Fixing The Budget Deficit: Part 2, Incentivizing Politicians

Yesterday, we began a series on how to fix the budget deficit by suggesting wholesale changes to how individuals are incentivized through the structures of taxes.  Change how people are rewarded and punished and you'll get them to do what we, as a society, would like to see done.  That was Step 1.

Step 2:  Create Appropriate Incentives For Politicians To Behave In The Country's Interest

Regardless of where someone aligns politically, the sentiment toward politicians could hardly get any lower.  In special elections to replace vacant seats, the incumbent party is being rejected in droves, however, voter anger has mostly been directed at Democrats.  Right now, politicians, especially CAREER politicians, are being looked upon as akin to either ambulance-chasing lawyers or used car salesmen - on a good day!

Let's face it.   Politicians do such a crummy job because their incentive is to do whatever it takes to get re-elcted even if it means voting for a piece of legislation they KNOW will be ultimately harmful.  Ideally, we need them to do the RIGHT thing for the LONG run even if it may affect their re-election campaigns because of SHORT run dynamics.

Do we need to change human behavior?  Do we need to drug them?  How do we get them to do the right thing?

We can get politicians to behave and vote exactly the way we want them to by changing their incentive structure.   How?  The same way a corporation does.  By rewarding them for "success" and punishing them for "failure" in the performance of their duties.

Let's take the budget as an example - an area Congress has a direct hand in determining.  Think of Representatives and Senators as large groups of two separate Boards of Directors for America Corporation.  If we want them to balance the budget, PAY THEM A BONUS if they balance the budget!
That way, it's certain to happen.

Think it would be too expensive?   Hardly!  Let's say we paid a performance bonus to the entire House of Representatives of $100 million for achieving a balanced budget.  If successful, that would produce more than $250,000 per person - more than a year's pay.  We could do the same for Senators.  A $100 million dollar bonus pool would translate into $1 million each.  Think they couldn't balance the budget with that carrot hanging in front of them?

Given the size of budget deficit we now have of nearly $1.5 trillion, that bonus structure would save itself many, many times over.  Suddenly, they wouldn't be so anxious to go on vacations.  Suddenly, hard decisions would be made as to where to make cuts.  Suddenly, we would see FAR FEWER pork projects.

We could also withhold some of that bonus until the goal is actually met.  Since economic data like budget deficits are only known after the fact, we should only release the bonuses when the final tallies are in.  That way, we don't pay them for their lousy projections, but for accomplishments.

This same methodology could be used to achieve other goals like reforming out of control entitlement programs, or trimming defense, or any other goal deemed to be in the best interests of our country as a whole.

The amount of pay could be determined by an executive compensation committee of respected and experienced people from all walks of life.  This committee could be made up of folks such as former Presidents (at least those without a wife who is serving as Secretary of State and wants that Presidency oh so bad!) or business executives or other high profile and trusted individuals. 

Another means of correcting the lunacy of our political ruling class would be to force them to eat their own cooking  You like Obamacare so much?  Sign up!   You like Social Security so much?  Sign up!  There should be no ability to "opt out".

If we forced them to abide by the rules they set out for everyone else, they might just be a tad less inclined to stuff these rules and programs down our throats!

This approach to how we utilize our Congress, if properly stuctured, would completely change the horrendous and inefficient dynamic characterizing Washington, D.C.  The interests of Congress and the populace would be completely aligned.  We would have a more effective governing society.

Marko's Take

We devoted a two-part video blog series to fixing Social Security.  Part 1 of the series, entitled "Social In-Security:  The Problem" can be accessed by clicking here http://www.youtube.com/markostaketv#p/u/0/twFn9XyP2rI.  Part 2 of the series, entitled "Social In-Security:  The Solution" will be posted in the next couple of days.

10 For 10: 10 Predictions For 2010

Every pundit puts out an annual list of what to look for in the upcoming year.  Most do so in either late December or very early January.  It's now this pundit's turn to give his "Take".

