Bill Bonner: Make the dollar honest again
From Bill Bonner, Chairman, Bonner & Partners:
PORTLAW, IRELAND – Last night, we drove over to the harbor town of Dungarvan for dinner.
The Irish countryside was idyllic – with rolling hills, forests, and hayfields. Then, arriving at Dungarvan, we saw the Atlantic shining in the distance.
Down at the harbor, the tide was out. Boats lay in the mud on their sides, waiting for the water to set them straight again. The restaurants were full. The parking lots were at capacity. Everywhere, groups of diners chatted and laughed.
“Ireland seems to be booming,” we said to our companions.
“Yes, it’s come back from the edge. Property prices are rising again – especially in Dublin. Wages are going up. But this town is particularly boomy. It’s very picturesque.”
Rapists in the Woods
Yesterday, we laughed at House Speaker Paul Ryan’s suggestion that politicians are moving “full speed ahead” on “transformational” tax reform.
Transformational reform is what is needed; it ain’t what’s on the table.
This matters to us, partly for selfish reasons… and partly as disinterested observers with a sense of humor.
We would love to see real tax reform. We pay 50% of our income in state and federal taxes. We are one of the lambs the feds invite for dinner.
Here’s our proposal: Cut the tax rate to 10%. For everybody. Drop all the credits. Close all the loopholes.
Tax lawyers would be out of work… insiders would be appalled… the poor would raise a ruckus… and the economy would boom.
But neither Republicans nor Democrats are proposing it.
First, because the powers that be have all finagled tax breaks for themselves. Complex tax systems favor the insiders; they hide in the weeds like a rapist in the woods.
Congress controls the tax system… and the insiders control Congress.
Second, the Deep State needs the money. The whole idea of government is to give the few a way to exploit the many. The tax system is just one way they do it.
Third, voters don’t care about it. Currently, most of them don’t pay much in income taxes.
Population of Turnips
Our friend David Stockman, who served as President Reagan’s budget chief, explains why:
The income tax has been slashed so many times since 1981 that it’s no longer a broad based societal tax; it’s a kind of luxury tax on upper income salary earners and the small share of households which garner most of the capital income from dividends, interest payments and capital gains…
Three-fifths of income tax filers accounted for only one-twentieth of the income taxes paid.
In addition… more than 52 million or 35% of tax filers – mostly at the bottom and middle of the income ladder – didn’t owe a single dime of taxes after deductions, exemptions and credits.
There are 91 million people who earn an average of $14,600 a year. That is a population of turnips. The feds could squeeze them in a cider press; they wouldn’t get much blood.
And these low-income workers make up more than half the 148 million people who file tax returns. They are the voters.
Yesterday, we showed that Americans are poorer than we thought. Your editor is better off. You are probably better off. But most people are not. The averages distort the truth. Huge increases in wealth and incomes at the top make it look like we’re all better off.
Phony-baloney inflation calculations further hide the wounds inflicted on the typical person in Flyover America.
An average car cost $19,000 in 1997. Today, it is $33,000. But as we explained yesterday, the feds say the price is unchanged. That’s because they say today’s car is “technologically superior.” So you’re getting twice as much car for your money.
But tell that to the guy with $19,000 who needs to buy a new car! He can only swing the deal by going deeper into debt.
So his debt rises like the new buildings in London that house the lenders – fast and high.
As interest rates fell, the cost of carrying that debt fell, too. This made a big increase in debt possible. Now, he depends on more and more debt… and ultra-low rates… just to maintain his standard of living.
Our point today is that anything short of real major reform won’t help.
Fiddling… tinkering… trying to shift the burden from Blue to Red… wasting more on military cronies and less on civilian zombies… wasting time “investigating” – none of this is going to make much difference.
We need real transformational reforms.
And the problem is not taxes, not Russia, not ISIS… not Blue, not Red; the problem is money. The typical American has too little of it. The Deep State insiders have too much. And the money itself is a fraud.
You want real transformational reform?
You wanna see the economy boom? You wanna see the Deep State chased from Washington? You wanna see Wall Street put in its place and an honest republic restored?
Then cut taxes as outlined above.
But don’t stop there. Make the dollar honest again; link it to gold at today’s price.
Fire all Fed employees but one. His job is to stand at the “gold window” at the Treasury Department and exchange gold for dollars, at a fixed rate.
But wait… We’re just getting started. Fire the spooks, too. We don’t need 17 different agencies snooping on Americans; one is more than enough.
Bring the troops home. Also, ban budget deficits. The feds would have to live within their means. No exceptions. No debt.
And, oh yes… ban unconstitutional “regulations.” Congress is supposed to make the nation’s laws, not bureaucrats and lobbyists.
Cut congressional salaries to what a politician is really worth – about minimum wage. And prohibit any law that a congressman can’t explain, in detail, while standing on one leg.
All we ask is that you give us some warning before you do these things; we’ll make sure we get out of town.
To Dungarvan. Or Argentina. Because it will be like Dawn of the Dead in America. When the EZ money falls away, the cronies and zombies will rise up.
Crux note: As Bill mentioned, it would take dramatic change to rescue the country from the next economic crisis. Bill’s team recently sent a memo to the White House to warn POTUS of the looming threat. Now, they’ve released that memo to the public… Get all the details here.