$700,000,000,000 Is An Unfathomable Sum

Divide it up among every man, woman, and child who is a citizen of the U.S. and it’s over $2300. A family of four would receive nearly $10,000. What could you do with that money? Would you be able to invigorate the economy better than our government?

Don’t get me wrong – I’m not advocating that this is the way this bailout money should be spent. I’m instead alluding to some basic political philosophy: who would be better stewards of this capital investment, the government or the people? A role of government is of course to provide infrastructure for the benefit of the people, and the banking system is certainly part of that infrastructure. I think of it this way: the banking system is like our water system, and the banks are like the pumps. A certain amount of this bailout obviously needs to go into maintenance of the pumps. But $700B? We’ll wind up with Ferrari pumps for certain, but what good will it do when there’s nobody turning on the water at the spigots?

I would like to see a certain portion of this bailout – $250B sounds like a nice, round number – that is devoted entirely to infrastructure. We need new bridges. More telecommunications bandwidth. Free flowing student loans to worthy college-bound kids. Small business innovation research grants could be quadrupled, or more. Tax incentives could be given to people to retrofit their vehicles to compressed natural gas (CNG), or to buy electric vehicles, or to retrofit their homes to charge up their CNG and electric vehicles.

In “The Hydrogen Economy”, author Jeremy Rifkin estimated that $10B would pay for an entire nation-wide hydrogen distribution infrastructure, making hydrogen fuel cell vehicles practical and completely (read that again: completely) breaking our dependence on foreign oil. Even if he was way off and it cost us $30B, we’d have plenty of this $250B (just a portion of the $700B, mind you) left over for other infrastructure projects.

It’s been said that the American economy needs this infusion of capital to avoid slipping into recession. What if there were a way to infuse many times this much capital into the American economy without costing the taxpayers a dime? We’re talking trillions of dollars in investment money flowing in from around the world. While money doesn’t solve all problems, not having money causes more problems. Sound like a pipe dream? It’s not, and it’s possible with a fundamental change to our economy’s revenue strategy. Open your mind to the possibilities and check out FairTax.org. I was a skeptic at first, but when I read the assessment of Alan Greenspan that a consumption based tax plan like FairTax would result in trillions of dollars in expatriated funds and outside investment flowing back into the U.S. economy, I was convinced.

The biggest objection to the FairTax plan is momentum: “it’ll never happen because too many people don’t want it to happen.” Being a bit facetious here, but what if we took some of that $250B in infrastructure investment I’m advocating (again, as just a portion of the $700B) and we bought those people off and gave them one-way plane tickets to China? Momentum objection removed.

If you want to learn more, read these books:
“The FairTax Book: Saying Goodby to the Income Tax and IRS”
“FairTax: The Truth”

7 thoughts on “$700,000,000,000 Is An Unfathomable Sum

  1. The bailout is nothing more than the final stand of Bush to steal taxpayer money. There should be no bailout. The markets will correct themselves, and any bank that goes under will be purchased by another bank and operations will continue. To prove this bailout is a scam, just read the wording in section 8 – “Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.” Paulson was appointed by Bush and together they have orchestrated the biggest heist in history. I hope the bailout does not happen at all. Its a rip off. Bush says if we don’t do it, there won’t be as much credit. So wait a minute. We’re exchanging money that taxpayers have in exchange for credit that taxpayers have to pay interest on? How does that make sense?

  2. Chuck,

    $11 trillion is an even bigger mind boggler, and that is the amount that Boortz claims will “come home” from offshore locations if the Fairtax should become law. The trouble is, Allen Greenspan not withstanding, that whole claim is a Fairtax myth! Home isn’t here!!! Check out the Tax Justice Network and look for their 2005 paper entitled “The Price of Offshore”. The TJN is an international group that tries to track all offshore holdings. Their report does indeed state that there is an estimated $11 trillion in wealth owned by high net worth individuals and companies that is parked in tax friendly locations. However, the $11 trillion is owned worldwide, and only $1.6 trillion is owned by North Americans—and there are 23 sovereign countries in North America. The estimate for US holdings is around $700 billion, and at a return of 7%, the lost taxes are under $50 billion, not a very big deal when measured against a $15 trillion US economy or a $3 trillion federal budget??

  3. Eric, so your vote would be for no bailout – what about a $700B “stimulus package”? In other words, how much of your opposition is based on the way the money is purported to be spent?

  4. Dutchman – To add to your point I’d suggest that not all of even just American owned assets would repatriate (a certain portion of that money is out of the country as non-liquid investments, or investments that have not yet yielded returns, or were expatriated for illicit–that is to say, tax evading–purposes). But if our economy switched to consumption-based revenue versus income-based revenue (you could also say growth-based revenue), how much of the $11T would move to the U.S. because it could grow here unfettered by taxes? i.e. the U.S. would become an offshore tax haven for the rest of the world.

    My main point was not the loss in tax revenues from those expatriated funds, it was the flow of capital back into the U.S. I will read the TJN paper; thanks for pointing it out.

  5. Chuck,

    While you are checking out the TJN, you also should reread HR25, Section 905. I believe it clearly says that there would be a 23% tax on profits made in the US by foreign companies. So, can it really grow here unfettered by taxes? If the foreign holdings are happy where they are, why in the world would they pick up and move? (The 23% is flexible as I understand it, and could be lower depending on any applicable trade treaties.)

    I certainly agree with you that American assets might not be easily relocated to the US for all the reasons you mentioned. Good point!

  6. Dutchman3,

    Tax Justice Network is nothing more than a progressive left wing blog. Here are some quotes from there home page:

    “We support progressive taxation, founded on the basic principle that tax should be based on ability to pay – that is, the wealthy should pay higher rates of tax.”

    “Tax systems should also be comprehensive, containing layers of different taxes such as income tax, corporation tax, enviromental taxes, inheritance taxes, customs duties and so on. Different taxes have different functions, and tax systems should contain an appropriate mix of them all”

    The fairtax is the answer because it encourages capital to gravitate back to the US. Closing tax loopholes isn’t going to do anything because it doesn’t change the fact that we have a taxcode that discourages investment. We have a 66,000 page tax code, closing “loopholes” by adding more pages is a dumb idea. If a 66,000 page tax code isn’t going to solve the problem, a 100,000 page tax code won’t either. Its still the same thing…a tax for postponing consumption.

    We need a tax that discourages consumption and encourages postponing consumption, that way real productivity and investment will grow.

  7. Dutchman3,

    Paragraph (b) of HR25 Section 905 specifically excludes tax on interest of portfolio debt, and paragraph (c) says that in cases where the U.S. has a tax treaty with the foreign national’s country, the prescribed tax rate of that treaty (which could be 0%) takes precedence over the FairTax provision. While I personally might prefer that this section would be modified in the spirit of a pure consumption tax, these 2 exclusions grant a great deal of flexibility over how we treat foreign investment, which would seem prudent in contending with unfriendly foreign tax policy.

    The reason an investor would move funds from an overseas investment to a U.S. investment is simple: the potential of making more money, balanced against less risk, is better in the U.S. than in their current investments. In other words, if a European investor is paying 15% taxes on gains in their European investment, if that capital in American investments (assuming gain and risk is similar, of course) is not taxed, then the investor will have significant incentive to move it.

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