American Solutions

A 12 Step Program to Reclaim Freedom and Prosperity

Step 1: Admit we have a Problem

Step 2: Believe a Power Greater than Ourselves Could Restore our Nation 7 Step 3: Constrain the Politicians: Require a Balanced Budget 9

Step 4: Create Real Trust Funds to Fix Entitlement Programs 10 Step 5: Re-engineer Government to Stop the Failed Programs 14 Step 6: Control the Regulators Step 7: Fix the Education Mess Step 8: Needed Legal Reforms Step 9: Root Out Fraud Step 10: Solve Immigration Permanently Step 11: Fix How we Tax Americans Step 12: Now we can pay down the debt Conclusions 19 21 29 31 32 35 41 42

We know America is stronger when its federal government is small and excluded from the economy. Income inequality has grown since government increased its intrusion into American society. The best way to provide opportunity and allow all American citizens to pursue happiness is to take the boot of government off the neck of prosperity. Big government attracts big corruption, big fraud, and big special interests that prosper by directing the largesse of the central government to their interests, causes, and cronies. The Congress, Presidency, and Supreme Court are all in violation of the Constitution of the United States and the oath they take to protect that document. They have created a web of failed policies and programs that detract from, instead of advancing, the general welfare of the American people. The Constitution allows the central governments Congress and Executive branches a limited number of enumerated powers to exercise over the nation. All other power remains with the people, or if government action is required with the states. After bitter debates over ratifying the Constitution, the founders restated their reliance on limited government by passing the 9th and 10th Amendments. The provocative allure of power drove each branch of government to justify increased intrusions into your personal and economic life under the ruse of promoting the general welfare. Regretfully, these invaders ignored the ultimate objective of the Preamble: to secure the blessings of liberty. The Supreme Court erected a slowly leaking bulwark against the worst incursions for decades and kept central government largely irrelevant through the beginning of the twentieth century. (The federal government spent only 2.3% of GDP in 1903 and 3.7% by 1929. Today the national tyranny totals 25% of our GDP.) However, the Supreme Court capitulated under a deluge of political pressure during, and since, the Great Depression. Judges enabled the federal government to impose a myriad of new programs and regulations clearly not permitted by the Constitution. Our supreme leaders permitted creative new interpretations based on promoting the general welfare or stretching the commerce clause until today they can justify anything the federal government thinks is best for us. These programs have universally failed to solve the problems they attacked and have destroyed not only the general welfare but also the particular welfare of those they sought to help. All we have to show from battling poverty, fixing education, and resurrecting our cities are trillions of dollars of debt that must be repaid by future generations. Such indebtedness further diminishes the general welfare and happiness of future citizens. One cannot make the argument that times are different and the founders did not have to deal with the problems we have today. Problems of poverty, public health, education, out-of-wedlock births, support for and regulation of corporations, public transportation, etc. were all issues that Americans debated in 1787. States dealt with these issues regularly. Some states proved more successful than

others. But the important point is that the founders were aware of such issues and decided the central government should not try to solve these problems. Government intrusions began in the 1930s for one purpose: using other peoples money to buy votes and obtain political power. The Supreme Court eventually provided cover for politicians as they let Constitutional protections erode. It is time we the people once again convince our servants, whether elected or appointed, to abandon failed programs and honor their oath to defend our Constitution. It is time to declare that the federal Wars on Poverty, Illiteracy, Drugs, etc. are not only lost, but were never the province of the federal government. Ideally, this declaration should be made by the Supreme Court. The Court should return to making decisions limiting the central government to its defined role and no longer permitting rampant waste of taxpayers money. America is addicted to unsustainable debt, sold to us by politicians who offer programs designed only to buy your votes. America needs a 12 Step Program to overcome its addiction. Of course the first step is to acknowledge we have a problem. When 1/3 of our citizens are on the dole and 49.1% of American households receive financial support from the federal government this is difficult; even more so when half of all Americans pay no income taxes to support the government. This 12 Step Program is built on two foundations: Revoke the power of politicians to spend your money and return to Constitutional limits on government. America was born from a struggle to defeat central government tyranny. The Constitution was created to both organize and limit central government powers. Without government intrusion Americas economy boomed. Now the tyranny of debt and confiscatory taxation has again arisen and must be opposed by American citizens. We must explain even to those who receive a subsistence level of income from the federal government that it is in their own, and their childrens, best interest to reign in the power of government. The key to digging out from under this debt is once again to un-leash growth and restrict governments ability to strangle our prosperity. The following 12 Steps will make America a better and a stronger country. They are not intended to solve all our problems. The goal is to return America to a foundation to become not only the most prosperous country in the world again, but also the most egalitarian in our distribution of wealth and freedom.

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We must first admit that America is currently powerless to break our dependency on debt and government intrusion into every element of our lives. Americans must realize our way of life, our freedoms, and our opportunities will be lost if we continue as a government-centric society instead of a society centered on individual liberty. Our founding document, The Declaration of Independence, acknowledges we possess but three fundamental rights: life, liberty, and the pursuit of happiness. (The right to property was implicit to the drafters in each of these enumerated rights.) These rights, together with freedom from government tyranny, drew millions of people to our country. It took a bloody civil war but we eventually granted these same rights to those brought to this country involuntarily. No other country has been willing to bleed to grant freedom to a powerless minority. This fact is largely ignored today. We teach our children about the dark side of our country and fail to expose them to the light of our nations great ideals and actions. It is time to reinvigorate the Constitution, a legal structure created not by rulers, judges, or warriors, but by We the people of the United States. Our second founding document affirmed the Declarations guiding principle by ending its preamble with the need to secure the Blessings of Liberty to ourselves and our Posterity. We are part of that Posterity, and yet too many now listen to the siren song of big government security and forego the Blessings of Liberty. We are now told people smarter than us need to protect us and care for us. Beginning roughly 100 years ago the Progressives, now called Liberals, began to preach that individuals were no longer strong enough to take care of themselves. We needed Big Government on our side to combat the forces of Big Business. Big Government needed ever more power to wage this war for Americans, so we needed to reinterpret the Constitution and ignore the fact that it was created for two equal reasons: to organize central government functions and to then limit the power of that government. The forces of Big Government used every possible problem or crisis to increase their intrusion into our lives. Every war, every recession (even those caused by Big Government), every industrial accident, every problem became the excuse for another layer of Big Government to solve our problems. But the problems were never solved; they became worse and new problems emerged. We were going to end poverty, yet we not only increased poverty but also destroyed families. But we were assured the next program would do the trick, if we just increased taxes and spent more money. Meanwhile, the forces of Big Government took over your schools and waged a propaganda war to prove that they were the force for good fighting against the evil of Big Business. No one notices that most of the feared Big Businesses that existed 100 years ago did not last. New products or new competitors reduced prices and drove these predators out of business or forced them into minor roles in Americas economy. The Railroads personified Big Business evil in the 19th

century, yet by the 1960s most railroads were bankrupt or had limited influence on American commerce. Meanwhile we became addicted to Big Government. Like any other addict, the country has grown weaker as it strives to fund its addiction. Even after spending $12 trillion dollars fighting the War on Poverty we have more Americans living in poverty than ever before. Since the federal government took over public education, the cost of educating a student has increased geometrically as academic standards stagnated. Students, especially in the most expensive urban districts, realize they are wasting time and as many as 50% now drop out before graduating. Government intervention has led to the escalation of health care costs; today nearly one fifth of our gross domestic product (GDP) is spent maintaining our health, with little improvement in outcomes from the 1960s. The American people, when surveyed, see that 51% of federal spending is wasted. But the forces of Big Government are very clever. They know that to keep power they must bribe as many people as possible with at least a small place at the government trough. They believe Americans are willing to give up liberty for a couple hundred dollars a month in food stamps, or a tax credit to pay for a new air conditioner, or medical care that seems to be free. The forces of Big Government now have 49.1% of all households receiving some form of government payment. In addition, think of all the incentives built into the tax code to change your behavior to have more children, to send them to college, to reimburse their teachers supplies, or to buy them an electric car. And only half of our citizens pay the income taxes that fund these slots at the trough. We have a problem. The Forces of Big Government are winning. The media assures us that anyone who opposes these failed programs is racist or mean-spirited. Can such power be defeated? Can We the People take back our country? Can we convince people that using debt to support failed programs wont work? Will those now on the government dole risk the subsistence lifestyles they have been locked into for an opportunity to really succeed? Can we return to the Constitutional structure built to avoid the very problems we face today? Things can be better, if riskier, by taking the next 11 Steps to restore Liberty and Opportunity in America, and control the wasteful expenditure of your posteritys legacy.

