What the Federal Government CAN Do

I stated in an earlier post there is little the federal government can do except get out of the way, enforce contracts, and prosecute fraud.

In that spirit here is my suggestions for unfreezing the credit markets

1. Suspend the withholding and collection of income taxes for 300 days. This is only 650 Billion (649,645,995,893 @ 2,165,486,653/day * 300 days) dollars not confiscated by the treasury and leaves the treasury with 1.7 trillion in revenues from other taxes. I know it is less than 700 billion, but if the Treasury Department can pull 700 billion out of its ass, I can pull 300 days out of mine. I selected 300 because it is a round number which creates a bailout figure of about 700 billion at current tax collection rates.Source: Heritage Foundation with income tax receipts comprising 30.8% of gross tax revenues.
   If you are going to loot the treasury at least give the money to the people who earned it. [principle employed: Get out of the way]
2. Repeal taxes on interest earned. [principle employed: Encourage saving (increase supply of credit capital) by getting out of the way]
3. Repeal taxes on dividends paid to shareholders. [principle employed: Encourage corporate and shareholder savings (increase supply of credit capital) by getting out of the way]
4. Repeal deductions for interested paid. [principle employed: Discourage borrowing (decrease demand on credit capital) by getting out of the way]
5. Amend RICO so as to include GSE's such as Freddie Mac and Fannie Mea [principle employed: prosecute fraud]
6. Do not permit re-writing mortgage terms by the Emperor of the Treasury. (see section 109(c) of the Paulson plan). [principle employed: enforce contracts]

I guarantee the business and individual savings rate of America will go up under this plan. With an increased pool of saved capital looking for returns, the capital markets will thaw.

The reason why this plan will not be adopted is that it does not create an Emperor of the Treasury which is the core, non-negotiable part of the Paulson/Bernanke/Bush plan.

The "bailout" proposed by the Paulson/Bernanke/Bush team is not about money or a mortgage such as the plan above is. The Paulson/Bernanke/Bush plan is about power. The design goal for the Puulson Plan is the stated goal of dictatorship.