King for a Day

If I was King for just one day, I would give it all away.

                                                     -Flock of Seagulls

Well, perhaps not. That would be the approach of our current Oval Office occupant. But what would you do? One day to re-write all the rules. Last week, I was on a Fox show called Decon-3, hosted by KT McFarland. (It can be seen here: http://ktmcfarland.com/2010/08/16/the-international-economy.) Towards the end of the show, KT asked this exact question. My fellow guest, Jack Bergen of Alcoa, got to answer the question first, but time ran out on the show before I could take a shot. Damn!

So, I’m going to answer the question here. I am King and I have complete authority to change the rules in an effort to fix what ails country. Tomorrow, I will abdicate and return to the financial industry. But my changes stay.

So here we go:

1. Institute a flat tax on personal income. Only tax money once. Corporate, dividend, and capital gains taxes are out the window. These changes would lead to an unprecedented economic boom as capital investment would flourish. People and businesses would actually understand the tax code, and compliance costs would drop by hundreds of billions. No one would have to tear their hair out every April.

Just as importantly, we would see a decline in political corruption. What many don’t understand is that the complexity of our tax code is, itself, a major source of corruption. Politicians hand out exemptions in exchange for political and financial support. We saw this as recently as the Dodd Frank bill, where Scott Brown’s vote was secured in exchange for exemptions for Fidelity and Putnam, both Massachusetts firms. Think they’ll be donating to the re-elect Brown campaign?

Texas 30th District

2. End Gerrymandering. This may seem an odd thing for me, the king, to focus on, but it’s an underappreciated problem. Gerrymandered congressional districts are created for one purpose: to create safe congressional districts for one party or another. This leads to a lot of bad things. First, it turns the House into one of political extremes. Since districts are contorted to be either very liberal or very conservative, representatives from those districts tend to reflect that. Further, since they don’t have to worry about re-election, the reps can feel free to be as extreme as they want.

Safe seats, like our tax code, are also a source of political corruption. When you serve for years and years and don’t have to worry about re-election, a strong sense of entitlement takes hold. Combine this with lack of accountability, and you have a recipe for malfeasance. Exhibit A: Charlie Rangel.

Iowa is the answer. Look at their district map:

It is put together by a bi-partisan panel that doesn’t split communities or counties. One look, and you know it makes sense. When I am king, all states will look like this.

3. Repeal Obamacare. The King says replace it with measures that will actually reduce medical costs. First, make insurance deductible at the individual level, not just the corporate. Second, let insurers sell across state lines, like car insurers. Third, institute tort reform to rid us of all the frivolous law suits. The plaintiffs’ lobby says these awards don’t amount to much in the grand scheme of things. They may be right, but what they’re missing is all the defensive medicine practiced so doctors can avoid said frivolous suits. That’s a huge number. Along these lines…

4. Institute the “British rule,” which is sometimes called “loser pays.” Really, it should be called the “rest of the world” rule, cuz that’s how it works most everywhere. Sue someone and lose, and you have to pick up their costs. The plaintiffs’ bar argues that this rule would limit access by the poor to the legal system. Baloney. If a poor person has a good case, a law firm could weigh the risk/reward of a contingency fee versus a payout to the defendants. They’d have to make judgments, in other words, as to whether a case has merit. Shocking thought, that.

5. Abolish public sector unions. John F. Kennedy used to get about a B- from the King. Recently, he went to an F when the King learned a single fact: he was the president who signed an executive order that legalized public sector unions. We are not amused. These unions are a pox on our country, and are one of the main reasons state and local governments are in the hole.

To understand why, consider a private sector union. Representing “Labor,” it sits across the table from management, which represents “Capital.” There is a natural and healthy tension, with each side needing the other. Compromise is necessary, and involves sacrifice from both sides.

Not so in the public sector, where unions sit across the table from politicians who represent other people’s capital, i.e. taxpayers. There is no incentive to be frugal, since the pols aren’t spending their own money. Better yet, by giving the unions everything they want, they get stuff back! Votes, money, volunteers, etc. A politician’s incentive is to give away the store, which is precisely what they’ve done. Enough already. The king says you’re done.

Well, there’s no doubt more, like fixing social security, but the king has had a busy day and must rest. It is August, after all. These five steps will return us to prosperity. I’d like to know your ideas. Please tell me what I’ve missed in the comments section.