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Twelve Step Programs aimed at fighting addictions rely heavily on finding spiritual strength to overcome an individuals weaknesses. Many times in our nations history we have sought spiritual guidance to overcome national problems. Seekers turned to Great Awakenings, Abolitionist movements, or temperance programs (not just against alcohol) to improve America. Some were more successful than others, but large numbers of Americans realized that they could not solve the nations problems as individuals. The second step in the Alcoholics Anonymous program states: Came to believe that a Power greater than ourselves could restore us to sanity. America needs to be restored to sanity. Many people are looking for that one leader who will come out of the wilderness to restore American values. Many conservatives long for the second coming of Ronald Reagan. While Reagan did many great things for America, even he was unable to put a permanent dent in the rushing tide of Big Government. While it would be wonderful once again to follow someone who believes in our founding values, one man cannot change things. Even at our founding no one man, not even George Washington, was able to set the course by himself. A massive proportion of our citizens united to create our country and its untried system for governing. At the time of the revolution, 500,000 copies of Thomas Paines Common Sense were published in a country of less than 3,000,000 men, women, and children. It was believed that almost every American read, or heard, at least part of Paines arguments for freedom and against tyranny. Americans also bled and died for Liberty during the Revolution: It is calculated that 250,000 citizens suffered in the national army or served in local militias over the course of the war. This is a phenomenal percentage of the military-age populationequivalent to 25,000,000 soldiers today. Most of the remaining Americans gave of their treasure as our currency became worthless, the country was cut off from world trade, and English armies pillaged the countryside. Where will we now find a Power greater than ourselves? Ideally, we should look for another Great Awakening to return us to the nations spiritual roots. America never had just one religion and our founders insured we would each be free to pursue our own faith. Past Great Awakenings came within the context of a pluralistic society and so could be repeated today. The Revolutionary period offers another option. The Revolution, and later the creation of the Constitution, had a clear spiritual guidance, but the immediate motivation was a battle against tyranny. Tyranny at our founding took the form of the King and Parliament on the other side of an ocean. Tyranny today results from a central government that perverted the power we granted to it and burdens its citizens with far greater injustices than any faced by Americans in 1776. Todays taxes are far beyond those imposed by Great Britain. No king would have considered telling Americans how to run their schools, care for their poor, raise their children, or manage their local industry.

In 1776, and again in 1787, Americans who created this nation looked specifically to a Power greater than themselves: We the People of the United States. Once again it is time to trust the People to restrain and restore America. Personally, I would rather trust 535 citizens picked at random to make our laws than those we have elected. Once we accept our problem and turn to a power higher than ourselves there are ten more steps that would restore the People to their rightful role in this country, put us back on the road to fiscal security, and limit the power of Big Government.

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We must enact a strong balanced budget amendment, that caps spending and taxes at levels consistent with providing only those functions permitted by the Constitution. Any such amendment should also include annual repayments of the existing national debt over a reasonable time frame. The central government has proven incompetent at managing anything or trying to fix social problems in a country of 300+ million residents spread over an expansive geography. Whether the founders were prescient or not, they did not give congress or the president power to control social problems, solve national issues, or regulate behaviors other than trade among the several states. When attempting such actions our government has a 100% failure rate. One option for the wording of this Amendment would be: Except in time of declared war against a foreign enemy, Congress shall not permit over the course of any fiscal year the total cash expenditures, for all purposes, of all branches of the Federal Government to exceed the total cash revenue received by the Federal Government. Nor shall the Congress or executive branches of the government impose any requirement on the States without providing the funding needed to implement such requirement. Cash expenditures and cash revenues shall exclude expenditures and receipts for the Social Security Trust Fund, Medicare Trust fund, and Transportation Trust Fund; and each of these Trust Funds will be independently managed by Boards of Trustees appointed by the States. For all years in which gross domestic product grows by a positive number there will be included as part of the total cash expenditures an annual sum used to retire the national debt. This amount shall be three percent of all other appropriated cash expenditures. The total amount of spending permitted after approval of this Amendment and the required segregation of the three Trust Funds listed above shall never exceed 11% of the prior years Gross Domestic Product. Furthermore should Congress wish to increase taxes or fees, or add new taxes or fees, to effect such excess of revenues over expenditures it would require a two-thirds vote of both houses of Congress to be approved.

To start America growing again and to re-instill freedom as our principal objective two major tasks must be accomplished: control entitlement programs and abandon other activities that the government is not empowered to pursue. We will now turn to practical solutions that will accomplish these tasks and demonstrate we can provide more than adequate government while spending less than 11% of your wealth. We did this for generations and achieved both liberty and broadly shared economic opportunity.

The federal government has no constitutional basis to run insurance schemes that provide pensions and healthcare for the elderly. However, we have created a contract with Americans to do just that. We take taxes during their working years, although that money is drastically inadequate, to fund pensions and health care when they retire. People plan based on these commitments, and we must fulfill our obligation to provide a basic level of retirement security. This does not mean we have an obligation to provide for every potential health or income need. There is no requirement that everyone gets a scooter free of charge or a disability income just because they have difficulty finding a job. We do need to provide honest, basic income and health security for American citizens. Such support should be funded by payments provided by workers, current and future, and their employers, not the general tax payer. We already have mechanisms for accomplishing this task: trust funds and realistic actuarial analysis. Both Medicare and Social Security were originally established and sold to Americans as trust funds that would protect your interests. You, and your employer, make contributions during your working years and that money is available when you retire, or become really disabled. Other important expenditures have been handled through trust funds; most notably the highway trust fund, used to build roads funded by gas taxes. There are two problems with the Social Security and Medicare trust funds: 1. Your political leaders stole your money to fund other government programs. 2. Your political leaders did not take in enough money to pay for the lavish benefits they later promised, especially health care benefits. Your political leaders have been lying to you for decades. They told you they created trust funds or lock boxes to protect payments you made to fund your retirement, provide for your long-term healthcare, or keep your roads in good repair. Instead they borrowed your payments and squandered them on social programs and giveaways to buy votes so they could stay in office. The first thing we must do is to restore real trust and get our fiscal house in order. We must create real, independent trust funds that insure the money you give to the government is used only for the purpose it was intended. In addition to protecting your assets, this will give the kleptocrats less money to move around, play games with, and waste. One key provision for these revitalized trust funds is that they must be created within the confines of the Constitution. This means they must be independent of the federal government and directed by the States. Each existing trust fund should be re-authorized as a stand-alone entity to be run by its own

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Board of Trustees. Each Board should have 50 Trustees, one from each state. Each State can decide how to appoint its representative. In the future all decisions must be approved by the Board of Trustees with actuarial assumptions personally attested to by the Trustees. The Board of Trustees must decide on affordable benefit levels and funding. Both the costs and revenues will be separated from the federal budget. Certain steps need be taken: Congress must return the funds pilfered from the trust funds and we need to start with an honest accounting of our existing liabilities. Funds not required for current year benefits would be invested to generate real income. Interest earned on trust fund balances would support future benefits and lower tax requirements. We must then honestly forecast future contributions from workers, employers, gas taxes, etc. that will become available to pay future benefits. Then, based on available funds, each Board of Trustees would determine the level of benefits available for pensions, health care, road construction, etc. The Board of Trustees must promptly deliver an annual report detailing its assumptions and expected benefits to each contributing citizen. Annually, the GAO will audit trust fund activities and future projections for accuracy and reasonableness. Should a fund be on a path to insolvency, the Board of Trustees must adjust either revenues (i.e. taxes or contributions) or future benefits within 12 monthsno more kicking the can down the road. The earlier problems are addressed, the simpler they are to solve.

After establishing each trust fund, Congress will have no future role in deciding either the benefits or contributions for any trust-fund-supported activity. No more pork barrel road projects. No more taking your Social Security taxes to fund failed education or poverty programs. Medicare Medicare is a special, and much bigger, problem. We entered into a contract with our citizens to take their money while they were working in return for caring for their health after they retired. Today there is a trust fund for this service, but the fund will be empty in a very few years. Since Medicare is currently paying more in claims than we receive in taxes the problem gets worse every year. We will either have to rapidly curtail benefits or steal ever-larger sums from the general tax fund. The first major problem with Medicare is that the average cost of benefits received is almost three times higher than the average value of taxes paid in by an individual and his/her employers during their working years. A second problem results from a system that rewards doctors, hospitals, and other providers to perform more procedures rather than keep the patient well. A third problem arises because patients do not see bills for months, or years, and have no incentive to question charges. This is particularly true for those who have supplemental insurance to cover expenses not paid by Medicare. A fourth problem results from the massive, rapidly growing level of fraud in the Medicare payment

