Dear Mr. President to be,
In about a week or so, the longest presidential campaign in election history will finally come to a close. A winner will be named and we can finally go about the business of solving the many issues that lay before us.
No matter who wins, this will be an historic vote. Both candidates promise to bring change to Washington. With most of the electorate believing that we are on the wrong track, the new President along with Congress will preside over exactly where it is that we go from here.
Front and center of the new direction will be a solution for what has become the worst financial crisis since the Great Depression. We won’t be able to fix other problems including our debt, social security, health insurance and defense without addressing what is transpiring in the current economy.
Though both candidates have well articulated plans for dealing with all of the above, the best laid plans of mice and men…
In other words the new President will have no choice but to play with the cards that are dealt to him. The platform for the future will have to wait. Instead, the winner of the election must address the perfect storm that is now conspiring against our economy.
The solution to this mess will not be easy. It will require either winner to put aside partisanship while making very difficult decisions. Everything should be on the table with comprehensive solutions being put forth by both parties.
We are one country that has risen to the occasion many times in our storied history. It is time for us to do so again. Hopefully the winner on Tuesday will be able to take us to where we want and need to go.
Here are a few suggestions that may get us back on the right path. If we do these things it is my belief that investors will benefit with a powerful stock rally that will recover much of what has been lost during this crisis.
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Let’s start with taxes. There are arguments to be made for and against the policies of both candidates here. Much of what is being said now is nothing more than sound bites. To me a combo platter would be the best solution.
The fact of the matter is we have massive debts and spending mandates that need to be paid by someone. At the same time, taxes are a drain on both individuals and corporations.
Raising taxes in the midst of a deep recession is bad policy. Thus the first step of any President should be to lower taxes across the board. That means we need to lower taxes for the middle class and the poor while at the same time lowering corporate and capital gain tax rates.
As Warren Buffett suggested those that have prospered over the last 20 years or so should pay a bit more in taxes. This can be done by raising the rate on the really wealthy, those making $1,000,000 or more or with a net worth of $5,000,000 will see increases in income taxes. In addition the estate tax repeal should be reversed.
In order to further strengthen the majority of workers in this country we need to see a very large increase in the minimum wage. Inflation is most painful to those making the least. While corporate profits have exploded, wages have not followed suit.
Doubling this wage would go a long way to stimulating the economy. Corporations may be reluctant to agree, but will benefit greatly by paying less in corporate and capital gain taxes.
On the spending side, infusions of government capital are a must. Movement to support existing infrastructure projects, including those projects that further a comprehensive alternative energy plan, should be continued under the new administration. Such expenditures will be good for business, but provide valuable assets to the economy.
Obviously the budget will be strained to support such a plan. In the short term, we have little choice. If tax receipts are lower in order to support the economy so be it.
Eventually though, and I would say after a two year period, the new President must bring the budget into balance. Doing so is critically important as huge amounts of debt will keep interest rates artificially high.
Not only do we need balance, but we must have a surplus that can help reduce our current debt. We need an entirely different mindset with respect to our budget. Plans to stimulate the economy with an increase in spending must be accompanied by a strict adherence to a balanced budget with an intention to generate surpluses that can be used to pay debt.
This will be the hardest challenge for the new President, but it can be done. Job one will be to manage entitlement spending. Here bold steps and sacrifice will be required.
From my own perspective I have paid huge amounts to Social Security over the years and I would gladly walk from those dollars in return for knowing that I will be taken care of in my old age.
In other words, I will trade my retirement income for guarantees of health care as I ride into the sunset. If I am healthy, I will work and contribute to GDP no matter my age, but if I am unable to work due to health, I need to know that I will be cared for.
That care will be ultimately less expensive than some sort stream of income that really isn’t there anyway. Those dollars have already been spent. That’s ok if my trade of retirement income for health care results in less debt for my children.
The point is the new administration must take bold steps. I honestly don’t care who wins. What I do care about is fixing this economy, paying our debts, creating a strong middle class, and caring for our elderly. Do so and we can remain the strongest nation in the world.
The added benefit is stocks will roar as a result!
This article was written by Jamie Dlugosch, contributor to InvestorPlace.com. For more actionable insight like this, go to: www.InvestorPlace.com and check out:
