A Twelve Step Program: Banish Debt and Deficits

To conqueror our addiction to debt and banish today’s deficits and economic doldrums join the "Friends of Adam" and pledge to take these 12 steps to grow the economy, cut expense and raise revenue.

Grow the economy:

1) At mortgagees’ option, reduce residential mortgages to current value and interest rates and award lenders any future equity growth up to the amount of the original loan minus owner's down and principal paymets.

We will languish in an economic slough of despond until we accept that those real estate values we never had have vanished for now.  Lenders' books are full of fictional balances which the ritual dance of foreclosure will not restore.  Their one hope of recouping something from a home under water is to take an equity stake and hope for the best.  Endless rounds of foreclosures offer no hope to those who need it and will only confirm lenders' losses.  And, if old values do return even partially, only mostly speculators will gain.

Meanwhile households need not break up or neighborhoods further decline. The housing resale market will quickly start working again once prices are realistic, and workers -- mobile once again -- can sell, move to where the work is, and buy again.

The late bubble was born of venal lenders and stupid borrowers, midwifed by inept governments at all levels and in all branches, the greed of Wall Street and the complete moral collapse of the rating agencies.  There is in short blame all around.  We can only hope that lessons are learned as the medicine goes down.

2) Quadruple and sustain investment in basic scientific research and education in the physical sciences in the new decade--and do it cooperatively world wide.  Emphasize especially thermodynamics (energy), materials properties, information theory, molecular biology, ecological economics.


The most basic level of human existence, that of societies of hunter-gathers, was grounded in fundamental knowledge, painfully learned, of edible plants and animal habits.  Our societies, past and future, have been and will be no different.  While our knowledge of the physical world is well beyond rudimentary, there is still much to learn about the biosphere--while there is a biosphere to learn from.

We need a greatly expanded knowledge base for two immediate reasons: (1) to keep from trashing the planet to the point of our own extinction and (2) to create a world of opportunity that puts the good life within reach of all.  We want to know more because it is fun.  Ultimately, we will want to know enough to spread beyond this or any other planet made uninhabitable by the death thros of its sun.

We will want to make this continuing investment because today's woes will be trivial compared to what our current blundering ways will bring us.  Though all of us can't be scientists, all of us will have to learn to think and behave by the high standards of that community. 

3) Implement a system for interoperable electronic medical records (and require its use); build a unified North American electrical grid with Mexico and Canada, and create affordable high speed Internet access for everyone.

Energy and information are the new factors of production, joining the more venerable land, labor and capital.  We will greatly prosper when energy is again cheap and abundant, and when information is ubiquitous and virtually free.  The automation of  medical information and procedures is especially important to that transformation of medical care we will need to curb the expenses of an aging population that grows ever more politically dominant.

4) Strictly enforce open, ethical, competitive business practices from main to wall street; otherwise get out of the way.

Business ethics is an oxymoron because cheating pays, especially when done "in full compliance with all applicable laws and regulations," as the lawyers are always saying when their clients are caught out in some obvious bit of chicanery.  It is hard, perhaps impossible, to change the basic fact that every retail buyer enters every marketplace more ignorant that its sellers.  But we somehow need to make it clear that "buyer beware" is both a necessary and an insufficient slogan, especially in a world composed of ever more sophisticated products and services.   Marketplaces can be left alone only when they serve both buyer and seller rather than exploit the ignorance of buyers., If they are not properly policed even the honest capitalist, who loves his family and country and goes to church will be obliged to cut corners to stay in business.

But when the rules of the road have the back of honest purveyors of goods and services who reflexively put the customer first nothing works better for the betterment of all than that intersection of supply and demand that we call the free market.  To borrow a coinage from the "news" business, markets must be "fair and balanced. "


Cut expense:

5) Bring the military home from Europe, Japan and Korea in two to four years and from Iraq and Afghanistan not long after.

Our defenses can be second to none without costing more than all possible enemies – and most friends -- spend put together.  We can project power without maintaining hundreds of thousands of boots on the ground in cushy outposts in friendly  now peaceful nations such as Germany.

"Waste, fraud and abuse" is an empty slogan mostly, but not when applied to inter-service rivalries (waste), the contracting habits of defense contractors and their military and congressional allies (fraud) and the empire building proclivities of the senior military (abuse). 

