual, the piper must always be paid.

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Tim Farage is a Senior Lecturer in the Computer Science Department at The University of Texas at Dallas. You are welcome to comment upon this blog entry and/or to contact him at tfarage@hotmail.com.

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