Wednesday, January 09, 2013

The Disunited Parties of America

Whereas Americans suffered the trauma of moving towards the Fiscal Cliff of 2012, and whereas the divided Congress resolved it only partly and for the short run, and whereas the Republicans and Democrats have vastly differing ideologies and policies for the USA, and since challenger parties have even more radically differing views, one impossible remedy would be to split up the government into the party lines.

If you don’t like political fantasy, then stop reading. Otherwise, here is how the fantasy would work. Americans would choose to belong to one of several political parties, or they could choose, by default, the Nonpartisan Party, which would continue current laws and policies. (We cannot call the Nonpartisan Party the “Independent Party,” because there is already an American Independent Party which is a political party.)

Each party would have its own president and congress, and its own regulations, taxes, spending, and currency. The country would still have a single military, Supreme Court and a federal Constitution amended so that each party would have autonomous control over its own members, recipients of transfer payments, and territory. The joint Congress elected by all the people would still function to authorize spending for foreign affairs and the military.

Consider first the Republican Party. The Republican Congress would enact its own tax structure. The federal debt and unfunded liabilities (promised transfer payments for Social Security and Medicare) would be divided among the party governments by population, so that each party government would be obligated to pay its share of current and promised transfer payments. If it has one third of the population, the Republican government would have responsibility for one third of the national debt.

The territory of the Republican government would consist of the private land owned by its members, plus a population-based proportional share, both assets and liabilities, of federal property. The Republican government would inherit the current laws, but could then change them. They could reduce their income tax rates, but any added debt would be handled with Republican Government bonds. They could cut domestic spending for their members, and they could change Social Security, Medicare, and Medicaid for their new members and the future incomes of their members.

The same authority would apply to the Democratic, Libertarian, Green, one or more socialist parties, a social-conservative party, and others. A new party would be authorized if it had ten thousand members. There could thus be a Geoist party that enacted a Georgist single tax on land values (including a tax on dumping pollution into the people’s land). They would attract millions of members, because only the Geoist party would leave workers and enterprises tax-free. (The Libertarian Congress would most likely keep and enact national sales and excise taxes, as was advocated by their previous presidential candidates.)

As a member of the Geoist Party, I would propose that, in order to get landowners to enrol, landowners with net tax losses would be compensated with geo-bonds. Geo-bonds would be backed by a strong asset: they would have the first claim on the future rents of Geoist land.

The Disunited Parties of America would offer Americans a choice of governance. The division would not be pleasant, but it would at least enable each party congress to deal with fiscal issues without the delays and special-interest concerns that are blocking long-term solutions.

Probably the Libertarian Congress would establish its own currency to replace today’s federal reserve notes. They would implement free-market banking. I imagine the Libertarian Congress would mint half-ounce gold coins with a denomination of $1000, engraved with the picture of the Austrian-school economist Ludwig von Mises. The banks in Libertarian land would issue their own currency convertible into Mises gold dollars. Mises bank notes and accounts would be adopted by people in the other party lands, as it would be sound money not vulnerable to inflation. The Republican and Democratic congresses would surely choose to remain with the federal reserve system.

How well the Geoist party economy prospers depends also on its monetary policy. There would be a big battle within the party on whether the Geoist Congress would directly issue fiat currency, or whether to have a free market in money and banking. If the fiat-money faction won, the outcome would be uncertain, as the debt service of geo-bonds could be high because of uncertainty about any future monetary and price inflation. I would vote for financial free trade, but would probably be outnumbered by the fiat money advocates. I imagine most business and households in geo-land would use the libertarian gold-backed money, and they would prefer to hold libertarian bonds that are denominated in gold-backed money that would be free of any inflation, tax, and uncertainty premium.

The Disunited Parties of America would resolve the tax debates. The Democrats would have high taxes on the wealthy, but all the wealthy persons would join the Geoist and Libertarian parties. The Republicans would have low income taxes and low welfare payments, but enterprises and wealthy people would also abandon the Republicans for the Libertarians and Geoists, and socially liberal people would abandon the party due to its strict social-conservative controls on speech, reproduction and drugs. The socialist parties would have high welfare spending for the poor, but no money to pay for it. The Libertarian Party would have some rich landowners and oil companies, but their 40-percent national sales tax would leave it with few residents in the middle and lower income classes.

The Geoist Party would end up with most of the people and land, but it would pay a high debt service for geo-bonds if buyers feared future fiat monetary inflation. With the Democrats and Socialists bankrupt, middle and lower-income folks would join the Geoist Party, since both their income and spending would be tax-free, and there would be full employment at higher wages than in the other party lands.

None of this will happen, but it shows that one source of the problem is an economic policy that is forced on everybody, in contrast to a pure market economy in which each person, family, and local community can choose its own borrowing and spending. The beauty of the market is that it caters to our individual differences, replacing military and political conflict with a diverse market that satisfied our individual desires.


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