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system. The government now acknowledges 15% of payments are inappropriate, but realistic estimates show 30% to 40% of payments are fraudulent or unnecessary. The key to fixing Medicare lies with reducing the overall cost of healthcare. But, like Social Security, Medicare needs to return to a stand-alone medical insurance system funded by its participants during their working years and managed by independent Trustees representing each state. Money should be paid into the system by workers and their employers. The amount of these payments should be based on actuarial projections of expected medical cost, not a politically-based calculus intended to buy senior citizen votes. A crucial element of these assumptions will be the level of care provide to retired citizens. We simply cannot afford to cover every ache, pain, or scooter that someone wishes others to pay for as they age. The Medicare Trust Fund should pay for good catastrophic care and an insurance program with reasonable deductibles for doctor visits. This insurance needs to be bid out to insurance companies that have the capacity to root out fraud; if seniors wish added coverage they would pay for additional insurance. Clearly, we need to rein in costs, fraud, and abuse. Medicare is particularly susceptible to fraud as beneficiaries do not see bills until months after claims are paid and the Medicare system does little to insure that its prompt payments are for valid services. Fraud likely consumes up to 40% of Medicare spending. If the new Trustees do not stop fraud, reduce the volume of duplicate procedures, and adjust patient co-payment responsibility, the taxes charged to current workers to cover both their own future costs and those for current retirees will be overwhelming. These are real costs that politicians have ignored for too long. The bills are coming due now and we must fix this problem. As long as Americans believe their government healthcare will take care of everything after they become ill, they will continue in lifestyles that lead to poor health outcomes without concern for the cost of care. Once the new Trust Fund establishes its baseline benefits and the tax rates employees and employers must pay to support that level of care, people can decide whether they need to prepare for added costs during retirement. Transportation America has long had a Transportation Trust Fund to pay for roads and other infrastructure with gasoline taxes. This fund has, however, prioritized projects according to the votes they will win rather than the importance of needed projects. Congress siphoned off money meant for needed road or bridge improvements and wasted it on foolish mass transportation projects, bridges to nowhere, and other local projects that have no economic value. Furthermore, the cost of all construction projects has been inflated by requiring all expenditures to be paid at the highest unionized labor rates, rather than at competitively-bid rates. As with Social Security and Medicare, we need to return responsibility for our infrastructure to an independent Board of Trustees representing the 50 States. This board will create a fully transparent multi-year strategic plan to implement specific approved projects based on the annual receipt of

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gasoline tax revenues. All contracts will be subject to open bids, at whatever rates local companies pay, and will be posted on the internet. America has a backlog of needs as politicians have allowed infrastructure to decay while they used your money to fund pork barrel, green, or other trendy projects.

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When you find yourself in a hole, stop digging. Will Rogers

Federal programs, especially those targeted at fixing social problems, have universally failed. Federal efforts to eradicate poverty, better educate our children, restore dilapidated cities, heal our citizens, provide job training, etc. have failed. It is time to recognize that our founders were correct to exclude such tasks from the powers granted to central government. Many problems we face today existed in the 18th century, but the founders decided to omit them as responsibilities of what they feared would become a bloated, tyrannical national government. Once again they have been proved correct. The only way to control federal bureaucracy is to starve it. After moving control of Social Security and Medicare to independent Trust Funds, we must eliminate failed social programs from federal control, return them to state responsibility, and put a cap on all other federal spending. Clearly, we need a plan to transition to this constitutional system to allow each state to again assume responsibility for their citizens. Since we, through our elected representatives, have addicted nearly a third of our fellow citizens to a life of dependency we cannot force them to shake their addiction cold turkey, or all at once. Due to the paucity of training provided by the educational establishment, most lack the ability to immediately be productive workers. If one did not know better, one would suspect a conspiracy to ensnare a majority of the citizens into a state of dependency, a dependency that would drive them to keep those in power to continue to dole out the meager subsistence living given to the masses. So we face a dilemma. Many citizens depend on federal payments, yet such payments are not Constitutionally permitted to be paid by the central government. And so long as these citizens depend on the federal dole they cannot truly obtain either their Liberty or a reasonable Pursuit of Happiness. There is a solution. Today the federal government spends about $1.1 trillion on unpermitted social programs (e.g. Medicaid, welfare, food stamps, aid to education, job training, housing and urban renewal, etc.). This amount includes not only the benefits that trickle down to those in need, but also the fraudulent payments and the cost of the federal bureaucracy that dispenses program funds. However, the States can provide these services to their residents. Each State knows the most important needs of their citizens. So the answer is to first eliminate the fraud, waste, and bureaucratic costs and then disburse the remainder to the States to spend how they wish. But how much do we disburse? Our economy faltered in 2008, but has been in recovery since 2009. As the current Administration notes this has been a period of low inflation, so it would appear that we should start this calculation from what we spent in

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2007. Since the Bush Administration also let such spending accelerate faster than previous administrations this would surely be a more than adequate point of departure. In 2011 it is estimated we spent about $1.1 trillion compared to $.7 trillion in 2007. So simply returning to 2007 levels of spending would realize a $.4 trillion savings and still provide benefits consistent to those spent prior to the downturn that has now been recovered. As we will demonstrate later, we can save all the funding the federal government currently throws at unsuccessful educational programs and can thus eliminate $38 billion of education spending (the amount form 2007). However, we also know the federal government acknowledges that between 15% and 26% of current social spending is lost to fraud and improper payments. We certainly should not provide that money to the States to continue disbursing to criminals. In addition, the federal government has created a bureaucratic organization to manage all these programs. By simply funding the states, based on population, we should expect to save at least 1/3 of current spending. This would result in about $225 billion in added savings.

So without diminishing support to those honestly in need we should expect to disburse about $550 billion to the states. That is a lot of money. That is more than the entire GDP of all but the 20 largest countries in the world. Plus the States already add to this funding with their own money. We can save $550 billion and still care for tens of millions of Americans as they make the transition to independence. The States, however, can best determine whether their residents most need health care, job training, housing support, etc. The Constitution always considered such support to be the responsibility of the States and it is time to allow them to once again determine what level of support they wish to fund. Over time, the federal government payments to the states would decline as one would expect the states to solve these problems and decide what they can afford using local taxation. The Bureaucracy One of the reasons America was economically so successful during its first 150 years was our very simple government structure from 1787 until the 1930s and its limited intrusion into citizens lives. Today we have an organization that is nearly impossible to chart, and the bureaucrats like it that way. Based on trendy politics and the progressive goal to increase reliance on government, we have grown from a half dozen small cabinet departments to 15 full cabinet functions and six other organizations that have cabinet rank. This does not include all the czars and advisors not permitted in the Constitution. The following re-organization would not only save billions of dollars of redundant administrative costs, but also improve accountability: Eliminate all czars and their staffs; any non-cabinet positions would cease to exist. Eliminate all political officers and advisors. This is not the Soviet Union. The President does not need your tax dollars to pay for political advice. Let the parties pay. Collapse the 21 functions that report to the president to six cabinet departments.

The Required Departments

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We need only the four remaining original departmentsState, Defense (which combines the older War and Navy departments), Treasury, and Justiceto which we should now create two new departments. The first new agency would be a Department of Research and Statistics (the DRS). This department would gather the research and statistical functions that are a small part of most departments today. The promotion of research, primarily through the patent office, was clearly one of the powers that the founders granted to the federal government. Similarly, the census and related statistical analysis functions have a national mission that is consistent with constitutional guidance. The second new department would be a Department of Citizen Services (the DCS). This will not be a new layer of bureaucracy added over the current Cabinet-level functions. The principal function of this department will be to administer the distribution of federal block grant funds to the States as they resume their role providing social services to their citizens. This will be a very small department primarily made up of accountants and administrators, to insure the appropriate distribution of funds. We need to return to the wisdom of the founders and dismantle the agencies and departments that attempted to fix our social woes, but generally made problems worse. Several departments should be eliminated immediately. Some departments oversee tasks that should be continued, at least during the transition to State control. We have discussed how to provide a smooth transition to state control, so let us look at what can be eliminated. Agriculture. World demand for food will clearly maintain the income of American farmers, so all corporate welfare should immediately be eliminated. Food stamps and other social programs should be replaced as part of the State Block Grant proposal outlined above. Agricultural research and food inspection programs will become part of the new DRS. We can surely just abandon such projects as the USDAs efforts to bring Broadband to American farmers, provide crop insurance, develop markets for carbon sequestration, create a National Organic Program, and other wasteful programs. Any real needs, such as crop insurance, will immediately be provided by the private sector. Commerce. The principal mission of this department is to provide corporate welfare to well-connected, large businesses. Their website claims The Commerce Department's mission is to help make American businesses more innovative at home and more competitive abroad. Can anyone believe a government agency will make any American business more innovative or competitive? Constitutional offices including the Census Bureau and the Patent Office (which turns a small profit) should become central to the new DRS while Commerces statistical and weather functions should also be moved to the DRS. The remainder of the department, its management, its staff, and its grants should be eliminated. Education. If there is one perfect example of failed government activity over the past 50 years the Department of Education would certainly be it. The small statistical function begun during the Civil War could be rolled into the Census Department in the new DRS; and all other functions, staff, and grants should be immediately eliminated. Let the States return to managing education. (See Step 7.)

