THE BLOG

Transition to Prosperity

07/22/2013 10:18 am ET | Updated Sep 21, 2013

Despite dire predictions to the contrary, it is not true that automation and innovation will cause permanent unemployment shortages and declining wages. While automation may reduce minimum wage assembly line jobs, it creates compensating higher paying jobs in the innovation , design, production, operation, maintenance and installation of sophisticated machine tools, and robots, and their related services (marketing, distribution, clerical, accounting, education, training, etc.). A major part of the solution is the development of educational partnerships and apprenticeship programs between industry and school and community college systems to develop an educated, sophisticated, high tech middle class workforce. This workforce will be more prosperous, productive and globally competitive in both high and low tech manufacturing and services to provide full employment, a positive balance of trade, and produce the revenues to fully fund the government, its agencies, and programs, and reduce the debt. Immigration laws must be liberalized to attract the world's best and brightest to make the U.S. the global center of research, development, and innovation. Also, a U.S. High Tech Export Free Zone program is essential.

Re-industrialization could be accomplished by requiring all recipients and beneficiaries of government basic research, development grants and/or other incentives to produce the created products in the U.S. for 3-5 years. After that period, these goods would likely become generic and could be offshored through patent, copyright, and/ or joint venture arrangements, making room for the next generation of innovation. All research and development would be required to be done in the U.S. domestic insourcing must be promoted. Also, sovereign high tech and financial investments would be strictly regulated to prevent industrial theft. This is not protectionism. These measures would ensure U.S. technological- superiority, competitiveness, job growth. Our prosperity is dependent upon the expansion of markets and demand. While innovation creates its own global markets (especially with advanced nations), the developing countries in South America, Africa, the Middle East, South East Asia and Russia offer the greatest trade growth potential.

It is essential to cultivate and dominate these developing markets through mutually beneficial trade agreements. The major portion of our foreign aid policy should be the exchange of U.S. produced goods, equipment, and know-how for raw, semi-finished, and low tech goods and materials. This would create jobs in both donor and recipient nations, increase the economic value of the recipient's natural resources, provide needed education, skill training, technical assistance, and boost their GDP.

To achieve fiscal and social viability, our cities, states, businesses, and unions must be saved from the unaffordable and crippling burdens of their health and pension obligations both of which are rightfully the responsibility of the federal government. Consequently, it is necessary to (1) implement affordable universal health care incorporating well known reforms and expanding Medicare to cover all citizens, (thus eliminating the need for Medicaid) and (2) reforming Social Security on a need basis. Both systems could be financed by a new progressive flat tax code that would eliminate all tax havens, loopholes, deductions, and carried interest (legitimate business capital investments would be expensed in accordance with IRS schedules and/or an increase in FICA). Existing pension and 401k accounts would be automatically switched, on a pro rata basis, into either Roth IRA's or a special inflation protected issue of U.S. government bonds (any resulting bond revenue surplus to Social Security needs would be dedicated to debt reduction).

The basic flat tax would cover actual cost of government operations and reformed federal programs.

There would be separate tax surcharges (and/or FICA increases) for the costs of health care, and Social Security, and the military, thus creating an effective taxpayer watchdog check on government spending, waste, inefficiency, and military adventurism other than national security. Set mandatory repatriation of foreign business profits at a fixed lower rate (to offset foreign taxes and special charges). There would be modest progressive estate taxes and no deduction for mortgage interest on any non-primary home.

Impose a uniform globally regulated transaction tax on all stock, bond and derivative transfers.

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