What the world needs today are solutions to its biggest problems - massive poverty and ignorance. Those solutions should be crafted by Americans because America (1) is the richest country on Earth (2) suffers less poverty and ignorance than other large nations (3) has the communicative skills and resources to disseminate solutions and their implementation and (4) America has the intelligence and ingenuity to solve these problems.
The questions the world faces today are how does it build wealth and at the same time educate and inform billions of people on how to avoid conflict and march into the future with dignity and purpose. Inasmuch as the USA itself suffers to a large degree from the same maladies – poverty (endemic) and ignorance – it would be prudent to first eradicate them here before telling the world how they should solve theirs.
When one solves a problem they first must look to the extremes to judge its severity. Last year the richest American, Warren Buffet, made over $27.4 million a day whereas an American living at the poverty line made about $55. The gap widens more dramatically when we throw in the fact that millions in the world live on less than $1 a day.
Now we know the severity of the problem the question becomes how do we close the gap. The time-honored religious and political solution has been to take from the rich – either by force, charity or taxation – and give to the poor. Were that an effective solution we wouldn’t have the world wide endemic poverty we have today. No the solution lies not in taking from the rich but by arranging our financial structures and policies to make the poor rich.
Unfortunately this idea, making the poor rich, assaults the understandings and beliefs in which man has wound his way through the ages. Man has been told and in great measure believes there will always be poor people. He has trouble getting his arms around the fact, that the poor can become wealthy. Here in America we know we can eradicate poverty if we only denounce socialistic “consumption” policies and adopt capitalistic “investment” policies.
Warren Buffet was not crippled by negative “consumption” beliefs. He found himself a niche in society that allowed him to accumulate $62,000,000,000 ( $62 billion) at last count. He became an “investor” and last year his investments increased $10 billion in value - $27.4 million a day for each of the 365 days last year.
Now we know the severity of the problem and the manner in which it has to be solved. The remaining question is how we solve it in practical terms. There is an easy answer to that question – so easy that it has escaped the attention and focus of ordinary Americans and their political representatives for years.
We need to make all Americans “investors” with a pool of capital invested in the American economy to grow during their lifetime into a nest egg sufficient in amount to provide them with an affluent retirement and property left over to will to the kids thereby making America and Americans progressively wealthier with every succeeding generation.
The problem with getting a pool of capital for poor and lower-income people is illustrated by the complaint voiced by politicians here in the 2008 election that over the last 7 years inflation-adjusted income of ordinary Americans has fallen $1,000 a year. When that is coupled with rising prices for food, other staples and gas and the rapid deterioration of the US dollar it is no wonder so many have no money left over to invest in America’s capital markets.
However, we can find that pool of capital if we look at the receipts of the Federal government and ask ourselves the question can Americans do a better job with the money they send to Washington than politicians do? And if we can how can we put money taken by Washington back in our own pocket to provide us with a pool of capital to become wealthy over our working life investing half as well as Warren Buffet in the American economy. In that manner we could afford an affluent retirement and the best medical care available.
The simple answer is that payroll taxes, not income taxes, would provide ordinary Americans with that pool of capital. If Americans could keep and invest the 15.3% deducted from their paychecks (7.65%) and the 7.65% paid on their behalf by their employer each pay period that could be their pool of capital. An average household making $40,000 a year would over a 40-year working life have $240,000 withheld in payroll taxes which if invested in the stock market in indexed funds would grow after 40 years into a $3.2 million nest egg that would throw off a $27,000 a month retirement check assuming an annual rate of return of 10%.
Of course these large amounts also assault the beliefs and experience of ordinary Americans. They go to the bank and get a paltry 2% in annual interest. More adventurous ones invest in the stock market and too many suffer losses. Whatever these negative experiences and beliefs engender in ordinary Americans they cannot let those experiences and beliefs blind them from the fact that Warren Buffet earned a 24.8% annual return on his investments in the stock market for the last 30 years thereby beating the S&P 500 stock index’s 12.8% annual return during that same 30-year period.