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Energy. The research and statistical functions of this department should move to the DRS, where scientific merit will determine the fate of future investment. We dont need a federal government department handing out investment dollars to companies like Solyndra, or managing other programs aimed at energy independence. Such funding is simply another form of federal graft and should be immediately stopped. Health and Human Services. As the principal department directing federal healthcare and welfare intervention, HHS would see the biggest changes in its structure and represents massive opportunities to recoup waste. As discussed in Step 4 the Medicare program will be turned over to a real rust fund directed by the States to insure the solvency of a program currently on a path to bankruptcy. Most of the other expensive functions of this department, including welfare, Medicaid, and other health programs, will be turned over to the states as described above. The operation of the Centers for Disease Control and the National Institute for Health will become part of the DRS. A very small staff will form the core of the DCS to distribute federally collected block grant funds to the states. Homeland Security. This massive department generally performs Constitutionally permitted functions. However, there is room for cost savings, privatization, and program elimination. This department should be consolidated into the Department of Justice to form one efficient force to protect our nation and eliminate unneeded, or politically motivated, programs. Housing and Urban Development. Can one imagine any department that better epitomizes failure than HUD? Picture Detroit. Envision the center of most other cities where existing communities were razed only to be replaced with government housing. Consider all the crony capital deals where urban land owners enrich themselves by directing projects onto their land or took advantage of constructing shabby affordable housing at taxpayer expense. HUD also took the lead in forcing banks to underwrite sub-prime loans for homeowners who did not have the resources to own homes. After privatizing FHA and Ginnie Mae, there really isnt anything left of HUD that should be done by the federal government. Once we run out the current contractual grants, this whole department can be closed, its buildings sold or leased, and Americas housing and urban areas can breathe a sigh of relief. It is a quick $45 billion+ saving each year. Interior. This department has always been a mixed-bag of programs and agencies not wanted elsewhere. With 70,000+ employees and an incoherent mission, there is certainly room to eliminate costs. Between green initiatives and stimulus spending this department provides many targets of opportunity. After eliminating such waste we can return the constitutional remainder to the two new departments. Labor. Two functions dominate spending in this department: Income Maintenance and Employment and Training. We spend over $130 billion dollars for just these two functions and both typify the federal governments failure. The rest of this department is a series of intrusive bureaus and agencies that provide no benefit to working Americans. Where in the Constitution does it enumerate that the central government is

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authorized to maintain incomes, foster employment and training, or operate other agencies to benefit extremely narrow subsets of the American people? It does not; so other than a few statistical agencies that would be transferred to the DRS, the remainder of this department should be rapidly dissolved with enormous savings. Transportation. America was able to grow and prosper without this department until 1967, and can do so again. The actual process of constructing roads, airports, ports, and other infrastructure projects would be performed under the guidance of the independent trust funds discussed in Step 4. Veterans Affairs. This department is a crucial element of the American system of national defense and should be returned to the Department of Defense.

Other agencies not included in these departments, such as the Environmental Protection Agency, should be entirely re-evaluated and moved into the DCS organization. Consolidating 15 departments into 6 streamlined departments, would eliminate 9 sets of Department Secretaries, Under Secretaries, Deputy Secretaries, Deputy Under Secretaries, Inspectors General, CFOs, press offices, human resource offices, accounting departments, and an endless list of redundant positions, facilities, and conferences. Remember, none of these departments were required for the first 60 years of our country and most of their real growth began in the 1930s or 1960s when the federal government decided it could solve all problems. It didnt. We can do without them all again.

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6: C
Balancing the budget, fixing entitlements, and returning failed social programs to State control would go a long way toward reducing the corrosive impact of government involvement in the American economy. But we still have two major problems. First, we over-regulate the private sphere which imposes costs in addition to direct government spending. Second, we have allowed an ever-growing bureaucracy to consume tax dollars and misdirect personal and economic activity. Some of these problems will be solved by removing government mismanaging of entitlement programs and funding of the poverty industry. But other actions should be taken to return America to a growing economy. Congress has abdicated its legislative responsibility by allowing an unaccountable federal bureaucracy to make laws that effect American citizens, calling them regulations. This allows Congress to avoid voting on difficult issues and it must stop. The following four actions take responsibility for regulatory decisions away from bureaucrats, to return them to the peoples representatives. All new regulations must be approved by Congress. This can take a form like the base closing process, where an Agency sends its proposed regulations to Congress for a simple up or down vote, followed by a Presidential signature. It is time for Congress to take back responsibility for every regulation that impacts Americans. All new regulations that are approved would automatically sunsetrequire re-approval after seven years. This causes all Senators to stand for re-election prior to re-approval of regulations. All currently existing regulations will sunset 10 years from the date of their original implementation. A schedule of re-approval will be created for all regulations implemented more than 10 years ago so they can be voted on during the next 5 years. Any regulation that is not re-approved within 30 days of submission to Congress, or not submitted to Congress within the next 5 years, will expire.

In addition, Americans need to be protected from the tyranny of the regulators who work for them at every level of government. Whether they wish to shut down lemonade stands or claim land as federal wetlands, the government is often wrong in the actions it takes. Citizens have little recourse other than defending themselves in court. Even if they win when attacked there is no recourse against the bureaucrats that wrongly caused their problems. The simple solution is to require every legal action taken by regulators, at all government levels, to include provision that: 1. If the citizen is found innocent, all legal and other defense costs plus interest on the cash invested shall be paid by the government. 2. When found innocent a citizen will be compensated for the time spent with punitive damages at three times the actual damages or costs in 1 above, whichever is larger.

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3. Each action will require that at least one individual regulator and one prosecutor be named as the designated responsible individuals for the action. These people must certify that the claim they are making is legitimate. Once any regulator, or prosecutor, brings charges against more than one citizen who is ruled innocent that person shall be immediately terminated, and not be eligible for rehire. These three simple actions would bring accountability back to government regulatory enforcement.

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Having a world-class education system is crucial to regaining the economic growth needed to solve our long-term fiscal troubles. We need to reverse almost everything we do today in the education-unionpolitical complex. We have let education experts pervert what was once the best system of free education in the world. We have caved to union demands. The universal union solution has been to put more teachers in the classroom (which generated more union dues), and to pay those teachers more.

30.0 Students served by each teacher 25.0 20.0 15.0 10.0 5.0 0.0 1955 1957

Public School Student Teacher Ratio

1959

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

While we constantly increase teacher pay and benefits, we simultaneously let federal and state bureaucrats increase non-classroom spending (i.e. overhead) even faster:

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2005

The combination of more teachers and bloated administration (overhead) results in massive increases in the cost to educate your children:

Spending per pupil in Constant 2008-09 dollars

$14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 1919 1931 1935 1939 1943 1947 1951 1955 1959 1963 1967 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

And what return have we received after throwing so much more of your hard-earned money at schools? None. Education performance has not improved in the 40 years we have seriously measured it:

Spending per pupil in constant dollars vs Performance in Math 250.0% and Reading
230.0% 210.0% Ratio Percent 190.0% 170.0% 150.0% 130.0% 110.0% 90.0% 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 Constant 2008 $ per Pupil Math Reading

When compared to foreign countries we have fallen to new lows of mediocrity, while spending substantially more per student. Lots of people have solutions to fix education. LBJs Great Society began to heavily involve the federal government in education. Carters failed administration created the Department of Education to focus on the problem. The Bush administration pushed its no child left behind policies. No improvement resulted. The education establishment and its unionized workforce have only two

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solutions: spend more tax payer dollars and eliminate school choice to trap students. We let the public education monopoly implement changes as they failed to educate our students, even while they consume ever more of your tax dollars. The following link provides one good summary of the problems in our failed education system as well as one set of solutions:
http://www.heritage.org/research/reports/2008/04/a-nation-still-at-risk-the-case-for-federalism-and-school-choice

Changing a system that educates tens of millions of students each year is a daunting task. While most school districts have thrown computers into their classrooms, they have not used technology to drive improved productivity or quality. The unions have proven too powerful to let students take advantage of new tools that can replace the average, or below average, people who are now drawn to become teachers. As long as union dues elect boards of education it is doubtful you will see schools change. Fortunately, existing technology and curriculum exist today that enable students to learn at their own pace, require mastery of the subject matter before progressing to the next level (i.e. grade), and allow teachers to be much more productive (and so require fewer of them.) There is a realistic business model to allow small groups of parents in a neighborhood to band together to form their own school. With the use of technology there is no longer a need to group students by grade as they can all move at their own pace. Think of this revolution in terms of group home schooling. Parents, churches, or even businesses could provide space and technical infrastructure. For the cost of a laptop and reasonable curriculum charges, a network of small private home schools could arise across the country. Each city block in an urban environment could have its own school under the direction and discipline of parents. Such an option could eliminate the public school monopoly. What would happen if they opened the school doors one year and no one showed up? (The cynical among us might say that they would still collect our taxes and pay unionized staff to teach no one, thus achieving their preferred student-toteacher ratio.) This alternative is a wonderful ideal, but realistically would not reach all students. If the public schools want to compete, let us propose a novel set of solutions to improve the outcomes and economics of education. As shown above, the productivity of public education in America has been abysmal. We increased the number of teachers in the classroom, overhead functions continue out of control, and cost per student in constant dollars increased ten-fold in less than a century. The National Center for Educational Statistics offers a big picture look at productivity for the entire education system for the fall of 2010: 75.9 million students enrolled in schools and colleges. 10.0 million people (full time equivalents) are employed by those schools and colleges, or one employee for every 7.6 customers/students 4.6 million of these employees are teachers or faculty, or one teacher for every 16.5 students in schools and colleges.

