Rebuilding Our Economy

March 6, 2009

Rebuilding Our Economy
By T.S. Khanna

Once, after a short truce, an army General reversed the direction of his cannons. The new General, acting under a sudden emergency, ordered firing. At the breaking of the sound barrier, people realized that it is a friendly fire coming on to them with the same destructive potential as that of the enemy; nevertheless, too late to escape.

The new President has presented and the Congress has passed an unprecedented huge deficit bill of $787 billion expenditure with empty coffers. We, the people, assume, trust and expect every congress member to make a thorough study of the bill before voting on it. But, in this case, most Congress members, acting as foot soldiers of the President, supported the bill without a reading, comprehension, analysis, or deliberation. Our Congress is suffering from a high degree of entropy----a measure of disorder proportional to the distance between assumptions and realities.

Sound barriers of the provisions in the bill have not broken and most people are not aware of the contents of the bill. In the political fog of confusion, the new administration has tried to prove itself equal to the emergency. No test guns have been in the plan to check their direction and the aftermath.

However, there is no escaping that a deficit financing of this magnitude is bound to set off uncontrollable inflation after a short-term control of deflation. Remember the news pictures of long lines for a loaf of bread at any price in the former Soviet Union. This is what happens when money is printed without commensurate production of marketable goods to back up. We are not immune to such economic inflictions.

Unfortunately, we are petrified into partisan thought process only. Partisan compromises are not always true solutions; quite often, quite the opposite. The call of emergency is to make a non-partisan economic analysis of the proposed expenditure, before we embark upon a spending spree.

In the meantime, we must adopt measures that do not involve deficit financing and bring immediate savings. Some suggestions as a starter:
1. To reestablish public confidence in their government, reduce salaries of all public officials, elected officials and public employees, by 50% and eliminate perks altogether. In fact, the public officials should volunteer to prove empathetic leadership;
2. Reduce pensions of all public officials by 30%;
3. Deport all illegal immigrants ( estimated twenty million and growing) without exception and impose exemplary penalties on those harboring illegal migrants. It will go long ways in reforming health care and stabilizing housing market. Transfer sympathies to the struggling citizens for a change;
4. Establish a Fair Wages Commission with powers of binding decisions to fix wages bearable by the markets. This is the key to rebuilding our economy. Corporations may not exploit the labor and the labor unions may not high-jack the economy;
5. Revise the Tax Code for a simplified option for personal tax; (a) eliminate all tax loopholes and tax shelters, (b) Allow $ 10,000 income deduction ( $ 15,000 for above 65) with a 20% fixed tax on additional income.