In my own personal opinion, the government that does the best, does the least. There really isn’t a social program that the private sector couldn’t handle better than the public sector but I understand that is unacceptable for some. Some demand a redistribution of wealth and some intervention by the government to take action to insure that the less fortunate are taken care of. Again, I do not agree, but that isn’t the point of this post. What I keep running into with most redistribution plans is quite simply bad economics. If you are going to do it, at least give yourself a decent chance with solid economics.
The point of this post is to provide an example that is as financially responsible as possible if you are going to redistribute wealth. For this example I am going to use the budget of the US. It’s probably the most familiar to the most of us and the numbers are readily available on the internet.
A seastead is not going to be as big or as complex, but will have its own problems that will need to be addressed. In this example those won’t be addressed, but I hope that we can do that through discussion as the thread continues. For this example, it’s as if you were the government of the US. I am going to make some cuts in my budget, but you do not have to make those same cuts in yours. This is meant to be a template and as long as you can still make the numbers work in your plan, there is no harm done in my opinion.
Okay first I’m gonna give you a bird’s eye view of our current government…
*Our GDP is right about $17.5 trillion
*Our current spending is right about $3.8 trillion
*Our current receipts are right about $3.2 trillion
*It would take me days to line item the spending and there is a ton of waste to point out, but it’s a moot point since I am starting over anyway.
Now to start. My rules just for myself.
I will have a surplus every year. Disasters and wars and other things happen. I want to be proactive instead of reactive.
I will not cut any previous commitments. We made a promise to veterans, seniors, ect… when we made these ginormous programs to support them to the point that they are now counting on those programs. Losing that money is a cruelty that they may have to face in the current system at some point, but I’m not going to let it happen in mine.
Whatever I pick will be sustainable. I have to take in at least as much money as I spend and make sure that stays the case in the future.
Everything needs to be simple. Every citizen should be able to understand how revenue is generated and how it is spent.
I need to lesson the plan’s damage to the economy as much as possible.
First revenue generation.
This may surprise some, but instead of cutting revenue, I’m going to increase it. Not because I would personally want to, but I know that others would and for those of you wanting it lower, again, as long as you can make the numbers work everything is good. I’m going to have one tax and one tax only to generate it. I would have a 40 percent VAT tax. If you would like an explanation, I can provide it in another post in this thread, but for right now think of it as a sales tax. While this is the only revenue generating tax, I would also allow for sin taxes. This money would be directed straight to the problem. For instance if smoking costs our healthcare system $100, you can collect $100 in sin tax provided that the money goes directly to covering those expenses.
Revenue expected to be generated: $7.1 trillion
Military Spending $300 billion, Yes I cut it more than in half. Still more than the next 3 countries combined. I would make the cuts by combining the 5 branches, decreasing the number of non-combat forces, decreasing the number of higher officers, increasing special forces, replacing hardware and troops with less expensive drones and automated units. I could go into more detail for hours, but for now I’ll simply say I cut it by making a smaller but better equipped force.
General Government $25 billion, Expenses of the Legislature and Executive Branch. I really really want to cut this because there is a lot of waste here, but I am resisting because some may think we need more spending here.
Protection $58.7 billion, Federal Police, Fire, Courts, Prisons. I left this the same.
Infrastructure $200 billion I combined several line items here and basically doubled it. Our nations infrastructure is crumbling.
Debt reduction $1 trillion This isn’t something in our current budget, but as you can see I gave it a priority. Once the debt is paid, this payment will go to the surplus. I estimate that the debt will be paid by early 2022 and the surplus grows by a trillion dollars every year after that. Since T-Bills won’t exist anymore, the surplus will be invested in the entire stock market. This will give us a better interest rate than T-Bills and would help the economy grow.
Other Spending $37.3 billion Again lots of stuff I could cut, but I left it the same.
Total spent $1.621 trillion Wait, what about all those social programs? Give me a second. I’m getting to it.
One time measure- Take all of the T-bills owned by the government and burn them. There is no need to pay interest to ourselves.
Okay now for those social programs…
We have $5.479 trillion to spend.
What I would do is simply write every man woman and child a check for $17,122, so a family of 4 would get about $68,487.50. They could use that money to take care of their needs however they see fit in the private sector.
Others may want to have more control so the money isn’t wasted. Perhaps a debit card that can only be spent on food, education, healthcare etc… or a combination of cards.
Still others will want the government to spend it for them. They still have more than the entire current federal budget to do that if they want. I am not a fan and think it’s the most wasteful, but it’s your seastead and your option.
Why do I think this is more economically sound?
A VAT makes it harder to cheat the system. A VAT leaves a paper trail that makes taxes easier to trace.
When you tax income, you discourage income. In this system people can make as much as they want. They are only taxed on what they spend.
It’s simpler. No forms to fill out come April. Everyone sees where their tax dollars are going at the end of the year.
It makes you more competitive in the world economy. It makes your exports cheaper for other countries and it makes importing more expensive.
It doesn’t trap recipients. You get your funds whether you are working or not so it doesn’t discourage working.
It gets rid of all subsidies and corporate welfare.
It encourages savings and investment. An unspent dollar is an untaxed dollar.
Now a few downsides…
In my scenario above the average worker would notice an increase in their paycheck of about 28%, but prices would be instantly 40% higher. Now I did this on purpose to let those wanting more social programs to be able to do so, but a sudden 12% inflation jump would be a pretty big shock.
This is regressive in it’s simplicity. I didn’t exempt food, shelter, clothing, etc… on purpose to keep this simple. The average wage earner spends a majority of his/her paycheck on these necessities. You can exempt these things, but the more you exempt, the more you have to raise the VAT percentage to keep the same revenue.
Some things you can play with…
You can cut or raise the VAT percentage. If you don’t exempt anything, simply multiply the percentage times the GDP.
You can pay off the debt slower than I did or not at all. You could have up to an extra trillion dollars a year to play with. If you added that your social programs that’s an extra $3125.00 per person. On the other hand if you pay off the debt and get a surplus, you could add even more to social programs further down the road.
Okay, critique, ask questions, offer suggestions or whatever else you can think of.