We are facing huge long-term problems: a real unemployment rate of 18%, dysfunctional banks that are "too big to fail", a regressive tax structure that's stifling economic growth, prisons that are bursting at the seams, urban schools that are struggling, a health care system that still needs major reform, the lack of a coherent national energy policy that will protect our economy and the environment, and a government that has been encroaching on our civil liberties. For decades we have lived with irresponsible public policies from career politicians in Congress who care more about increasing their party’s power and getting re-elected than they care about solving long-term problems. They haven’t been honest with us, and they have been lousy public servants.
I’m different. I do not want to be a career politician. I am not a Democrat or a Republican. I’m a Problem Solver. I want to force members of Congress to be responsible, and implement sustainable solutions to real problems. Please read the positions I present on this website, and spread the word to friends and family.
Wednesday, July 7, 2010
Text and Video of John's Speech on How to Save the Economy
You can watch John's speech by clicking here:
Here is the text:
Hello everyone. Thank you for coming! And hello to those of you watching on TV or the internet. I’m here to talk about our dire need for government action to fix our economy in the short term, and protect and keep it healthy in the long term. The good news is, the solutions exist! Unfortunately, they are not being implemented by our elected officials in Washington because of a combination of ignorance, greed, cowardice, and corruption. We must all fight to overcome these forces, and build a coalition of true public servants in Washington that have the knowledge and courage to solve these problems.
Before I get into the details of my economic proposals, I’d like to tell you a little bit about myself. I’ve been a Professor of Engineering at Trinity College in Hartford for 20 years. I also teach some public policy and environmental science. I’ve been passionate about the need for real problem-solving in government for my entire life, and for my entire life I’ve been disappointed with the Republicans and Democrats we’ve sent to Washington. They seem to care more about building their party’s power, and getting re-elected, than they care about doing the right things. So, I started getting involved in independent party politics in Connecticut in 2006. That involvement has included the takeover of the Connecticut for Lieberman Party, for which I’m on the ballot for U.S. Senate this November. I’m also seeking the nominations of the Independent Party, the Green Party, and the Libertarian Party. I believe that all these minor parties, while they differ on many issues, overlap significantly in their commitments to honest and responsive government, and the protection of our constitution and our civil rights.
Some personal history: I grew up on a farm in northern California, in the middle of nowhere, 8 miles from the nearest post office. I learned what hard work is. I was the foreman of our harvest crew when I was 12, working 70 hours a week in 100 degree weather, usually supervising migrant farm workers from Mexico. With my parents’ encouragement, I worked my way through the local university and was a member of the first generation of my family to graduate from college. I earned a bachelor’s degree in mechanical engineering, graduating summa cum laude, and was fortunate enough to go to graduate school at Stanford University and earn a master’s and Ph.D. in mechanical engineering. I then landed my dream job at Trinity College. A few other things that I think give me a unique perspective: when I was 9, my parents leased our farm for two years and joined the Peace Corps. My family and I spent two years in Zaire, Africa, from 1972-1974. The experience changed my life, and gave me a deep love for the freedom and opportunities that we have in the United States. I also developed a respect and love for all the people of the world. In CT, I’ve volunteered with Hartford schools for 19 years, and I feel that I understand the challenges of our cities very well. During my twenty years at Trinity I’ve been very involved in faculty governance, and done a lot of committee work. I feel that all of these experiences make me well qualified to be your Senator.
So let’s talk about the economy: First our immediate needs. We have a real unemployment rate of 18%, when we include people who are working part-time and can’t find a full-time job, and people who have simply given up looking. And in some of our cities, unemployment is as high as 50%! Home and commercial property foreclosure rates are dangerously high, and they show no signs of going down. Some experts say this is our biggest concern. And small businesses, our biggest potential source for jobs, are struggling to survive. Our economy is ice cold, and it has the potential to get worse. People are suffering, and if things don’t change, there will be a significant long term toll on our citizens’ well being.
