THE SYSTOCRAT PAPERS

Fellow Systocrats:

A couple of days ago I posted a warning to American taxpayers re: the dangers of allowing our elected representatives to approve a massive 700 billion dollar bailout plan without allowing enough time to consider either the full implications or other viable alternatives.  Following up on that post, today I received an email, purportedly authored by one T.J. Birkenmeier, which sets forth a "Main Street" alternative to the 85 billion dollar AIG bailout.  The email is below - basically Mr. Birkenmeier proposes that instead of wasting money on a company that "put greed ahead of responsibility and used their good name to take risky bets that did not pay off," we should instead place this money in the hands of the American people, after deducting federal income tax.  Assuming that the taxable rate averages out to be 30% and that there are around 200 million people over the age of 18 in this country, Mr. Birkenmeier estimates that after taxes, each person would receive $297,500! Now, I have no idea who Mr. Birkenmeier is or what he does for a living, but I sure like the way he thinks! 

Unfortunately, the AIG bailout is a done deal (although AIG's shareholders are meeting on Monday to discuss more attractive alternatives) . . . BUT, the 700 billion dollar bailout proposed by the Bush administration is not!  So, in order to provide TSP readers with a more concrete idea of the sheer magnitude of a 700 billion dollar transaction, I've calculated the numbers for a Birkenmeier-style "Main Street" bailout, using his basic methodology. 

"Birk" calculates the number of Americans over the age of 18 at roughly 200 million.  The census department projects this number at 229,526,000 in 2008.  If we divide 700 billion by this number, we come up with $3,049,763 per taxpayer!  After we subtract 35% (the highest federal income tax rate for income over $357,700), or $1,067,417, each taxpayer is still left with $1,982,346!  Remember that the federal government is left with 245 billion dollars after collecting taxes on the Main Street bailout. 

Holy crap! 

UPDATE: While these large refund numbers make the heart of any red-blooded American beat a bit faster, it appears that Birk's math, and my own derivative calculations, may be off.  In response to the comment below by Dave R. I ran all of the calculations again.  Turns out that Birk's refund per taxpayer is $425 and the refund on the 700 billion package is $3,049 or so.  Damn - there goes that 52 inch HD flatscreen tv I was planning to buy once our Main Street lobby proved successful!  700 million is still a lot of bread, though.  I'm no mathematician, so if anyone else wants to weigh in on these calculations, please feel free. 

At the beginning of this roller coaster "bailout" ride, Treasury Secretary Paulson stated that the purpose of the bailout is to "buy up bad mortgage debt" in order to make our financial system function again.  Putting this kind of money into the hands of the American people instead of Wall Street might do more to solve the bad mortgage/foreclosure crisis.  By contrast, it's uncertain whether or not the "Wall Street" plan would do the same, since it's not clear whether or not 700 billion is enough to save the targeted financial entities, or that these entities won't simply resume their irresponsible ways, invite another disastrous collapse and then extend their dirty hands for more bailout money. 

700 billion dollars.  Isn't it interesting that 700 billion tax dollars is available to bail out irresponsible financial institutions, while we struggle to make funds available to aid the millions of homeless people in this country or for the millions of Americans who have been foreclosed on over the last year?  While there's little or no money available to help the residents of New Orleans rebuild after Hurricane Katrina, apparently we can come up with 700 billion dollars to pay inflated CEO salaries as a "thank you" for playing a large role in bringing about this crisis? 

700 BILLION DOLLARS!!!!!  I must say, I thought the Birkenmeier email was rather humorous when I first read it, but the more I think about it . . . maybe we should contact our elected representatives and lobby for the "Main Street" plan. 

In any event, thanks to "Birk" for a thought-provoking idea.  Here's a significant portion of his email:

I'm against the $85,000,000,000 bailout of AIG. Instead, I'm in favor of giving the $85,000,000,000 to America in a "We Deserve It Dividend."  To make the math simple, let's assume there are $200,000,000 bonafide U.S. Citizens 18+.  Our population is about 301,000,000 +/- counting every man, woman and child.  So, 200,000,000 might be a fair stab at adults 18 and up.  So divide 200 million adults 18+ into $85 billion - that equals $425,000.00

My plan is to give $425,000 to every person 18+ as a "We Deserve It Dividend.  Of course, it would NOT be tax free.  So let's assume a tax rate of 30%.  Every individual 18+ has to pay $127,500.00 in taxes.  That sends $25,500,000,000 right back to Uncle Sam.  But it means that every adult 18+ has $297,500.00 in their pocket.  A husband and wife have $595,000.00. 

What would you do with $297,500.00 in your family?

Pay off your mortgage - housing crisis solved.  Repay college loans - what a great boost to new grads. Put away money for college - it'll be there.  Save in a bank - create money to loan to entrepreneurs.  Buy a new car - create jobs.  Invest in the market - capital drives growth. 

Pay for your parent's medical insurance - health care improves.  Enable Deadbeat Dads to come clean - or else.

Remember this is for every adult US Citizen 18+ including the folks who lost their jobs at Lehman Brothers and every other company that is cutting back.  And of course, for those serving in our Armed Forces. If we're going to redistribute wealth let's really do it . . .

As for AIG, liquidate it.  Sell off its parts.

Let American General go back to being American General.

Sell off the real estate.  Let the private sector bargain hunters cut it up and clean it up.

Here's my rationale: we deserve it and AIG doesn't.

Sure it's a crazy idea that can "never work."

But can you imagine the coast to coast block party???