By investing in indexed funds, ones that invest in a pool of 500 or more stable stocks, the risk that one failure is significantly reduced. The US Government has one of these “personal investment accounts” available for government workers including Senators and Congressmen and after almost 20 years of experience it has proven that there is little or no risk (they too invested in Enron with no significant harm to the overall indexed fund) and the returns on investment in indexed stock funds has been spectacular compared to bank interest.
The ultimate solution will be to make this pool of capital unavailable to the taxpayer until he retires so that he can (1) benefit from the long-term returns on his investment which history indicates will be greater than 10% annually, (2) benefit from the compounding effect of that investment (interest paid on interest accumulated) (3) restrict his invasion of the account that (a) will cripple the effect of compounding and (b) increase the possibility that he will become a ward of and a burden to the government when he retires without or with insufficient funds.
There you have the solution to poverty. The solution to the ignorance factor must be woven into the fabric of society as it becomes wealthier. The above plan to make Americans and America wealthier is covered in the Ownership Society Institute’s Rise Up America plan one can review at www.riseupamerica.us It was designed to let Americans who haven’t been highly educated achieve the American Dream so long as during their working life they remain stable and industrious.
The Rise Up America Plan has established four policies and procedures to transition from existing entitlement programs like Social Security and Medicare to personally financed retirement.
1. Benefits under the old plans will be the floor under which no future benefits due beneficiaries can fall. In other words all benefits under the old plans will be honored, paid and guaranteed to all existing and future beneficiaries living and even those yet to be born,
2. $1.3 trillion in payroll taxes annually collected by the government will be placed into personal accounts owned by the taxpayer and immediately invested in the stock market to ignite the creation of new businesses and jobs,
3. the government will guarantee that the $1.1 trillion in annual Social Security and Medicare benefits will be paid to participants, and
4. the methods of funding these policies will increase the value of the US Dollar heretofore crippled by the overuse of the printing press.
As many know Americans spend more in recent years than they earn seriously cutting our stream of new capital into our stock and bond markets. In fact complaints have been lodged about allowing Mid-Eastern and Chinese investments to supplant investments normally made by Americans. Under Rise Up the single largest untapped new capital in the world namely the $1.3 trillion in payroll taxes will be invested annually into our capital markets thereby exploding the growth of the economy.
As many know the cruelest tax of all on the poor and middle-class is inflation. Inflation has been primarily caused by the overuse of the printing press to pay for political mistakes in running the government. Inflating our money supply just to pay expenses (“consumption”) has devalued it so significantly that a dollar today is the equivalent of 2 cents in 1913. Had we printed money and “invested” that money in a growing institution like the stock market we would have had a country worth 50 times what it is today.
Under Rise Up it is suggested that we fund the benefits payable under Social Security and Medicare by monetary means (we print the money that we pay). Economically that will mean that we will fund those expenses dollar for dollar by expanding the money supply the exact amount of those benefits which as participants die and personal accounts grow sufficient in size to fund retirement will eventually extinguish themselves automatically.
For every dollar of the $1.3 trillion invested in the market by participants, they will earn 10 ten more than they invest due to compounding factor. Through this mechanism of funding benefits by monetary means and investing payroll taxes by fiscal means the wealth of Americans and America will sky rocket making our dollar worth considerably more on the world market.
Under the Rise Up America plan many additional benefits will accrue to Americans and America. For a listing of those benefits you can go to the “Mission Statement” on the above website. For example the $45 trillion in unfunded debt will be automatically extinguished, the national debt of $9 trillion will be reduced to $5 trillion, the national budget will be cut in half, Americans will receive the largest tax cut in history, the poor will become rich, manufacturers won’t have to fund their employees pension and old-age medical needs, government won’t have to fund retirement and old-age medical needs and a host of other benefits.
If you would like to join the Ownership Society Institute in promoting the Rise Up America plan go to our website and sign up for our free book and contribute to our effort to eradicate poverty in America as well as to explode the growth of the economy. Solving poverty will go a long way to providing society with the dignity it needs to eradicate ignorance. Nothing in the world makes man more responsible than protecting his property. A personal account is the property 21st Century man needs.