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5.4 million employees do something other than teach your children, so 54% of the people working in education perform overhead functions. Call your local school board to get a list of the jobs outside of the classroom to see what you pay for in the public school system. Source: Digest of Education Statistics: 2010 http://nces.ed.gov/programs/digest/d10/

Does this make sense? How many people remember when classrooms averaged 25+ students and the overhead for a school was the principal, the lunch room staff, and a secretary? And the graduates of these schools won WWII and went on the change the world. Now we have one employee being paid to work with every 7.6 students, yet those who graduate have poorer skills each year. The 31% of students that drop out of secondary schools must recognize they are simply being warehoused. Of those who do graduate and matriculate to college, fewer than half earn a bachelors degree. Those most in need, our urban students who are also most likely to be kept dependent on government handouts, drop out at rates approaching 50%. If any business in the world had this recordincreasing costs, declining productivity, constant loss of customers, and decreasing qualitythey would go bankrupt. The American education system is largely bankrupt, but the taxpayers keep throwing money down the rat hole to keep failed schools open. Unions negotiate with inept bureaucrats and politicians whose campaigns they fund. To paraphrase a union leader, the kids wont matter until they start paying union dues. It is time to take dramatic steps to completely change the system. Luckily we know what worked in the past, and still works in other countries today. We are starting to see the technology discussed above make a real difference, improving both student performance and school productivity. The following bold steps will change education in America. As you think through each option keep two questions in mind: Could we do any worse than the system our federal government has created to educate our children? Do you want the education elite to use your children in their experiment to change society into a progressive ideal? First, we need to stop all federal education programs other than a small agency to keep national statistics. This function can be moved to the Census Bureau, and the rest of the Department of Education can disappear. Tomorrow. The states will adapt quickly. They will stop receiving money for all those creative grant-funded programs that dont work. At the same time this will allow states and school boards to eliminate bureaucrats needed to beg for federal grant money, to report on the progress of national initiatives, to constantly change curricula to meet the newest whim from Washington, etc. The federal government will immediately realize tens of billions in savings with no negative consequences. We can put responsibility for education back on the States, where it always belonged. Some states will do better than others. Some States will decide to spend more than others. That happens today but there is no relation between more spending and better performance. Clearly, states already have incentives to improve education without the federal government mandating how to waste their dollars.

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Second, the states should use the current crisis to eliminate the overhead in American education. As shown above, it is not necessary to eliminate one single teaching job after cutting off the federal money we are currently borrowing from China. Americans have long believed that local control will make schools better. This might have been true when unpaid parents ran local school boards. Such boards did not have to deal with a unionized workforce and constant federal mandates. Today districts delegate school operations to a combination of elected officials and professional managers. The result is contention and massive inefficiency as each school district creates its own senior administrative staff, human resource specialists, grant writers, curriculum development functions, transportation departments, nutritionists, etc. None of these people teach your children. All of these people receive pay and benefits that must align with unionized teachers pay, or they have their own unions. As shown above these non-classroom costs are growing even faster than instructional costs. For the 2008-2009 school year there were 13,809 school districts that managed 98,706 public schools. (www.nces.ed.gov ) These districts and schools served 49.3 million students in the K-12 system. That works out to about 3,570 students per district. Some urban high schools have that many students in one location. Why do we have all this overhead? Eliminating federal programs and mandates will immediately allow states to cut back, but the states should ask why they need all this duplicative overhead to teach the basics to American students. Clearly, the States have the right to organize this way, but it makes absolutely no sense. Positive results for your children only occur at the school level. No one sitting in administration teaches your children to read, write, or do math. Why should we have 13,809 different ways to do arithmetic? Teach algebra? Diagram a sentence? Explain American History? Why do we need 13,809 superintendents, transportation managers, accounting managers, etc.? As shown by Census data we currently spend 46% of our K-12 public school funds on overhead functions outside the classroom. The education structure must be dramatically reduced. The primary locus of accountability needs to be the individual school and its principal. Most states would not require more than one state-wide board of education. Larger states might need urban districts for major cities, with a few regional districts to serve the rest of the state. How much could we save by eliminating over 13,000 bureaucracies? This option should be part of a strategic review on educating our children. Third, we should seriously ask why teachers or school janitors need unions? Unions were created to protect industrial workers from robber barons who supposedly took advantage of their economic power over employees. Whom do teachers and other public sector workers need protection against? You, the taxpayer?! Taxpayers own their public schools. In reality, the union movement realized in the middle of the 20th century that most private sector workers want to protect themselves and to not shovel dues into corrupt union coffers. Union leadership turned to the public sector in order to retain power and they quickly learned two things: 1) unions could use members dues to buy the politicians they would later negotiate with; and 2) most local school districts and other public entities would never be able to stand up to professional union negotiators. In

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fact, school management usually wants unions to win concessions. Increased pay and benefits for unionized public workers quickly translate into increased pay and better benefits for themselves. Unions fund the campaigns of the same politicians that decide how much union members deserve to earn. Do you see a conflict of interest? But who pays? The taxpayer. It is time to simply outlaw public sector unions, again. In education this means the school board would create the compensation system, set teaching loads for each classroom, and define the expected outcomes. If teachers want to work they accept the jobs. If not enough qualified teachers applied for positions, the school board would have to change the offer to attract workers, or implement technological solutions that would make the remaining teachers more productive. Fourth, we should eliminate Schools of Education. Teachers should have degrees in a subject area they plan to teach and be tested regularly to insure proficiency. Then they should study a core of 4 or 5 courses to address how children learn, within the Psychology or Sociology department. Offer these 4 or 5 courses every semester. This would allow students who want to become teachers to focus just one semester on class room or self-esteem skills. Anyone who already has a degree who wants to change careers could take the same 4 or 5 courses in just one semester, to become a teacher. Eliminate the meaningless classes, education department overhead, tenured professors, phony research projects, etc. We have funded billions of dollars in education research; to what result? Failure. Let us stop doing what does not work. Let those who wish to earn a graduate degree to become a principal get an MBA or Psychology degree. We have all the education PhDs we will ever need; look at what they have created. We should stop this process, or at least insure it receives absolutely no public funding. Fifth, we must revise teacher pay schedules. Today most teachers progress up a ladder of increased pay based on longevity. Whether they become better or worse, their salaries increase with time served. Who else gets automatic raises, plus negotiated cost-of-living increases? There should be only two levels of base pay for teachers: probationary level for new teachers and professional level for fully qualified teachers. We should also eliminate the extra compensation teachers receive for obtaining advanced degrees, often at district expense. No data shows that a mediocre teacher improves by garnering increased educational credentials. The rest of each teachers salary should be based on how well their students do on rigorous annual subject area tests. A teacher who empowers all students to pass a stringent exam should be able to earn a 50% bonus. Similarly teachers, regardless of years of experience, who have few students able to pass such an exam should revert to probationary status and pay, until they quickly demonstrate they are able to teach. And tenure will disappear along with unions. Sixth, since the current system does not work we should entirely revamp K-12 education. Public schools should focus on teaching a rigorous core of basic skills that enable students to learn a profession and become a good citizen. We do not need to keep students in the public school system for twelve years. At best, senior year is a social event, not a learning experience. Good students who wish to go to college

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are either in advanced placement or dual enrollment programs their last two years. Poor students drop out. Those in the middle are bored, take largely meaningless electives, and learn little. It is time for ten good years of public schooling with the school year possibly lengthening. There is no need to retain the current warehouse model to keep kids in school twelve years. As part of this overhaul classes need to become much more focused. Public K-10 education should build basic foundations. The current plethora of electives and dumbed-down classes is pointless. If parents want elective courses, they can pay for them. In the first two years students should be taught to love language (reading and writing) and math. From the beginning these courses should be taught by specialists. Why do we think one teacher can teach every subject well? Take 40 kids, let half take language arts in the morning while the other half are in math, then alternate in the afternoon. The student-to-teacher ratio remains the same, but students learn from teachers who know their subject. From third until sixth grade math, English grammar, and reading should remain the focus. Science and history books should be a compelling part of the reading focus, to expose students to new fields and the meaning of being an American. During these years, technology should begin to support these more diverse topics. Beginning with seventh grade, students should take serious courses in English, math, science, and history, to finish their secondary education by tenth grade. Appropriate education technology will enable some students to move through the core courses faster than others and add even more skills within ten years.

