Politicians in both parties are best at spending other people's money.
I am a frugal person who spends the exact same way, no matter who is paying the tab. I'm sure many of my loyal readers feel the same way.
The last time Congress tried to help America, it spent $787 billion on a stimulus effort that produced 1.5 million jobs, which is more than $500,000 per job, according to the Labor Department.
However, I have two wishes for the United States, one of which will cost the taxpayers nothing and the other which will cost the taxpayer $350 billion maximum and possibly much less.
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My first wish is for a repatriation tax holiday — a tax break for companies bringing back overseas profits to the United States.
Huge U.S multinational corporations have billions of dollars overseas.
Under a repatriation tax holiday, U.S. companies would be enticed to bring foreign profits back to the U.S. by taxing them at a 10 percent tax rate, rather than the current top corporate rate of 35 percent.
I would add that 20 percent of all money repatriated would have to go to creating new U.S jobs and can be held in escrow until the jobs are created.
Cisco has more than $43 billion in cash, and almost all of it is overseas. Cisco CEO John Chambers has vowed that he will double the dividend for shareholders if this law is passed.
The extra $1.3 billion in dividends would be taxed at 15 percent and bring in $180 million in federal, state and city taxes as well — and this is all just from Cisco.
The government also would have more revenue from people working and states wouldn’t be burdened with massive unemployment payments.
Some politicians are even starting to understand this concept. Sen. Charles Schumer, D-N.Y., has said recently that his party would be willing to consider a tax repatriation holiday, provided the companies that benefit from the lower tax rate use the funds to help create jobs.
Many Republicans have said the exact same thing.
My other wish is a proposal from Martin Feldstein, who was the chairman of the Council of Economic Advisers from 1982 to 1984 under President Ronald Reagan and now is a Harvard economics professor.
To halt the fall in house prices, the government should reduce mortgage principal when it exceeds 110 percent of the home value. A little more than 70 percent of all houses that are “underwater” fall into this category. (Homeowners are underwater when their house is worth less than the value of their mortgage.)
Some folks wouldn't participate, and the total cost would be less than $300 billion, which sounds like a lot of money
However, as Feldstein argues, house prices are falling because millions of homeowners are defaulting on their mortgages, and the sale of their foreclosed properties is driving down the prices of all homes.
Nearly 15 million homeowners owe more than their homes are worth. In this group, about half the mortgages exceed the home value by more than 30 percent.
Most residential mortgages are effectively nonrecourse loans, meaning creditors can eventually take the house if the homeowner defaults but cannot take other assets or earnings. Individuals with substantial excess mortgage debt therefore have a strong incentive to stop paying; they can often stay in their homes for a year or more before the property is foreclosed and they are forced to move.
Many who have faithfully paid their mortgage and didn't take out more debt than they could afford are against doing this.
I understand, but consider this. Many senior citizens and people who want to sell their homes are unable to do so, or get a reduced amount when they do sell, because of the backlog of squatters and foreclosures.
This plan also is fair because both borrowers and creditors would make sacrifices. The bank would accept the cost of the principal writedown because the resulting loan — with its lower loan-to-value ratio and its full recourse feature — would be much less likely to result in default. The borrowers would accept full recourse to get the mortgage reduction.
This will improve the entire U.S. economy because:
• The excessive mortgage debt prevents homeowners from moving to areas where there are better job prospects.
• These borrowers are underwater, they cannot refinance their mortgages.
Is this perfect? No. But don't let the perfect be the enemy of the good.
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About the Author: Bill Spetrino
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