Disruptive Economics for Growth

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I will spare you the latest reports from the dismal science of economics.  We all feel the pain.  Part of that pain is our frustration that our politicians are acting true to type—like politicians running for cover or for reelection or both.  This week we will get a double dose in the latest Republican candidate debate and the President’s latest ‘speech’ about what he is planning to do about the economy if only his political opponents would put country before party and let him have his political way with them.

So instead of all this disruptive political bantering what if we focused on changing the economic game to actually address a few of our problems to see if can pull the country out of the ditch and get growing again.

I call this new approach disruptive economics because we must disrupt or break the psychology of accepting uncertainty, slow growth, high unemployment, dysfunctional government and loss of America’s global competitive advantage.

How do we break that cycle and get growing again?  The old fashioned way—we earn it by taking names and kicking ass to demonstrate to ourselves that we have what it takes to get growing again. Once we have our confidence back, our mojo will follow and stuff will happen.

But to get to disruptive economics we must break the cycle of disruptive politics—at least for a while until we get this mess cleaned up—so here’s my proposal:

  1. We need President Obama to Succeed!  We need for President Obama to be successful because we need him to rally Americans and cheer us on as we tackle the disruptive economic sacrifices and changes ahead.  It is not the program he wanted but he has a choice: get with a program that will work for us—or get gone!  So let’s tell him to get with our program and he’ll be our hero again.  Resist us and we tell him he can go play golf with Jimmy Carter every day.
  2. We need Congress to act on our disruptive economics agenda now!  We issue a voters fatwa (it’s like a hex on politicians). Here it is:  Shut Up and Get Back to Work!  We want the crap to stop.  We want you to work together like adults instead of children!  If you don’t get your act together to put our disruptive economics plan in place to get the country growing again, raise confidence, regain our competitive advantage and stop all this political correctness—we are going to vote every incumbent out of office!  That is a fatwa we can believe in!
  3. We are coming to take back our country from politicians!  This is not a TEA party conspiracy, it is common sense.  America has succeeded because of our sense of optimism, ingenuity and willingness to adapt to change—and we need to make some serious changes starting now!

Damn, that feels good!

Now, what is this disruptive economics turnaround plan I’ve been teasing you about?  We need to take actions that provide real, positive, immediate results to encourage GDP growth, reduce uncertainty and restore confidence sufficient to unleash all that hoarded business cash and create jobs. So let’s tackle these problems directly rather than arguing about the poor results and symptoms by doing the following:


Stabilize Mortgages.  The Fed should provide long-term funding to U.S. banks at current low rates to refinance mortgage debt, buy stability and time to get back to growth. The program would allow:

Fixed Rate Mortgage Conversion. Owner occupied homes current on their payments qualify to modify or refi adjustable rate mortgages to a 30 year fixed rate of 3% max even if you are underwater. Banks may bid rate down lower for better qualified customers.

Conventional and Jumbo Loan Coverage. The program must cover conventional loan sizes in every market and jumbo loan sizes in high priced markets.

Fed Balance Sheet Growth with Stability. Some estimate this will increase the Fed’s balance sheet by $1 trillion, (about like QE1) but housing stability will raise confidence and is a condition precedent to growth so it should be a relatively low cost, low risk way to provide stability until housing values get back above water.

Clear the Housing Market. Housing values are way down and many are frozen in the headlights.  Perversely, mortgage mod rules mostly refused to help people unless they defaulted. We need to clear the market of foreclosed properties ASAP to get housing values growing again.  Here is my proposed action plan to do that:

Mortgage Modifications through Bankruptcy. Allow home owners to use chapter 11 to leverage banks to modify first mortgages.  Banks will never volunteer to slit their own throats. Most will settle and the loss will be split equitably between homeowner and lender under court supervision. Ban recourse on home equity loans and second mortgages.  If lenders get nothing in bankruptcy they will settle.

Fed reverse auction to buy toxic mortgage-backed security assets on bank balance sheets based upon discount offered on a tranche by tranche basis.  Banks write off discount over five years to clean up balance sheets to share the pain.

Fed creates Resolution Trust Corp to hold toxic assets and monetize them as market permits.  Proceeds would be used to retire Federal debt.

Break up and privatize Fannie and Freddie.  Get the government out of this politically correct-driven business and create a strong, competitive, diversified market of many players for mortgage lending through the Fed clean-up of toxic assets


New Rules for All RegulationsRegulation is out of control and used as a political tool to implement policies that Congress would unlikely approve. We must stop that and enforce adult supervision of regulation.  Here’s my proposal:

Every Federal rule automatically sunsets every 7 years. Reauthorization requires new rulemaking, new approval by Congress to validate we still need it.