After tenth grade students will choose one of three options: If their families believe they have the maturity and ability students could attend the college of their choice and pursue a four year degree. If they wish further academic training, but initially wish to stay home, they could attend a local community college. The K-10 school board could provide transportation and would pay the instate tuition for these students. This options costs substantially less than the $10,000-$30,000 we annually pay for a student to remain in high school. In two years students would earn an Associates degree, and be ready to finish Bachelors degree at their own expense in two years or less. For students who do not wish to continue in school, apprentice programs should be available in companies, trade schools, or community colleges. If students do not have enough skills to be worth minimum wage to a company, the school board could use some of the $10,000-$30,000 per student to fund employers to train these students on the job.

These six steps seem radical. Compared to times when American education was the envy of the world, they really arent that novel. They are quite different from the failed education system we have created over the past 50 to 60 years. Spending substantially less money, we can better educate our students. Making education more focused will accomplish this latter objective. Reducing the overwhelming layers of educational overhead, deleting failed federal mandates, and reducing the number of years students

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are warehoused in schools, will immediately save 25% to 40% of the cost of public education in America, while retaining only the best teachers. Such improvements have been achieved in the private sector over the past decades; why not in education?

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d d L gal R forms

America was founded because of a desire to insure liberty and flee tyranny. We relished our freedom and our ideals made us a rich nation. Wealth contributed to our freedoms. As the nation prospered and embraced technology fewer citizens were bound to the subsistence livings of our early days. As America grew wealthy, Society also began to adopt changes that seemed affordable for such a rich country. Our apparently ever-growing wealth allowed Lyndon Johnson to justify his intrusive Great Society programs. In a generation or two, his opponents were proved right: these programs failed and in fact made the problems they attempted to solve worse. And of course the costs wildly exceeded the original estimates. Much of the change we must now make to government requires we undo these wellmeaning, but failed, programs. As LBJ forced his vision of a Great Society on America, we began to accept other fair changes to how America operates. With good intentions we accepted a flood of litigation, radical environmentalism, and the unionization of public services. Trial lawyers, environmentalists, and unions used some of their profits, donations, and dues to finance politicians who agreed to embed their causes into the social fabric of America. We discussed the need to limit public sector unions in our discussion of Education (Step 7), but how can we reign in the abuses of tort lawyers and radical environmentalists? Tort Reform & the Plaintiffs Trial Attorneys Controlling abuses in the legal profession is a very technical problem, with some proven solutions implemented at the state level. However, the trial lawyersor tort barare very rich, powerful, and politically well connected. The importance trial lawyers place on political influence is reflected in their massive contributions to the Democrat Party. The free reign they receive to prosecute spurious claims has impacted the cost of everything we buy or use. One of the many reasons for the escalating price of healthcare is the full cost of medical litigation. No other country in the world allows lawyers to profit from honest mistakes in its medical system. There are bad doctors, hospitals, and drugs, but enriching lawyers is not the way to solve this problem. The estimated cost of litigation and malpractice insuranceplus the resultant defensive medicine practiced to avoid litigationadd an estimated $200 to $300 billion per year to healthcare costs and represent a major reason why health care has risen from 5% of GDP in 1960 to almost 18% today. The cost of spurious litigation drives up the price of almost every product you buy. It is time to implement the reasonable controls already used in several states, to take power away from the trial bar and its well-funded political allies. Radical Environmentalism Radical environmental groups rely on spurious litigation to terrorize American businesses and to stop needed development projects. No other group has taken as aggressive a position to derail American

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growth and freedom. Delayed projects and products result in fewer jobs, lower living standards, and less tax revenue. America recognized it had environmental problems and took steps to control the minority of companies that wished to dump such problems on the rest of us. However, like many other issues we have gone from solving specific problems to allowing a radical fringe element impose its costly environmental agenda on every part of society. We now have an EPA that wishes to regulate everything from our every exhalation of carbon dioxide to the dust created by farm tractors that feed the world. Environmentalists use the courts to stop or delay projects. Suits are brought regardless of any real environmental impact, the will of the vast majority of citizens, or the cost to our economy. As we discovered with the global warming fiasco, their science is often worthless and their real objective is to obtain political power and redistribute or eliminate wealth. There are no simple solutions to remove this tyranny. In the long run we need judges who will throw out such costly frivolity. But one thing could be done: require plaintiffs who are not a direct party to a contractual dispute to pay the costs, expenses, and lost profits of defendants should the latter prevail. Since most such environmental plaintiffs seldom have any assets, they should also be required to post a bond for the anticipated amount of such a claim. Another action would eliminate the policy-making power of the EPA. This agency should only enforce narrowly-defined laws passed by Congress.

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9: R

Eliminating most federal government activities shrinks the opportunity for fraud and waste. Americans, per a recent Gallup poll, realize 51% of government spending is wasted. The government itself acknowledges improper payments ranging from 4% to 26% in all its programs and this is just what they caught. Even as programs are returned to State control, there are a few simple steps we can take to help curtail fraud: 1. Create complete transparency. Post all cash or in-kind government payments to individuals or groups on the internet. Once you accept money from your fellow taxpayers, you give up any right to privacy. The people paying for your food, housing, health care, or giving you tax payments such as the Earned Income Tax Credit (EITC) or disability income have the right to know where their money is spent. You have become a ward of the state. This includes any corporations, labor unions, farms, or other entities that receive direct payments or specific benefits enacted by legislation or regulation. The government will be allowed up to 6 months to prepare the lists, and if any agency does not comply it will cease making payments until the information is made available. 2. Lists, by county, providing the above information would be published in local papers twice each year. 3. We know that there are very high levels of fraud in government-run programs that provide health care, disability income, the EITC, food stamps, housing, and even school lunches. To enlist the aid of all American citizens in rooting out fraud we should reward whistle-blowers who turn in fraudulent beneficiaries with 50% of the savings for the first two years. 4. Those who cheat their fellow citizens should be convicted of a felony, go to a real jail for a reasonable time, and lose their civil rights (at least the right to vote) for life. Accepting charity was once viewed as a curse in American society. Today we advertise during soap operas for people to sign up for federal programs and incentivize lawyers to challenge for clients rights to get money from their neighbors. It is time to direct government aid to only those with no other option: citizens who are physically or mentally incapable of working. Of course, people who lose a job through no fault of their own would continue to receive up to 26 weeks of unemployment since they paid for this insurance while working. If you enlist citizens as watch dogs, and impose serious consequences for violations, you will see a drop in the theft we call fraud. Medicare is probably the largest source of such fraud, and much of this abuse is organized criminal activity, so that need must particularly be addressed by the Trust Fund to preserve the assets they will be responsible to safeguard.

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:
When an alien lives with you in your land, do not mistreat him. The alien living with you must be treated as one of your native-born. Love him as yourself, for you were aliens in Egypt. Leviticus 19:33-34 (NIV) Dealing with immigration is always a charged topic. The United States is a country of immigrants. ALL of us migrated here from other continents, only the time frames differ. Except for public health concerns (e.g. tuberculosis) we had no controls on immigrants until Californians wished to stop Chinese entrants in the late 19th century. As a sovereign nation we have both the ability and the obligation to control immigration to our country. For one thing, we have no obligation to allow criminals to enter or stay in our country. This not only includes proven criminals, but also aliens that associate with criminals, such as gang members or terrorists. Clearly, the first step is to truly secure our borders. But what about people who just wish to come to America to live, retire, work or create companies? If they are willing to accept certain requirements, we should welcome them and treat them as one of your native-born. This does not, however, mean they receive citizenship. We already have procedures whereby people from other countries can legally take steps to gain entrance to America with the goal of eventually becoming citizens. This process need not change. What we need to address is the method for other people to come to America, work in America, and meet the obligations of being in America. Since they are not native-born, they would have to fulfill additional, but not onerous, obligations to continue to remain and work in America. Why? The modern world is dangerous and many people wish to destroy America. This is not restricted to Islamic terrorists. Think of Hugo Chavez and his compatriots to our south. He clearly wishes our nations destruction and their agents would easily blend into the Latin communities in most states. China is not a friend to America and already has agents in our country. Criminal elements also use aliens to move and market illegal and damaging products. It is clear that the United States needs to control the people who come to this country. But the vast majority of hard-working people should be welcomed to America. We should have straightforward procedures to insure they are a blessing and not a burden to America. We must also acknowledge that the current onslaught of illegal immigration is a burden to America. Of course many of the people that slip into the country or overstay their visas are here for criminal reasons and they should be the focus of our enforcement actions. But even those guests who just work hard every day can be problematic, through no fault of their own, in the current system. How?