6) Reimburse medicine and education for outcomes.

Be open to precise criticisms of "Obamacare" and the educational “Race to the Top” from practical vice ideological viewpoints.  Make it clear to doctors, hospitals,  teachers  and professors alike that professional standing comes with a price, and results come before golf, conferences in the sun, summers off and sabbaticals.  We must also accept that outstanding pros deserve and will get outstanding pay. 

7) Eliminate most subsidies and tax expenditures and deductions.

It is probably not possible to have a tax code that is both fair and simple.  But as much as possible we should raise revenue from those who can afford it to pay the expenses of government and and not use the tax code to manipulate behavior.  There are many culprits to bring to heel and justice for the housing boom and bust, and the tax code's subsidies for home owners is surely one of them. 

8) Declare victory in the wars on drugs, vice and "immoral" conduct, starting with cannabis.

We will get the kids (and ourselves) off drugs when we convince them (and ourselves) that "doing is dumb."  But prohibition, we should have learned a century ago, is stupider still.  It is not necessary to address all addictive and/or intoxicating substances alike.  Using and dealing are two separate activities and decriminalizing demand doesn't mean that creating supply cannot be carefully controlled.

Curbs on cannabis are especially ripe for dismantling.  Grass is only mildly intoxicating, probably not physiologically addictive,  already socially acceptable, easily grown, processed and consumed.  There is even a budding culture of connoisseurship as with scotch whiskey and and fine wine.  Only unlicensed dealers should be jailed.  Of course, school children should be taught the virtues of abstinence and moderation,  and of the debilitating effect of constant, prolongued use.  Of course rehabilitation should be offered through self help groups when possible (friends of Zonker?), and more formal medical programs -- cheaper than jails -- made available.

While we're at it we should also decriminalize any and all sexual acts among conscenting adults, whether money changes hands or not.  It wouldn't hurt society to raise the legal status of prostitutes at least to the level of used car dealers and time share salesmen.  Nor would the republic fall if any and all loving couples were to enter into binding contracts -- usually called marriage -- by way of advertising the permanence of their relationships. 

One sensible way to resolve the  religious controversies over same sex marriage would be for all couples, gay or straight, to cede the term "marriage" to the believers to apply if they wish only to their members tieing the knot at their alters.  The rest of us would have what legally we have always enjoyed, a civil union.  Of course we could always shop around for a more welcoming congregation.   But I digress.  Back to balancing the budget and paying our debts.

Raise Revenue:

9) Roll back the Bush tax cuts over four years, the wealthiest fifth of taxpayers now, the next three quintiles in the next three years and the poorest fifth never.

These cuts stuffed uneeded funds into pockets of the most flush among us.  They were supposed to wisely and prudently invest "their own money" and lead the way to new plateaus of growth and prosperity.  Instead they blew up the housing bubble and played in the casino of highly leveraged financial instruments among other rentier behaviors that produced nothing useful or of service.  When the inevitable ill economic winds blew their house of cards away they took the homes and jobs of the rest of us along for the ride.  Instead of going up tax revenues dropped as well and the only remedies for the short fall on offer from the wealthy is to shrink government spending on the poor, the old and make up the balance short shifting the kids.  No way.

10) Eliminate over time the corporate income tax and compensate by adding two more tax brackets at 44 and 49% and continuing the inheritance tax indexed for inflation after the first million in graduated steps identical to those used for the income tax.

Taxing corporations is a fools game that merely raises consumer prices in most cases and gives corporations incentive to lobby for loopholes and leading to undue influence over, if not coruption within, the legislative process.

11) Adjust social security by indexing retirement age to longevity, taxing all earned income and recouping excess payments from retirees’ estates.

These steps will  do much to put social security on automatic pilot.  Congress will no doubt continue to tinker with benefits formulas but these steps would ensure that the trust fund grows as the economy grows.  It will also ensure that excess payments to the wealthy don't enrich undeserving heirs.

12) Tax carbon -- not gasoline – directly and forget about cap and trade.

Eliminating the federal gas tax in favor of a broader tax on carbon should be a popular trade-off with the public as the price of gasoline at the pump continues its inevitable climb.  Emitting corporations, freed from income taxes, can free themselves from this tax by investing in mitigating technology, eliminating the need for the EPA to step in with frequently ineffectual regulations.