Every rule with impacts greater than $100 million requires up or down recorded vote by Congress to take effect.  Congress is giving away its legislative authority and must be accountable for the cost and impact of rules adopted. Make this applicable to every rule adopted in the current Congress.  Unless Congress approves them they die with the adjournment of Congress sine die.

Federal rules must reasonably balance claimed benefits against their cost impacts on the economy and national competitivenessRegulation is too one-sided and should be required to balance competing interest to protect the public interest. We need a standard way to evaluate all regulation costs and benefits—like truth in labeling on soup cans. Agencies must be forced to own a burden of proof of reasonable balance of economic impacts against benefits. Rules adopted are appealable for lack of balance. Loser pays court costs.

Amend all existing environmental laws to require balancing of environmental benefits and economic impacts. Today there are no consequences for adopting stupid, expensive, intrusive rules—force them to balance competing interests and let business sue them (just like environmental groups) if they don’t and recover their litigation costs if they win in court. The public interest should require balanced consideration of the environment, people and companies impacted and national economic competitiveness. Judicial review includes determination of reasonable balancing of interests.


Repeal Major Causes of Business Uncertainty and start over:

  1. Repeal and Replace ObamaCare with Competitive Interstate Health Exchanges before all employers cancel their group health plans.  Keep the health exchange idea but make it voluntary and interstate. Enable employers to shop for competitive group coverage, allow trade groups to pool members to shop for interstate plans, enable individuals to join buying groups to shop for interstate plans. Prohibit mandated coverage that drive up costs.
  2. Repeal Dodd-Frank because it costs too much, intrudes too much and is an uncontrollable financial czar program capable of unsupervised mischief.
  3. Repeal Sarbanes Oxley because it drove up costs and provided little benefit.
  4. Repeal Community Reinvestment Banking Acts because Congress used it to pressure small banks to give out unsustainable loans to unqualified people and started the housing mess.

Permanent Tax and Spending Reforms:

  1. Cut Federal spending to achieve hard target of <20% of GDP to encourage investment, job creation and GDP growth
  2. Cut corporate tax rate to restore global competitiveness from 35% to 15% but eliminate all corporate deductions and tax credits to reduce lobbying
  3. Eliminate tax on repatriating foreign earnings to bring money home. Eliminate taxes on capital gains, dividends, interest, estates to encourage investment
  4. Eliminate Alternative Minimum Tax—it just pisses us off.
  5. Simplify personal income tax rates at 8%, 14% and 23%; raise personal exemption but eliminate all personal tax deductions, and tax credits
  6. Adopt national consumption tax of 15-18% on all sales of goods and services no exemptions and dedicate it to paying down debt. Today only 49% of Americans pay income taxes.  This gives everyone an equal opportunity to pay down debt.


  1. Consolidate to Create a Department of Energy & Environmental Resources merging the Departments of  Energy, Interior and EPA into one integrated agency with FERC as the national energy and environmental regulator.
  2. Congress must define clear national energy and environmental policy priorities including:
  • Domestic Energy Production policy.  All moratoria on oil and natural gas exploration and energy development are lifted.  FERC to develop least cost, environmentally responsible energy development rules for America’s energy security and economic competitiveness.
  • Clean Energy Standard policy.  FERC to assure a responsible, cost effective balance of energy resources developed from both supply and demand side sources to provide energy security, energy diversity and cost competitiveness.  Yes, we want clean energy from renewable sources but we can no longer subsidize it so we are eliminating all tax subsidies, credits, grants and loan guarantees for all energy development.
  • Environmental Protection policy.  Existing environmental laws and regulations remain in effect except that every law is amended to require a reasonable balancing of benefits and regulatory costs to protect and balance the competing public interests of environmental protection, economic growth and competitiveness, and national energy security. FERC has authority to modify any rules inconsistent with the public interest duty to balance benefits and impacts. Yes, we want a clean, healthy environment but snail darters and desert rats are not more important than people or national energy security and economic competitiveness.

FERC authority to implement and enforce domestic energy and environmental policy preempting other Federal agencies over permitting, siting, auctioning lease rights and environmental and economic regulation of energy production in interstate commerce, on Federal lands, off-shore, on-shore and interstate electric transmission, petroleum liquids, coal, renewable energy and natural gas pipelines with duty to maximize American economic competitiveness, energy security, and domestic energy production balancing environmental and economic impacts in the public interest.

That’s my plan, I’m sticking to it!


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