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What happens if you are a law-abiding citizen who wishes to start a maintenance business or small construction firm? As you bid on work you must compete with people who hire illegal workers, pay them less than the minimum wage, ignore taxes, do not pay workmans compensation premiums, and avoid the requirements of federal, state, or local bureaucrats. In other words the person following the law cannot compete. This is a small example of the problems created by a large group of illegal workers, hard workers who can be brutalized to make money for the unscrupulous. The reality is that even under awful working conditions by American standards millions of people are better off in America and are willing to take any risk to come here to work. We need to do better. We need to allow people to come to America under one of two options: 1. Using existing laws and visa provisions certain workers can apply to come to America, go through our current process, and possibly become citizens. 2. We need new provisions to allow people to work in America, but not become citizens unless they start over under those existing laws. If they follow the rules outlined below we will let them work and protect them from unfair labor practices, but they must recognize that they will not be on a path to citizenship. They will not be second-class citizens; they will remain citizens of their home countries and valued guests in America. What special provisions and laws must they accept for the privilege of working and living in America? To those who scoff that it isnt such a privilege, ask what other countries will people risk their lives to enter? And from what countries will people risk their lives to leave? The basic rules: 1. Visitors need to apply for a work permit, identifying themselves in sufficient detail to insure they have NO criminal past. Speeding tickets will be permitted, but not misdemeanors or felonies. Those who are here now need not return home, but future entrants must apply from their home countries. Providing false documents to obtain a work permit will be considered a disqualifying felony. 2. Guests must acknowledge they will be subject to all American taxes and also agree that while they must contribute to certain programs such as Social Security, they will not collect if they return home before meeting program requirements. 3. Since our Medicare program is not actuarially sound, they must agree that they will not collect Medicare benefits, as they are not likely to make adequate contributions over their working careers to pay for benefits and so must rely on the health care provisions of their home countries when they retire. 4. Since they are the citizens of another country to which they can easily return, they must agree to a minimum income tax withholding of 15% of their income, rather than using the W4 rates allowed for American citizens. Their actual taxes will, however, be based on their earned incomes; most would likely receive a refund each year. 5. When coming to America, they must acknowledge that they have the resources to support themselves and that they will not receive any welfare or other government support. Of course

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they will be eligible for benefits they, or their employers, pay into including unemployment insurance, COBRA provisions for health insurance, workmans compensation, etc. 6. In accepting the work permit they agree that should they have children while in America those children will not automatically become American citizens. 7. All work permit holders must re-apply, and pay a nominal processing fee, at least once per year to insure they are still in compliance with all laws. These are tough but fair provisions that offer the opportunity to work in the United States. People applying for work permits would not be excluded from applying for citizenship through the procedures currently in effect, but they would not go to the head of the line. Most people who are here illegally today would be allowed to remain and work under these provisions. This is not a path to citizenship, but rather a way to care for aliens who wish to be here and to insure they compete fairly within the rules of the American economy. We must acknowledge that not everyone will take advantage of this program; many are under the control of employers who wish to continue taking advantage of the lower costs of using illegal workers. So we must then vigorously enforce our laws: employers who employ illegals are felons. Enforcement actions should be aimed squarely at employers. The consequences should be serious: large fines for companies that would consume any benefit from illegal hiring practices; plus jail time when we prove individuals broke the law. We must be very punitive to those who profit from mistreating an alien [who] lives with you. This might mean we have to pay a little more for food and certain services, but America will benefit in many ways when aliens become welcome visitors and contributors. We also need to secure our borders, not to control those who wish to obtain visas or work permits and move between countries, but to keep out criminals and those who do not want to tell us who they are. It is time to bring all people who live in America out in the open, to let them compete fairly in our society. If you are willing to work and participate in America we welcome you.

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We are addicted to debt, debt created by a flood of spending used to buy votes. Spending on failed programs, not inadequate taxation, created our debt; therefore the first Ten Steps of this program focus on eliminating the debt dealers power in Washington and withdrawing the poisonous spending from our system. Now one must fix the tax code to generate just enough revenue to balance the budget. We need to start with a few numbers. America was able to prosper for the first 3 decades of the 20th Century with a federal government that spent on average less than 4% of GDP (except in time of war). But, in the 1930s federal politicians learned they could use your money to buy votes, so now we see that government intrusion is slowly debilitating our economy:

The Obama Recovery, together with his stimulus dollars, has further eroded our prosperity. How much money does the government need to take from its citizens? To simplify, we will summarize federal spending into eight categories over representative 5 year increments that include both good and bad times.
Summary of Federal Spending as a % of GDP National Defense & Veterans benefits Net Interest Social Security Medicare Transportation Social services (Community Development, Education, Health, & Income Security) All other Total 1991 5.1% 3.2% 4.5% 1.7% 0.5% 4.9% 2.2% 22.1% 1996 3.9% 3.1% 4.5% 2.2% 0.5% 5.2% 0.6% 19.9% 2001 3.4% 2.0% 4.2% 2.1% 0.5% 5.0% 0.9% 18.1% 2006 4.4% 1.7% 4.1% 2.5% 0.5% 5.8% 0.8% 19.8% 2011 est 5.9% 1.7% 5.0% 3.4% 0.7% 7.8% 1.5% 25.9%

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Social Security, Medicare, Transportation, and a few other small Trust Fund programs will be withdrawn from Congressional control, to be funded by their own trust funds and fees:
1991 Social Security Medicare Transportation Remaining 4.5% 1.7% 0.5% 15.3% 1996 4.5% 2.2% 0.5% 12.7% 2001 4.2% 2.1% 0.5% 11.3% 2006 4.1% 2.5% 0.5% 12.8% 2011 est 5.0% 3.4% 0.7% 16.8%

We use 2011 as the baseline year to show the impact of proper fiscal management in Washington.

First we need to determine how much the federal government would transfer to the states for social service programs. Both 1991 and 2001 were mild recessionary yearsyears that would have required extra spending for social servicesyet we only spent 4.9% and 5.0% of GDP respectively in those years. So without any improved efficiency we can return social service expenditures to 5.0% of GDP from the bloated 7.8% of 2011. (This small return to sanity would save over $400 billion a year.) Then we begin eliminating the failed and redundant programs, together with their bureaucratic gate keepers, that keep people dependent on the narcotic of welfare. Many programs are complete failures and the States will let those completely disappear. The States would also be able to consolidate many programs (e.g. the 47 duplicative job training programs). To be generous lets say that after eliminating all federal bureaucracy and fixing these problems we could cut social services spending in half. This reduces spending levels to 2.5% of GDP. But we have not yet addressed fraud. Since even the government acknowledges that fraud consumes 4% to 26% of spending on programs, we should realistically be able to eliminate another 20% of funding by making states accountable for appropriate spending. As a result, the federal government would send 2% of GDP to the states for social service spending. This allows us to save 5.8% of GDP, without impacting people in real need. As we consolidate government and reduce regulations we should expect to see large savings in the general operations of the government, the All other expenses category. To make things simple in this analysis lets just cap such spending at 1% of GDP (about $150 BILLION). This is more than we spent as a % of GDP in 1996, 2001, or 2006 so we know it can be readily accomplished, none of those administrations were particularly frugal. This saves another .5% of GDP. As we exit the wars in Iraq and Afghanistan it is likely that defense spending will drop in proportion to GDP, but we must never let our military be unprepared again so we forecast no savings in this line item. The impact of these changes shows that we need only collect 10.5% of GDP from taxes to fund the federal government:

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Spending level in 2011 after transferring Medicare, Social Security, and Transportation to independent Trust Funds Savings: Block granting Social services to the States Other government efficiencies Taxes required to fund a balanced budget

16.8% -5.8% -0.5% 10.5%

It seems reasonable that we need only pay about 10%, or a tithe, of our income to support the government. If one excludes the taxes collected for Social Security, Medicare, and other Trust Funds, how does this amount compare to historical tax collections?
Tax receipts, excluding Social Security & Medicare Trust Fund Taxes ($ in billions) Individual income taxes Corporate income taxes Excise taxes Less: Trust fund collections Other (primarily Estate and Gift taxes, Customs duties, and Federal Reserve earnings) Total 1991 467.8 98.1 42.4 (24.1) 1996 656.4 171.8 54.0 (28.6) 2001 994.3 151.1 66.2 (41.9) 2006 1,043.9 353.9 74.0 (51.5) 2011 est 956.0 198.4 74.1 (53.0)

50.6 634.8

61.4 915.0

85.5 1,255.2

97.3 1,517.6

138.4 1,313.9

These revenues convert to the following percent of GDP:

% of GDP Individual income taxes Corporate income taxes Excise taxes Less: Trust fund collections Other (primarily Estate and Gift taxes, Customs duties, and Federal Reserve earnings) Total 1991 7.8% 1.6% 0.7% -0.4% 1996 8.4% 2.2% 0.7% -0.4% 2001 9.7% 1.5% 0.6% -0.4% 2006 7.8% 2.6% 0.6% -0.4% 2011 est 6.5% 1.3% 0.5% -0.4%

0.8% 10.6%

0.8% 11.7%

0.8% 12.2%

0.7% 11.3%

0.9% 8.9%

In each of the sample years we had different tax codes, yet until 2011 we would have had a fiscal surplus had we been able to control spending to 10.5% of GDP. Once we remove wasteful government spending we will again see historical rates of growth, and the tax revenues that come with it.

