Free Market Economics and Capitalism

Since the free market system is driven by consumerism, the worst situation that can occur is for consumers to lose confidence. There are several ways that they can lose confidence. Fear that they will lose their job is a major one. Fear that they will not be able to find gainful employment if they do lose their job is another. That our government can't seem to address the appropriate problem doesn't help either. And then seeing our government throw taxpayer money away again and again and again to no avail adds a deeper level of despair. Make no mistake, this is not an economic or financial crisis that we are in, it is a crisis of confidence. It isn't just our economy that is flailing, our government is swatting blindly and hoping to hit a home run.

The government has reacted way to slowly to a problem that they played a significant part in creating. Since they have waited far too long to address the problem, they must do much more to fix it. There are five key areas that they must address and they are:

1. Bolster public confidence in the Free Market System.
2. Stabilize the Financial Markets.
3. Stabilize the Housing Market.
4. Improve oversight, regulation, and transparency of markets.
5. Stimulate economic growth.

I will list some concrete ideas for each of these 5 key areas next. First to bolster public confidence in the Free Market System of Capitalism we can:

• Overhaul the IRS (streamline it and simplify the tax code).
• Eliminate the Death Tax.
• Eliminate the Alternative Minimum Tax.
• Eliminate the Capital Gains Tax.
• Close overseas tax loopholes for big business.
• Lower tax rates for everybody.
• Spend on infrastructure improvements.

To stabilize the financial markets we could:

• Establish an entity like the Resolution Trust Corporation to buy up all the toxic assets and hold them to maturity so that banks and corporations can remove them from their books and get a fresh start.
• Institute a complete ban on all credit based derivatives (as this totally unregulated market segment has fueled the corporate greed fire for the past two decades).
• Overhaul the Financial Accounting Standards Board (FASB).

To stabilize the housing market:

• Repeal the Community Reinvestment Act.
• Eliminate the Death Tax.
• Eliminate the Capital Gains Tax.
• Reduce the Estate Tax.
• Toughen the training and licensing requirements for mortgage loan originators and brokers.
• Eliminate Fannie Mae and Freddie Mac.
• Stop nationalizing banks.

To improve oversight, regulation and transparency of markets.

• Overhaul the Financial Accounting Standards Board (FASB).
• Strengthen the Securities and Exchange Commission (SEC) by increasing funding, manpower, and scope of authority.
• Increase transparency at the SEC.

To spur economic growth:

• Institute permanent and substantial tax breaks for business.
• Give business refundable tax credits that are retroactive for all of 2008.
• Eliminate the Capital Gains Tax.
• Eliminate Inventory Taxes on businesses.
• Eliminate the Sarbanes Oxley Act (regards accounting standards for business)
• Increase funding for the Small Business Administration (SBA).

You will notice that a few of the same suggestions appear in different categories, that is because there is a little bit of overlap between these areas as they are so closely related to each other. Noticeably absent is any idea of simply tossing money at business with no strings attached, which is instead the first action that our government took.

It is all about confidence folks, and we have such a long, long way to go yet. Finally to address the immediate federal budgetary shortfalls, we could institute a temporary consumption tax. A federal sales tax no more than 2.25% and phase it out over 10 years.