We have also seen our economy change over the last few decades in a way that has increased the disparity between working families and the wealthy. Corporate executives now make 350 times the average pay of their employees, while in the 1970’s they made 40 times their employees' average pay. And at the same time that this disparity has exploded, our tax structure has become significantly more regressive. If you add up all the taxes that we pay: Property taxes, sales taxes, excise taxes such as gasoline and cigarette and cell phone taxes, state income tax, FICA tax, and federal income tax, we Americans pay on average 32% of our income in total taxes. I’m going to tell you a secret that you’re not supposed to know: the top 1% income earners in the United States only pay 31% of their income in total taxes. I’m going to repeat that: on average Americans pay 32% of the income in total taxes, and the top 1% income earners pay 31%. Do you think it’s fair that the richest Americans pay a lower percentage of their income in total taxes than the American average? I don't. And this is new. In the 1950’s, the top income tax bracket was 90%. Now it’s 35%. Over the last 50 years, our tax structure has become much more regressive, that is to say, it has shifted more to the working middle class. We may agree that this isn’t fair, but more importantly, it’s a disaster for our economy. Here’s why.
Unemployment levels are primarily a function of how much money is being spent in our economy. If more goods and services are being purchased, more goods and services need to be produced, and more people are hired to produce and sell those goods and services. Taxes reduce people’s spending power. If you increase taxes by $3,000 on a family that makes $50,000 a year, it makes a big difference. It makes it harder for them to make their mortgage payment, or buy health insurance, or pay their child’s tuition. It reduces their spending. If you reduce the taxes of someone who makes a million dollars a year by $3,000, it’s not going to change their spending much at all. So by making the tax structure more regressive, you’ve removed spending from the economy, and ultimately increased unemployment.
So all of these things are related. Spending levels, and therefore U.S. unemployment levels, are most affected by our overall tax rates. When unemployment is too low (which we approached in the 1990's), there is a shortage of workers for employers, it causes inflation, and hurts our economy. In this situation government should cool off the economy by raising taxes, which reduces spending, and stabilizes unemployment rates and inflation. When unemployment is too high (or in our current situation, WAY too high), government should lower taxes in a progressive way, putting more money into the hands of the average person, which increases spending, and creates jobs.
So I’m going to talk about one single, simple piece of legislation that will fix all of these problems: unemployment, foreclosures, small business failures, tax fairness, and to some extent, wall street compensation. It’s a change to our FICA tax structure. Right now, a family that makes $100,000 a year pays approximately $6,000 of social security tax. Do you know how much someone who makes $10 million a year pays? $6,000! This is as regressive as it gets! This also applies to the employer contributions to FICA; employers must match the tax payments that are deducted from their employees' checks, but only on salaries below $107,000. This is a huge tax burden on small businesses in particular. Here’s my proposal: eliminate FICA taxes for employees and employers for incomes below $100,000, and institute the current FICA tax of 7.65% only on additional income above $100,000. I call this FLIP THE FICA. This will allow working families to keep 7.65% more of their paychecks, which will help them pay their mortgages and spend reasonably. And it will reduce small businesses’ payroll expenses by 7.65%. These two things in combination will create a tremendous amount of jobs, greatly reduce the rate of foreclosures, greatly reduce the rate of small business failures, reduce government unemployment payments, and get our economy back on track very quickly. Flipping the FICA will also discourage corporations from giving huge bonuses to their top executives, because they would have to pay the same FICA taxes on the bonuses as they used to pay on their lower-income workers' paychecks.
In my plan, once the economy rights itself, and real unemployment drops below 8%, FICA taxes on incomes below $100,000 would be raised from 0 to 3.8%, and when real unemployment drops below 5%, FICA taxes on incomes below $100,000 would return to the original 7.65%. Medicare and Social Security benefit calculations for individuals would remain the same throughout the plan as they would have been without these changes. It’s as simple as that! Flip the FICA, until we have full employment, and then FICA for everyone, not just the working middle class. If we present this plan publicly, calmly and intelligently to members of Congress, perhaps we can embarrass them into doing the right thing, instead of protecting the interests of large corporations and wealthy people.
OK, how about longer term issues? How do we build a healthy economy down the road? I have four proposals:
1. Enforce antitrust laws. The United States developed the most vibrant and powerful economy in the world because we have been fantastic innovators, inventors, and entrepreneurs. Unfortunately, we’ve changed into an economy of huge corporations, because for the last 10-15 years our government hasn’t enforced, or done away with, antitrust laws. We need to swing the pendulum back to the other end of the spectrum, to give small businesses a chance to become our economic engine in the United States again. Here’s an example: we should break up each of the huge banks that are “too big to fail” into 10 smaller banks, primarily because they have also become “too big to function decently.” And we should do it now. I’m not the only person who feels this way. I encourage everyone to read “13 Bankers” by Simon Johnson and James Kwak.