In no particular order of importance, I expect to see the following:

1.  The economy, currently in "recovery" mode, will start to sputter by no later than the middle of the second quarter, and will cascade lower into the end of the year (http://markostake.blogspot.com/2009/12/recovery-recession-or-depression.html).

2.  Residential home prices wll RISE through 2010 (http://markostake.blogspot.com/2010/01/bottom-in-real-estate.html).

3.  Commercial real estate collapses, led by closures of strip malls and the failure of small businesses (http://markostake.blogspot.com/2009/11/small-business-failures-leading.html).

4.  Stocks RISE in 2011 (http://markostake.blogspot.com/2010/01/why-does-stock-market-act-like.html).

5.  Republicans take the House and the Senate.

6.  Interest rates will remain low throughout the year (http://markostake.blogspot.com/2010/01/have-any-interest-in-future-direction.html).

7.  Some version of a "Windfall Profits Tax" gets enacted on oil companies.

8.  Obamacare does NOT pass in anything close to its current form, unless via executive mandate (http://markostake.blogspot.com/2009/12/obamacare-part-1-whos-fer-it-whos-agin.html), (http://markostake.blogspot.com/2009/12/obamacare-part-2-when-us-gets-involved.html),
(http://markostake.blogspot.com/2009/12/obamacare-part-3-economic-reality.html).

9.  Shortages of necessities such as food, water, gasoline and other staples will lead to unprecedented civil disobedience and riots.

10. Gold will reach something in the order of $5,000 and Silver $250 per ounce by the end of the year or early 2011.

11.  I will make an 11th prediction:  The U.S. Dollar will be virtually, if not entirely relegated to second-tier status.

As you can tell from the 11th prediction, at least one of my forecasts came true.  I did indeed make an 11th prediction! 

You didn't think I'd take a chance on going 0 for 10 did you?

Thanks for reading!  If you have some predictions of your own or think I missed mentioning one, you know what to do:  TAKE ME ON!

Marko's Take

Obamacare... Part 1: Who's Fer It, Who's Agin' It?

The Senate version of Obamacare passed on Christmas Eve by a 60-39 vote, completely along party lines.  Thank God, President Obama has managed to UNITE the country as he promised while campaigning! Ninety-two year old Democratic Senator Robert Byrd, (presumably along with his dog, Billy), had to be wheeled in to vote, while Republican Senator Jim Bunning of Kentucky refused to vote at all!

Proponents will be easier to enumerate, so let's start there first.  They include the administration and the 60 Democrats in the Senate.  And, of course, most of the House of Representatives, led by Nancy Pelosi.  This is, of course, PREPOSTEROUS, since NONE of the provisions of Obamacare will apply to any of them! 

As to the opponents, the list gets a bit more extensive.  Among the nays include the American People, who, according to the most recent Rasmussen poll, oppose Obamacare  by 55%, with only 41% in favor.  This poll was conducted less than a week ago.  Therefore, Obamacare should prove VERY UNHEALTHY for Democrats seeking re-election in 2010!

Other opponents include Big Pharma and the AARP.  Big Labor opposes Obamacare, too, because of the 40% excise tax it levies on so called "Cadillac Plans", the portion of existing health-care plans that are very lavish, such as the ones enjoyed by many unions and Congress.  Oh yes, that excise tax applies to everyone BUT CONGRESS!

On the 23rd of December, one congressman, Democrat Parker Griffith of Alabama, switched parties BECAUSE of his opposition to Obamacare.  Prior to running for Congress, Griffith was an oncologist.  He opposes the bill because of the impact on doctors and quality of patient care.  But what does he know.  It's not like he was a doctor!  Republican's haven't held this seat since the Civil War!

Before the bill is enacted, it must be first reconciled between the House and Senate versions, which is expected to take place in February.

Now that we know how the sides line up, we'll continue tomorrow with another aspect of Obamacare.

I hope you had a Merry Christmas.  I did.  "Take me on" with any comments below.

Marko's Take