Jan 24 2009
A Workable Economic Recovery Plan?
Is it possible for one person with an original and unique idea change national fiscal policy and create a sustainable and renewable Economic Recovery Plan? Humbly, I sure hope so. I had better explain further, I hold no college degree; I am not formally trained in economic theory, and am not a captain of industry. And yet, the following ideas are realistic and pragmatic, make economic and common sense, and need national attention.
The goal is to infuse $1 Trillion into the economy without $1 direct government spending. Based on creating PAY BACK scenarios, the Fund America economic recovery plan has the person, group, or community that receives a benefit PAY for it. Financial responsibility instills self reliance, self respect and self empowerment.
This website and blog explains the Fund America program in detail. This is a 100% altruistic endeavor - not one penny in profit is sought. This financial tool is offered for consideration and revision by professional economists and elected policy makers far smarter than me.
A micro economic example: A successful small business owner has actively supported FINCA (www.villagebanking.org) with donations to the microfinance organization for 10 years. He traveled to remote villages in Latin America, Africa and Asia and personally witnessed the transforming power of loaning $100+ to women with a micro business plan. He watched first-hand the over 95% payback history on these life changing loans. In 2008 with two kids in college and business less profitable, he calls John Hatch the founder of FINCA to see if he could continue his support, but, without donations. They came up with a plan.
The benefactor would liquidate some stock market retirement funds to buy a CD at his bank with the interest paid to his retirement fund. The CD would be pledged as collateral to secure a loan from his bank to FINCA for its village banking. FINCA would pay the loan off from its collections of interest and principal from their village based borrowers. To safeguard the CD principal, FINCA would go to Warren Buffet’s Berkshire Hathaway and pay for an assurance policy to protect the CD from being called upon for anything more than 15% of the total pledge. The stop loss insurance costs 3% up front of the total funding.
The Benefactor liquidates his retirement stock portfolio in mid 2008, and purchases a CD at his bank. He pledges the CD as a guarantee on a loan for $250,000 (more than he had donated over ten years). The bank, thrilled to get a jumbo CD, and agreed to charge prime for the loan to FINCA. FINCA’s total costs are much lower than other financings. By year end, the retirement funds were safely out of the market and earning a high interest rate. Best of all, in four years when the loan is paid in full and the CD is released, he can do it all again… sustainable and renewable!
On a Macroeconomic scale, there will have to be incentives, tax allowances, safeguards, real time transparent reporting systems, strong regulatory oversight, and risk management. Fund America programs fund a diversity of projects from Micro-Finance, vocational training and placement, infrastructure construction, urban renewal, venture capital funds for Green Energy, Biosphere Technologies, to Medical R & D. All of this accomplished without any direct government funding, and not $1 given away.
Some highlights of this sustainable Economic Recovery Plan
To create strong incentives for participation, benefactors who purchase CDs at their banks and pledge them as collateral for Fund America programs receive a 10% Tax Credit plus earn CD interest tax free. The US Government would have to guaranty the pledged CD principal against bank defaults. Be very clear, this is a lot better than the Government writing a $1 Trillion dollar check to stimulate the economy. When the loans are personal and the payback comes from wages, the actual amount paid to the loans would be exempt from income taxes – same for amounts paying off student loans.
Each and every Fund America loan would carry insurance policies that underwrite two separate things: 1) the risk of completion; and 2) a limit on the collateral call exposure. Funded at loan origination this would take the forms of completion bonds, and assurance stop-loss policies. There are many more detailed provisions.
My hope and belief is that with all our modern communication tools, emails, websites, blogs, and Op Eds, one person can effect change and influence national policy and we can create a sustainable and renewable economic recovery plan.
4 responses so far
Hello,
I read your prosperity mandate proposal today and try as I might, I could not find anything wrong with it. In fact, I think this idea neatly ties many troublesome ends together, and it seems simple and easy enough for anyone to understand. Since you are asking for feedback, I have one small comment… it strikes me as a little odd that there are no comment entries in the blog… can it be possible that the site is so new that there are no entries yet? In any case, bravo, I will share the plan with my friends.
SW
this is very readable; the story of the FINCA microloan is a fascinating case study. As I understand it, today’s volatile and bearish market means that interest earning, insured CD’s - along with tax credits - would be considered by many to be a good, safe, investment. Is this correct? It doesn’t seem like it conflicts with capitalist interests in any way; it seems like capitalist investors would consider investing in such a program merely for the guaranteed rate of return. In fact, it seem as though investors might jump at the chance. Am I right in seeing things this way?
Thanks for writing this. The website has a great deal of macroeconomic terminology that confuses me; I enjoy the blog postings for their lucidity.
Matt -
The intent is for it to be an EXTREMELY attractive investment - no tax on the interest earned, 10% tax credit, and Government guarantee on the principal if there is a bank failure (which would not happen with a large infusion of deposits).
All this is intended to draw in the enormous amount of monies sitting on the side lines.
Even more monies will be available, due to companies, and individuals wanting to lower their tax liability when the Fund America Tax Initiative takes away tax subsidies that DO NOT CREATE JOBS - Capital gains tax, depletion allowances, accelerated depreciation, and certain farm subsidies.
Please ask any other questions — it helps us make our thoughts more crystal!
We’re getting beter… due to your comments.
Should have a Web Petition and a Facebook Casue page up this week.