2. If we are going to succeed in enforcing anti-trust laws, we will need to end corporate ownership of our government. This will require real campaign finance reform, and an amendment to the constitution that ends corporate citizenship and states clearly that money does not equal free speech. The recent supreme court ruling that gives multinational corporations free reign in spending on political advertising must be reversed.
3. Health Care reform: Health care is 17% of our economy. We need to address cost control. We should evolve our current system to function as a single payer system, with intelligent tort reform. There are many ways to do this, and I recommend that people watch my half hour TV show on Health Care on youtube. I also recommend that they read this book: "The Healing of America", by T.R. Reid. It’s an excellent presentation of the health care options we have.
4. We will not grow our economy unless we have an educated work force, and that’s going to require addressing the problems of our urban areas. I’m proposing a Marshall Plan for our cities, although it’s really a Marshall plan for every part of the country. It should have three components:
a. Education: We live in the era of the standardized test. We need to teach critical thinking, and how to work independently. We need to reform No Child Left Behind, and we need charter schools and vocational schools that have the freedom to implement innovative curricula, especially in our cities. We need to learn from New Orleans: after Katrina, they have rebuilt their school system from scratch, building about 50% charter schools, and 50% regular public schools. The charter schools are doing significantly better. We can also learn from model charter schools here in CT, for example the Common Ground High School in New Haven, which has greatly improved the performance and learning of high school kids. And in our existing urban public schools, we need to offer honors classes for students who want them. I’ve worked with a lot of good, smart kids in Hartford, who crave that opportunity.
b. The second part of the Marshall Plan is a federal jobs program that offers a minimum wage job with health insurance to anyone who is willing to work, anywhere in the country.
c. The final component is drug law reform: I support the proposals of Law Enforcement Against Prohibition, or LEAP, and the solutions proposed by Dirk Chase Eldredge in his book “Ending the War on Drugs”. I encourage everyone to watch my 30 minute TV show on U.S. Drug Policy on youtube. And just so you know, Mr. Eldridge is a conservative republican.
These four proposals will ensure that we grow a healthy and vibrant economy once we recover from our current crisis.
So how do we protect our economy from financial crises in the future? I see two likely sources of future crises:
1. Another mortgage crisis. The current regulatory bill being debated in Congress does a few good things, but it falls far short. Here’s a quote from Douglas Elliott of the Brookings Institution, who supports the bill: "The bill will not eliminate financial crises, but it will make them less frequent and considerably milder, which is all we can realistically accomplish.” Mr. Elliott is wrong on that latter point. I propose one single, simple piece of legislation that will prevent this kind of financial crisis from happening again: require any lender to keep ownership of a minimum of 30% of any loan they make, for the lifetime of that loan. I’ve talked to a lot of successful financial sector experts, and they agree with this proposal, and that 30% is the correct number: it would not hinder lending, but it would prevent coercive, risky lending, and it would prevent misrepresentation of the quality of bundled mortgages. This simple law would have prevented the current crisis, and it will prevent future mortgage crises.
2. The second area that I fear could cause a fiscal crisis is Energy Policy. The United States has never had a comprehensive and well-articulated energy policy. Until we do, our economy is vulnerable. See my website to read details of my national energy policy.
Thank you for listening. To summarize, my two most important economic proposals are also the simplest:
1. FLIP THE FICA to solve our immediate problems of unemployment, foreclosures, small business failures, and tax fairness.
2. Require all lenders to own a minimum of 30% of all loans for the lifetime of the loan, to protect our economy from a future mortgage crisis.
I also propose a host of changes to antitrust enforcement, corporate citizenship, health care, education, employment, and drug law reform that will build a healthy economy into the future. I encourage you to go to my website, www.Mertens2010.com, and watch my TV shows on youtube, for more details. By the way, my 30 minute TV show, John Mertens for U.S. Senate, is now running on public access in all 169 towns in the state. I discuss a different issue each month.
So, in conclusion, I am on the ballot in November. I offer an alternative to the same old baloney from the democratic and republican parties, or as I refer to them together, the INCUMBENT PARTY. That’s the party that takes hundreds of millions of dollars from special interests, and fails to represent us, the people. If you elect me, I will work incredibly hard, every day, for us. The voters. No one else. I ask for your vote in November. Thank you.
I’d be happy to take any questions.