How often do you find something in our political system that doesn’t make sense and should be changed? For me it’s all the time, and its especially frustrating in that most of modern politics focuses on completely different things. I can’t expound on all of these ideas in a readable post, so I’m just going to make a list of bullet points with minimal description. Hopefully you find this thought-provoking.
· Deal with our monopoly/oligopoly problem
o Most industries in the US are dominated by a small number of firms. We have the same number of publicly listed companies that we had in the mid 1970’s with an economy that is 3 times larger. This causes a number of problems, but fortunately there is a book by Jonathan Tepper called “The Myth of Capitalism” which clearly lays this out.
o Ideas to fix this include using the SEC to break up large companies, making many reporting regulations size dependent in order to give small business a break, or even special taxes on companies based on market share (perhaps a special tax starting at 10% market control that starts small and gets very high as you approach 70% market control)
· Lawsuit reforms
o People have agreed for a long time that litigation is out of control. Many of the problems in our society stem from this, as proposed solutions fall apart due to a shift in liability. It curtails our freedoms as trampolines, merry go rounds, diving boards, and other things are no longer available. It creates a tremendous burden on business owners, particularly pressuring smaller medical practices to shut down or merge operations with a larger practice.
· Hazardous waste disposal
o Recycling programs have been very successful in getting people to separate out bottles, cans, paper, and other recyclable materials – yet many household items like batteries, fluorescent bulbs, paints, cleaners, oils, acids and so on contain chemicals that should not go to landfills, yet they end up in regular trashcans. For small-time contractors its often worse as they make very little money per project and are expected to pay much larger sums than big competitors to dispose of hazardous waste.
o The solution here is simple: aim to make hazardous waste disposal as easy and convenient as recycling. It should be totally free with local government collection centers, possibly paid for by taxing the initial sale of the items they collect.
· EPA Reform – taxes over controls
o The EPA needs to have the authority to tax to a small extent. Many times, production of hazardous waste is a byproduct of modern society that can’t be avoided. Currently, they try to address issues with direct controls on emissions limits of certain things, but this is often an inefficient approach that tries to limit the excess production of one thing with the direct control of another. To put it simply, I’m merely suggesting that this policy lever would be useful.
· Subsidize Fruits and Vegetables
o We hear about the “obesity epidemic” all the time, yet healthy options always cost more. Lower-middle class people in modern society live in crowded places with roommates – they often don’t have their own kitchens and refrigerators, and they find it cheaper and easier to stick with low cost fast food. Look at any of the value menu items, however, and they are all carbs, beans, cheese, and cheap meats with no more than a sprinkling of iceberg lettuce. Healthier choices always cost more, or at the very least are equivalent (example – get a “salad” instead of a “sandwich” at subway and you forego the bread but pay the same for the same quantity of meats and greens). I think it should be subsidized to the point where that extra garden salad costs no more than that extra dollar for the bag of chips, particularly at low-end fast food places.
· Student Loans
o Tuition has been rising in leaps and bounds while median incomes go nowhere. Loans have become easier to get for larger amounts, and college degrees are required for more jobs than ever – many of which never required degrees in the past and don’t pay any more than they used to. This system is very damaging to our youth, it delays and often prevents family formation, and it really needs to be addressed.
· Affordable Housing
o Watch the classic “It’s a Wonderful Life” and Pottersville resembles most city living today – with people paying more to rent in crummy, over-crowded housing than they paid to own a home in the “Bailey Park” alternative. The reason is simple – housing costs have skyrocketed while median incomes went nowhere. After the last housing bust, wall street was invited to purchase single-family homes in rental schemes for the first time – leading to a large “recovery” in housing prices that went beyond the prior peak in national terms. Rental units are often dominated by a small number of large firms with monopoly level pricing power. This issue needs serious attention.
· Federal Reserve Policy Tools
o Current policy tools of the federal reserve are interest-rate manipulation and quantitative easing. Both of these push money into the system by expanding debt and driving up asset prices. These tools destabilize the system by making the rich (asset owners) ever richer while wages go nowhere, while ordinary people find retirement and large purchases ever further from their reach, and debt loads increase exponentially.
o Other tools I’d propose: The ability to make direct payments to every citizen (show your social security card at a bank to redeem) which would increase consumer spending while allowing consumers to pay off debt, helping to stabilize the system. If you don’t like that idea, perhaps allowing the federal reserve to create a “government infrastructure spending” fund which could then help much needed public improvements get built while creating jobs. Perhaps you allow banks to borrow at a “penalty rate” so that credit would not freeze up completely yet it would not manipulate asset prices so much … my main point here is that the current tools are counter productive.
· Government shutdown policy
o Our current shutdown policy was set in the late 70’s and started hitting from the Reagan era onward. It focuses all of the penalties on a small set of people from low-level government employees, to government contractors, to national parks and related businesses while the actual officials feel no pressure at all. Whether its something as mild as freezing pay of elected officials (they’re all rich anyway) or as extreme as a cloture type system where they are literally locked in the building and remain in session until they agree on something (and the president can only veto if he’s locked in there too) – I’m not sure what the answer should be. The current setup needs to change though.
· Patent Reform
o Patents should be about innovation rather than preserving monopolies. I believe that very strict limitation on the duration of patents should be enforced … no patent lasts longer than 30 years. If you cant make money with a 30 year exclusion, you wont be funding the project anyway – and it would unleash an enormous wave of innovation as all of that locked away knowledge would become a free public resource. Limits like this would also curtail the efforts of “patent trolls” which don’t really innovate so much as patent everything possible in order to take control of any possible benefits that others find.
· Wall street regulation
o Leveraged Buy-Outs should be illegal because they take money from current stakeholders and give it to the party doing the takeover. A company like Sears or Toys-R-Us for example would get loaded with debt that was only used to pass its control from the current owners to the new hedge fund – greatly diluting the claims of pension holders, current debt holders, and other stakeholders such as employees. It’s a transfer of wealth plain and simple.
o Stock buy-backs should be illegal and actually were until 1983. They were once considered stock price manipulation, and they generally are as they load a company with debt for a rise in stock price that often proves temporary. This can help an exiting CEO or a hedge fund with options contracts, but it actually harms the other stakeholders including debt holders, pension fund holders, and employees.
o SEC operations. We often hear that the “SEC is asleep at the wheel” as they allow all sorts of financial frauds to take place, often with much warning ahead of time. Forensic accounting is an area that some short-sellers specialize in … they uncover active frauds while shorting the stock. Unfortunately many of these active frauds are allowed to continue long after they are exposed. The SEC needs to take these more seriously.
I’m running a bit long so I’ll stop here, but I hope that reading this will get you thinking on how the system really needs to change rather than being distracted by the latest political media fad.