Thursday, May 3, 2012

Economic Turnaround? - Think of Our Country as a Business

Let's think of our country as a business. In business you have production, expenses, and profit. This is a simple mathematical formula: Production (revenue) - Expenses = Profit (or Loss). Our economy works the same way.

The revenue from our country's perspective is taxes. The expenses are in the form of overhead  administration (government employees, military, and whatever programs are in place).

The private sector business is just a small department within the larger company. They are the production line. They take labor and produce goods and taxes. The taxes are the company's (country's) revenue.

The administration (government) does not produce anything. They merely manage the company as a whole. They are an expense that is subtracted from revenue. Anything the administration does will subtract from revenue.

The result is either a profit, where we produced more than we spent, or a loss, where we spent more than we produced.

For every job that is added to production (the private sector), total revenue increases.

For every job that is added to administration (the government), expenses increase and total net revenue decreases. When the administration decides to spend money for various programs, this also increases expenses and decreases net revenue.

Now, when any normal business operates, its goal is to produce as much as possible, keep its expenses as low as possible, and be able to reduce its price to be more competitive with other companies (countries) so it can produce more and still make a profit.

Now, the more you produce, because of economies of scale, the lower your raw material prices and the higher the profit.

All of these employees, whether they are in production or administration are shareholders in the company. This is an employee owned company. all of the profit gets divided up and distributed to the employees. The dividend they get from the company is a piece of the net revenue (taxes) back.

So, the result is:  the larger the production (private sector) and the smaller the administration (government), the more money people have and the more people working overall because production capacity has increased, because you are more competitive in the market (world).

Unfortunately, we are headed in the opposite direction. The production (private sector) is shrinking, requiring each employee to produce more (taxes) for the same wage, and the administration (government) is growing and programs are expanding, further increasing expenses. All of this results in a large operating loss and a company (country) going out of business (economic collapse).

On top of that, the administration assigns a much, much higher production quota to the more productive employees (higher taxes) and doesn't require more than half of all the employees to produce anything!

Oh, but you say: "the administrative employee are producers, because they produce taxes." Well, your wrong. The administrative (government) employee is a 100% expense, which means the taxes they produce reduces the expense by a little bit, but the net is still an expense. Say the government employee makes $50,000. He/she pays (produces) 25% in taxes, or $12,500. The net expense to the business (country) is $37,500 (a loss).

You have to remember, only private sector jobs contribute to the gross domestic product (GDP). ALL government jobs subtract from the GDP.

So, what do we do? Do you want the United States to avoid an economic collapse? Any country could do it, even Europe, Russia, China, or Japan. It's so easy! Here are 3 suggestions that would make us the greatest country on Earth again:

1. Eliminate ALL corporate taxes. When companies are taxed, they don't pay the tax, the customer pays the tax. The company merely logs the tax as an expense and adds it to the price of the goods or services they provide. YOU, the consumer, pay ALL of the taxes when you pay for the good or service. Companies from all over the world will be flocking to the United States to escape their own country's tax system in favor of ours.

2. Eliminate all government programs except what the US constitution allows, typically things like national defense and protection of interstate commerce. Get back to basics. Ween people off of social security, medicare, medicaid, welfare, food stamps and all of the other government entitlements. Eliminate the Dept. of Education, EPA, OSHA, FDA, ATF, and any other department we don't need and goes against our forefather's intentions. What will happen to all those government employees? They'll get jobs in the private sector (see the last part of item 1). Enact term limits for all elected officials. Make re-distribution of wealth a crime in government, just like it is in the private sector (called theft).

3. Institute the Fair Tax. No, it doesn't increase taxes by 30% like the government and media idiots tell you. You pay no income tax anymore, so forget about losing the home mortgage interest deduction or any other deduction for that matter. If there is no income tax, there is no need for any deductions. It's that simple. The companies don't have to pay their income taxes or match your income taxes anymore. They will reduce their prices quickly because their expenses are reduced and they want to be more competitive and produce more. If their competitors try to keep their prices high, they will lose business to their competition, so they have to reduce their prices too.

Now that the price of goods and services are reduced and contain no hidden taxes, the Fair Tax is added to the price as a national sales tax of 23%, collected by the states along with their state sales taxes. This should actually be lower, because the 23% was figured on keeping the present government as it is. Our new and improved, reduced government won't cost as much. Heck, let's just keep it as it is and use the extra money to pay off the national debt. Add into the repeal of the 16th amendment that once the national debt is paid off, the percentage must be reduced to provide no more than a 3% surplus (to cover expenses to ramp up for a necessary war or national disaster), and add no debt ever again except under extreme emergency. The price of goods and services, including the Fair Tax will be about equal to what it was before.

So why do it if it won't change the price of things? Wait, there's more! The Fairtax is only added to 'new' goods and services, not used stuff. Also, there is a necessities of life clause. Everyone gets money back from the government to cover the taxes paid on the necessities of life. So, it's tax as you go above the poverty level. If you are living below the poverty level, you pay no taxes (Net. You pay the taxes, but you get them back). What's more fair than that? Many state governments have been operating from sales taxes for years. Look at Florida or Texas for example.

Implement these three things and the only unemployment this country will have are those who are too lazy to work or those with medical problems that keep them from being able to work. We'll pay off our national debt, and everyone will live happily ever after, with freedom, liberty, and justice for all!