What Obama should say in his State of the Union address
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"My opponents in the Tea Party say we are overtaxed, I agree. That's why I am proposing an immediate tax cut for working people, which will be the largest tax cut in American history: a full FICA payroll tax suspension. This will provide immediate tax relief to working folks, and, ironically, help to restore some progressivity to the federal tax code. FICA is a regressive flat tax paid by everybody working for a paycheck from an employer. There are no deductions for FICA. While nominally split between employee and employer, the pass thru costs effects of the employer portion of the FICA tax fall on employees and consumers. As a consequence of this tax, many lower income workers end up paying more in federal taxes as a percentage of their income than many higher income earners. My administration intends to end this disparity. In no way is this tax relief a handout for working people. This is money that they earn that the federal government currently takes from them. Over the last 5 years, we have bailed-out banks, industries, and so-called "job creators," all of which has failed to restore output and employment to previous levels. My predecessor passed major top heavy tax relief, which overwhelmingly benefited higher income earners, and that too failed to boost output and employment without an unstainable credit expansion, much which was driven by fraud by lenders, leaving our economy in ruins when the bubble burst before my arrival in this office. After three decades of trickle down economics and unsatisfactory results, it's time for something different, it's time for major tax relief from the bottom-up.
All Social Security and Medicare payments will be made timely, and my administration will also propose to increase benefits. Social Security and Medicare will continue to provide income and healthcare security for future retirees. The real cost of Social Security and Medicare is the real resources that are purchased and used by retirees. My administration intends to expand the economy and ensure future generations will be able to retire at a level that makes us all proud to be Americans. These are programs that serve public purpose and make our society decent and humane for all those who live in it, and they are good for our economy. Under no circumstances will my administration propose rolling back the safety nets.
These two steps, a full FICA tax cut and increasing the strength of the safety net, will help to restore equity in the private sector and turn on the engines of market capitalism that drive our economy. In 90 days, we will be on track for record output and much lower unemployment. Some say we can't afford this, that it will add to our deficit; well, the federal government is the issuer of the currency. Since 1971, when President Nixon ended Bretton Woods, the federal government has faced no operational constraints on spending; and, as a matter of accounting, the federal government's deficit is directly equal to non government US dollar savings. The funds to pay our taxes and buy government securities come from government spending. Involuntary unemployment is a direct consequence of government not spending enough for us to pay our taxes and save what we try to save. My administration intends to recognize these operational realities and adapt federal policy. We will put our people back to work, and let the federal government's deficit float per the savings demands of the non government.
In addition, my administration will propose a substantial one-time per capita distribution of federal funds to the states to restore the solvency of subnational governments, who are currency users. This will help to immediately put teachers, fireman, and police officers back to work at the local level. Finally, I will propose draft legislation for the development of a federally funded transitional Job Guarantee program for every American who is able and willing to work but unable to find employment. Instead of allowing able individuals to fall through the cracks, we will offer an opportunity for them to work and contribute to their community in non-profit and public-sector work activities from which society will gain useful output, while the individual will retain the self-respect of earning their way through a difficult time in their lives. A rules-based Job Guarantee program will provide greater price stability than currently achieved through unemployment of millions of Americans, and it will allow the market of unemployed job seekers to determine the countercyclical size of the federal government's budget deficit needed to maintain full employment. The days of Congress micromanaging the economy in times of distress will come to an end, which will allow Congress to re-focus on the public purpose of normal federal spending decisions."
All credit to Warren Mosler, as the ideas contained here all come from him.