How To Raise Revenue And Fund Job Creation Without Raising Taxes (A Solution Campaign Donors Would Not Like You To Consider)

 Our nation faces some very challenging times. The loss of so many jobs to overseas industry and the collapse of the housing market have left a void in our economy that has so far been filled with a lot of borrowing by our government and bail outs for our "Too big to fail" lending institutions. The government cannot continue indefinitely borrowing money at the present level yet stimulus is needed to keep our economy afloat while we look for new ways to provide goods and services to the rest of the world and ourselves that will keep our population gainfully employed and enough taxes rolling in to pay the bills of our society. In the face of these difficulties, there has been very little new ideas coming from our government and a lot of rehashing of old ones.

Raising taxes on the wealthy is a popular solution with a majority of our population. While that may need to be done at some point it is useful to note that raising taxes does not always equal raising revenue. The wealthy are exceptionally skilled at getting out of paying taxes which goes back to the old saying, "You don't get rich by giving it away." Lobbying for tax cuts is a big industry in Washington and accounts for a large percentage of donations and benefits for our law makers. If lobbying for tax cuts were made illegal tomorrow the standard of living of politicians would decrease significantly. Riding around in limousines on the way to fancy dinners and parties would be replaced with driving themselves home to get some mac and cheese and possibly some of Costco's boxed wine.
 
Lowering taxes has been suggested by some as a way to stimulate the economy. (The politicians that really like the dinners and parties are big supporters). Another stimulus package has been suggested but the additional borrowing needed to fund that makes it seem unlikely except in a "Too little too late" type of scenario. Increased spending on roads and such has been helping a lot but the funding for that has pretty much run out and we are about to dump 100,000 newly unemployed soldiers into a job market that is already struggling to keep folks employed. I guess I should mention the idea that austerity measures are needed to fix our nation's issues but enacting austerity measures in a struggling economy is the surest way to achieve a downward economic spiral. (Just check out the action in Greece).

The obvious problem with many of these ideas is they don't really address the issue. If you raise taxes it is likely that jobs will be lost and possibly revenue. If you increase borrowing to stimulate the economy without raising revenue you will create jobs but create more debt problems and possibly a further downgrade of the US government credit rating making it more costly to borrow money later on. Austerity measures will likely decrease revenue and cause dramatic job loss. Tax cuts are the equivilant of more borrowing and haven't proven to create that many jobs. With all of that in mind I propose a simple idea that both creates jobs and raises revenue without taxing anybody more than they are now.
 
Stated simply, I propose a system of Regional Public Lending Corporations to promote commerce and inject new revenue into our shaky economy. By allowing public lending corporations to form at the state level with the mission of providing financial services to the state's citizens the revenue generating powers of fractional reserve banking can be utilized to fund a portion of the needs of our society. During the financial collapse the tax payers of the United States were left holding the bag when our private lenders over extended themselves. Allowing these same banks to borrow money from the federal reserve at zero percent and loan it back to the federal government at current bond rates or to the citizenry at even higher interest rates has been incredibly expensive and a major part of that cost can be seen in a lack-luster recovery that has brought few jobs and little relief.
 
Since the US government is the lender of last resort it would not be much of a stretch to allow the states to be primary lenders for the citizenry. State lending corporations and their private partners could start with the extremely lucrative revolving credit market. Imagine if you could make a balance transfer to a public lender who is mandated to return a high percentage of all interest payments into a fund that creates jobs and services in your state. Since paying interest is like a voluntary tax why not invest those voluntary contributions into our society creating jobs for your neighbors and fellow citizens. Turning interest payments into a contribution to our society and nation would stimulate spending and help to create even more jobs. 

Perhaps you think the money involved is too small to make a difference. Well here are a few statistics provide by Creditcards.com to give you an idea of what I am talking about. 

 Average credit card debt per household with  credit card debt: $15,799* 

609.8 million credit cards held by U.S.  consumers. (Source: "The Survey of Consumer Payment  Choice," Federal Reserve Bank of Boston, January 2010) 

Average number of credit cards held by cardholders: 3.5, as of yearend 2008 (Source: "The Survey of Consumer Payment Choice,"  Federal Reserve Bank of Boston, January 2010)

Average APR on new credit card offer: 14.89 percent (Source: CreditCards.com  Weekly Rate Report, July 20, 2011.)

Average APR on credit card with a balance on it: 13.10 percent, as of May  2011 (Source: Federal Reserve's G.19 report on  consumer credit, released July 2011)

Total U.S. revolving debt (98 percent of  which is made up of credit card debt): $793.1 billion, as of May  2011 (Source: Federal Reserve's G.19 report on consumer credit, released  July 2011)

   Information provided by CreditCards.com;

 
There are other lending markets that could benefit from the participation of public lenders. The total US consumer debt was 2.43 trillion dollars as of May 2011. We are talking about loans for consumer goods that do not have as high an interest rate but are secured with material collateral (like cars and stuff). This would be an area where the public lending corporations could stimulate new spending and job growth when needed by helping consumers and businesses to purchase things they need while providing even more revenue to their state.
 
The total US mortgage debt is 10.54 trillion dollars. Competitive lending in this area would provide a considerable amount of revenue for public lenders especially now that home values are beginning to level off. Interest payments on residential mortgages that are returned to the State of Alaska general fund in the form of dividends from the Alaska Housing Finance Corporation (a public lender in Alaska with a AAA credit rating) have totaled 1.9 billion dollars since 1986 and that is just from the profit generated by lending money bonded from the Permanent Fund.  Impressive when you consider a State having little more than 500,000 people in the 1980's.

If you click the links you can see that some public lenders exist at the state level and they can be very effective in providing people with homes even in a financial collapse like the one we are experiencing. While the rest of the nation was experiencing predatory lending and adjustable rate mortgage reset defaults, Alaska had a competitive credit market for mortgages that included some very good fixed long term interest rates and a lot of programs for earning a lower rate like energy efficiency rate adjustments. When I got my AHFC home loan in 2004 I improved my home from a 2 star to a 4 plus star energy efficiency rating and reduced my interest rate by .75 percent in that program. (AHFC does not loan money for luxury homes and is limited in the amount they can lend.) I cite the performance of this public lender and the stabilizing influence it had on credit markets in Alaska as evidence of the effectiveness of public lenders in the mortgage lending field.
 
I do not propose putting any of our current crop of "too big to fail" lenders out of business. I do suggest downsizing them by allowing public lenders to compete with them for the business of taxpayers like myself would be a good idea, a job creating idea. By using a corporate structure and organizing these institutions to act as profit generating corporations with the citizens of the region as both the customers and in many ways the stock holders we could increase revenue for many job creating programs re-investing the money directly back into the tax base.
  
With so much wealth accumulating into fewer and fewer hands, this is exactly the kind of push back that is necessary to return some much needed revenue to the people and the tax base.

I could easily write more on this topic but I think this sufficiently states the proposal to raise revenue and fund job creation without increasing taxes.

Ps- If you are wondering how this would work, a small loan from the federal government would serve as the seed money for these new regional lenders. Fractional reserve banking would take care of the rest.

 Here is a fun video that dramatizes a simplified explanation of Fractional Reserve Banking