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We have discussed the need to reform government spending, but we also need to make our tax system reasonable, efficient, and fair. How do we do this? Since we only need to collect an average of 10.5% of income to cover expenses we should be able to do this easily, and with lower rates: 1. Eliminate all tax credits and deductions, except one. If you want to own a house, that decision should not be subsidized by renters. Should you wish to donate to charity, that decision should be driven by your faith or other beliefs. If you want to have lots of children, thats great; but that decision should not be subsidized by single people or those without children. Going to college is wonderful for many, but those who dont go should not have to pay for your education. The list is endless. The tax code should not be a tool for social engineering. One deduction should remain: your taxable income should be reduced by the amount of any taxes you pay to another jurisdiction (i.e. state, local, etc.). There is no justification for taxing income you never receive. 2. All income should be treated the same, no matter how you earn it. This eliminates any difference between salaries, wages, dividends, or capital gains. This approach is both fair and efficient. It eliminates the need to spend money on creative ways to convert one type of income into another. However, since government will only need 10.5% of GDP, and we have eliminated most deductions and credits, tax rates will not be high enough to make this a hardship on anyone. 3. Every American benefits from living in this country, and every American should pay taxes. For many this will be a nominal amount until all Americans once again prosper from growth this program will generate. 4. Every American will also die, and one hopes each will be able to transfer something of value to the next generation. Should this be a taxable event? For most people it should not. We should allow a reasonable exemption to cover most estates. For those who are most fortunate, there is a justification for fairly taxing an estate as if it were a normal taxable event. The simplest and fairest way to accomplish this is to assume that assets transferred to heirs were sold to them, and tax any capital gains at the new income tax rates. If someone owned $5 million of assets they had purchased for $4 million, their estate would owe the normal tax on the $1 million gain, not on the whole amount. In this example we should remember the original $4 million had already been taxed at least once when originally earned. Such changes would yield an extremely simple, fair tax code with rates probably ranging from 1% of income up to about 20% of income for the wealthiest. On average, most Americans would probably pay about 5% to 8% of our incomes for the opportunity to live in America, and we would be able to prepare a typical tax return in less than an hour! We need to similarly end corporate welfare as well as reform our ridiculous tax code; and the steps required for the corporate tax code would be even simpler. 1. Every corporation already provides an annual statement of income or loss to its shareholders. Historically, corporations have maintained separate financial records to tell the federal and state governments what their income or loss was using government tax provisions and requirements. Most companies have a large incentive to tell their lenders and shareholders, especially their

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public shareholders, just how well they are doing and to tell the government just how poorly they are doing. Why do we inflict all this extra work on companies? Under the new tax code Corporations would simply pay federal taxes as a percent of the income they report to their shareholders. 2. Corporations will be required, as most are today, to prepare their books in accordance with generally accepted accounting principles. They will no longer have to account separately to determine taxable income. If they earn money in another country, and pay taxes on that income, they will get a credit for the taxes paid in that country up to the amount they would have owed if the income had been earned in the United States. They would allocate their total reported income based on the percentage of revenue received in each foreign country. (This eliminates all that messy transfer pricing and sale of fake assets to foreign subsidiaries companies use to avoid paying taxes in America.) 3. All federal tax credits, accelerated depreciation, special incentives, etc. will end. (Separate from the tax code, all other corporate welfare and subsidies should also be eliminated in the government reorganization described above.) This will not only allow a companys projects to stand or fall based on intrinsic worth, but would eliminate the need for corporate lobbying and donations. 4. Closely-held businesses will still be able to report corporate income on their personal tax return, but the income they report would be determined based on item 2 above. Smaller companies would be allowed to report income on a cash basis to further simplify reporting. For most corporations the required tax rates will drop dramatically. Some American companies actually pay 35% of their income to the government today, but the largest and most profitable often pay nothing. Since every year some companies lose money, the corporate tax rate will probably need to be around 12% to 13% of reported income in order to generate the 10.5% of GDP needed to fund the government. These changes should each result in one-page returns for most individuals and companies. American companies would become more competitive. Jobs would flow to America as a low tax haven and more jobs mean more income, which means more tax revenueseven at these lower rates. We would also free some of the brightest people in the country from creating tax dodges so they can create real value in the marketplace. One more thing As shown above, tax receipts are very sensitive to general economic conditions. America needs to create a rainy day fund that generates income in good years to fund shortfalls when the economy weakens. Many states have such funds. A simple structure would be to add a small surtax during good years to be reserved in its own trust fund to only be expended during recessions. In any year that the economy was growing at more than 2.5%, each tax payer would pay an extra 2% of the taxes owed. So if someone owes $1,000 they would pay an extra $20. This new Trust Fund would be managed independently of Congress. If the economy went into

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recession, these dollars would then be distributed to those who lose their jobs after basic unemployment insurance expires. Since these trust funds would earn interest during good times we may eventually collect more than is needed and the Trustees could suspend collection for a year.

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America has consumed more than we have produced for decades. Some of this consumption was required to win two world wars, but most spending occurred after the advent of the Democrats Great Society. If we implement the suggestions in this pamphlet we can control spending and, with reasonable tax rates, fund what the federal government is really permitted to do. Except in times of major declared wars, we must then require that the federal budget remain in balance. Once we remove the bulk of spending from the politicians and require they balance the budget, we can methodically pay off the debt. The very fact that we have a realistic, long-term program to eliminate the entire debt would again make the United States the strongest economic power in the world. There will be many ways to repay the debt. Two immediate options include: 1. American oil, coal and natural gas are a national resource. We need to remove national energy programs from the clutches of Congress and federal bureaucrats. Much as the sale of western lands during the early 19th century benefited the country, the sale of energy resources should pay down our debt. There should be a national royalty rate on all fuels extracted from onshore and offshore fields, with a higher, but reasonable rate, for resource extraction from government owned lands or offshore fields. This royalty rate must, however, be used only to pay off the national debt. Once the debt is repaid, future payments must be dispersed to all Americans as an annual dividend. 2. Since excessive consumption created the problem, we could institute a 1% national consumption tax. The amount would be trivial on any particular transaction, but would create over $100 billion a year to pay down our debt. If we limit federal spending to its Constitutional limits, future economic growth will generate expanded tax collections without increasing rates. Such tax revenue should also be used to pay down the debt, which will further accelerate growth. It is time to rethink just how strong America would be without public debt. Should a currently unforeseen opportunity arise, or an enemy threaten, we would still have unlimited borrowing capacity to meet such needs.

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lusi

When we accomplish all this, what will happen to the poor and needy? How will they live without the handouts they receive today that cost us trillions of dollars? How will the dishonest people who steal funds intended for the ill or needy survive? Will all the displaced bureaucrats have jobs? The belief that government must care for every need leads people into lifestyles that end in poor health, lack of education, and ultimately unhappiness that too often is assuaged by substance abuse. Franklin Roosevelt knew this even as he saddled America with a new entitlement mentality. These lifestyles cost America more money and pain than can be imagined. But to the liberal elite, the very problems they have created with their false assumptions about human nature justify ever more government intrusion. The elites and their bureaucratic henchmen then use the power of government to advertise programs, expand programs, and convince their clients they will fail without programs. And you pay for programs. We propose a bold course to restore the proper role of the national government. One thing we know: everything we have done since the New Deal has failed miserably. While it has cost the productive class of working citizens their money, it has robbed the welfare-dependent class of something much more important: true self-esteem and self-reliance. For almost 100 years liberals have slowly created a welfare state that is strangling America. It is time for a bold, revolutionary approach to restore an American system that works and completely reject the failed structure we live with today. We should implement such reforms through the legislature, though it is likely that we have to revert to the court system to reverse 100 years of faulty legal precedent. Making any of these changes will be hard. The media and the poverty-industry will persecute any who attempt this program. Federal politicians will not give up their power and thus their access to campaign funds. State politicians will resist their assumed loss of funds from the federal government and the potential of bail outs should they dig their own spending holes too deep. The unions will fight every step of the way to keep their coffers full. Trial lawyers will sue to limit any restrictions on their ability to use litigation for their own benefit.

Ultimately, it will probably be necessary to force our state legislatures to call for a new Constitution Convention to put these specific requirements into the Constitution. Regardless, we must take action to restore this country to it past glory. America is one of only two truly freedom-based societies in the history of mankind, and we are clearly in danger of losing our way.

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