A Fiscal Cliff Fable — Or Maybe a Solution?

by admin on December 27, 2012

Volume 2, Issue 37

They called him the SAP. The kid looked about 12 years old. He was Special Assistant to POTUS — the President of the United States. The President gave him the mission of cutting through the impasse and getting both parties to come up with a plan to get the USA off of the “Over-Leveraged Nation Goes Broke” scenario that most agree is inevitable in time given the present course.

The SAP set forth on his mission and held short meetings with practically every legislator in Washington. He invited a very small number of them to work with him on the solution. Virtually every invitee agreed. They all regretted it because the kid almost never slept.

In the first couple of days they went over the numbers and beat on them to make sure they were right. Some hoped this would reveal that everything was going to be OK. It did not turn out that way. Twenty years or so out, pick any model you want, the US could not keep up paying its obligations to Social Security, China, et al. Someone was going to have to take a haircut, maybe everybody on the planet.

And old habits that were hard to break were going to have to be broken. Wars were too expensive. We were going to have to learn to be better at preventing war and winding it down fast. Paramilitary budgets would probably go up. We would need to link up with all of the nations of the world — excepting the irresponsible ones — to share intelligence information on a scale unprecedented even by the world wars.*

Borrowing would be another bad habit to break, except when growth forecasts became stable again, enough to justify leveraging money cautiously and with set limits.

By Day 3 there was grudging agreement that people who had put money into Social Security had to at least get their money back out again, and if the numbers could be made to work, indexed for inflation and possible including a modest rate of return of say 2% (on the theory that 4% could be maintained going forward and half the gains would go to the government to pay for the administration of the program and as an additional revenue stream to ensure the country would never get into a fiscal corner again). That was the first decision that got locked into the model. Social Security would not be shut down but the government had to find better ways to grow the monies than it had in the past. This planted the seed for a subsequent idea a month later.

On Day 4 there was general agreement to actually invest more money in free retraining for people of working age (and any seniors who wanted it) to be able to support themselves. People capable of giving such trainings would be asked to tithe 10% of their time to conduct such training without compensation. The others looked on in amazement as the SAP dispatched a small army of staff to go work out the details of that program according to the principle the small group had agreed upon — with as much as possible of the retraining to be done by or in partnership with the private sector.

This idea triggered another one that day, to run a government-partnered-with-personnel-agencies master job and candidate database, into which all people out of work would be listed along with their talents and objectives, to be matched with the jobs available that employers would be sure to post on this master database system. The companies with great matching/search algorithms would be asked to donate their time to create together the best matching optimizer on the planet. The challenge itself would attract top technology talent even without money as a factor, the SAP’s team reasoned, pointing to the phenomenon of the quality of the best open-source software.

Late that same day, as energies were perhaps flagging,  the SAP came up with his own  idea of creating the opportunity for people too old or infirm to work outside the home to make money by honestly endorsing the brands they really do like, and giving their reasons. He made a call to a techie entrepreneur friend to get that plan underway as a venture company. Later in the day he laughed at himself for even having the idea. First take away their money, then their dignity, wow there’s a great solution. (Later the friend refused to give up on the idea, which became the next Google. But that’s getting ahead of the story.)

On Day 5 they ran the numbers and calculated how much more tax money would have to come from the ruling class. Half the room assumed a fighting stance. The SAP got up and acted out a role-playing game in which he pretended to have the power to negotiate with the ruling class directly over the conflict. “What do you want?” he asked the legislators of the Right. They didn’t know what to say. Finally one person said “Let our votes count double because we stepped in to save the country.” “After you got us into this mess,” said a legislator of the Left. The room devolved into temporary chaos at a high decibel level.

By Day 6 the horse-trading had reached close to the reality horizon. But it was really on Day 7 that the ideas began to sound practical. By day 30 the ideas were actually ingenious and showed what Americans are made of. The government would partner with the rich to co-invest in America and around the world in companies doing basic scientific research and/or innovating new technologies with great upside and not just economic. In addition to a tax shift to be fairer to everyone, resulting in additional support from the wealthy, this co-investment idea would turn out to yield profit shares to the government far exceeding tax revenues.

By Day 60 the deal was struck and by Day 120 it was written into Law. Other countries took the clues and adapted the ideas to their own cultures and situations.

A fable? Or what we must do, when we stop fooling around?

Happy New Era!

Bill

*I recommended this in a speech to the Commandant and Corps of Cadets at West Point in 1982, who invited me because they liked my book Mind Magic. The paper, which emphasized the need for “strategic micro-action”, is available on request. Strategic micro-action would have meant getting out of Afghanistan after Osama Bin Laden was eliminated, winding down troops strengths faster in both Iraq and Afghanistan after punitive demonstrations in both countries sapping the strengths of terrorist organizations, and after removal of Saddam Hussein, without sticking around to try to help with ethnic civil wars or police actions, however maintaining training forces and paramilitary. It would also have meant years of preparation in paramilitary coordination in every region with greater use of the media overtly or covertly (e.g. smuggled smartphones) to tell our side of the story and recruitment of more locals everywhere. Our story is the truth about freedom and democracy and so should find some adherents in even the most brainwashed countries. These are just a few of the implications of a shift in policy away from wars and to far greater use of strategic micro-action. Serious students of military history might want to look up the guerilla techniques George Washington learned from the Native Americans, and the effectiveness of the German maestro of strategic micro-action Otto Skorzeny during WWII.

PS — The first release of this post contained the idea of an optimized surgical multilateral global cancellation of some debt. My lifelong friend since I was 21 Norman Hecht, one of my favorite geniuses, convinced me that this idea is too risky and under-researched to broach it without a ton more research, and that paragraph has been stricken from the article above. Now my curiosity to investigate the option has increased and I will be studying the input-output tables that exist to understand the ripple effects of any such drastic measures before bringing up the subject again.

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