Wednesday, September 27, 2017

'How To Make Mexico Pay For The Wall'

Hub city traffic routes for illegal drug trade through Mexico to US

(first published in North State Journal 9/27/17)

Mr. President: If this is already your plan, congratulations.

When Donald Trump, the candidate, kept saying: “BUH-Leeve me! Mexico will pay for the wall,” the media and Democrats scoffed and said there was no way to get Mexico to pay for border wall.

What could President Trump possibly have had in mind?

We could suspend all military and foreign aid to Mexico totaling over $320 million per year to pay for the wall. Losing $320 million a year in foreign and military assistance from America would amount to a .03 percent reduction in total national spending in Mexico.

That is not a killer in overall economic terms for Mexico. Their GDP is $1.046 trillion in US dollars, two-thirds the size of Canada’s GDP. Mexico is the 13th largest economy in the world today. Foreign aid used to go solely to devastated nations who needed it.

It would take 62.5 years, however, to pay for the border wall by diverting appropriations from Congress this way.

What if President Trump had in mind a much higher rate of interdiction of laundered “dirty” drug money that freely flows from purchases made in the U.S. back to sources in Mexico?

Call it “Reverse Money Laundering”: intercept “clean” drug money on its way back to Mexico and convert it into American general revenue to build the wall. It would be like creating a special tax on U.S. drug users and Mexican drug lords to pay for border security.

What could be better than that?

DEA officially collected $138 million in seized money in 2009. However, estimates of laundered money from illegal drug trade between the US and Mexico ranged as high as $38 billion or 275 times the amount of officially seized money.

We are leaving $37.8 billion in ill-gotten profits on the table that could be used to pay for the wall or repave a few highways if we could get our hands on it.

Mexico could pay for its own wall to keep their citizens in Mexico if they wanted. Roughly 10 percent of their population has been exported to America over the past 25 years. But they won’t.


One reason why the Mexican government doesn’t want an effective impermeable wall might be they know how important $38 billion in cash is to the Mexican economy and banking system. Cutting off that flow of cash could sink hundreds of small Mexican banks and cause a real dent in their annual GDP.

Money laundering is a huge network of small businesses in the southwest. Local authorities have little interest in enforcing federal statutes, and the FBI doesn’t have the resources to sift through millions of local bank transactions from mostly cash businesses such as convenience stores, restaurants, funeral homes, lawn services, and car retailers.

It’s a real war out there as well with lots of bloodshed and violence in support of drug trafficking. We have to treat it as war to defeat it.

A tidal wave of dirty money spread over a large landscape is barely noticeable. The point of vulnerability is when dirty money re-enters the banking system so drug lords can buy mansions, yachts, luxury cars, and more weapons with it.

By building a 21st century “virtual wall” with every conceivable technological instrument that can be used to detect cash flows at the border, intelligence gathering with a banking firewall can be used to significantly ratchet up the capture of significant percentage amounts of this laundered money.

That is how Mexico can be made to pay for the wall. Mexican drug lords losing billions in dirty profits from American drug users. The Mexican economy and banking system losing access to billions in laundered money every year.

Mexican interests will have then officially “paid for The Wall.”

And if this isn’t your plan, Mr. President, well, then “you’re welcome!”

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Thursday, September 21, 2017

The DACA For 'The Wall' Deal

Hadrian's Wall Built by The Romans to Keep Hot-Tempered Scots Out of England

(first published in North State Journal, 9/20/17)

Most deals are lost in Congress by politicians who didn’t recognize when they had ‘won’.

They let 'the perfect be the enemy of the good'.

President Trump set up a classic political deal to be made between proponents of DACA (Deferred Action for Childhood Arrivals) and proponents of 'Building The Wall' when he had dinner with Senate Democrat Leader Chuck Schumer and House Democrat Leader Nancy Pelosi. 

Neither side is going to get all they want all by themselves. But both sides stand to gain 80%+ of what they want if they cooperate on a bipartisan bill that deals with both issues at the same time. 

If they recognize they ‘won’, that is.

On one side, you have proponents of DACA who feel strongly that 1.9 million people who came to America at the average age of 6 with their parents who came here illegally should be allowed to stay in America and not be deported.

On the other, you have proponents of much stronger border security who feel strongly that we must have an impenetrable border with Mexico as a precondition for any discussion about immigration reform.

Today, we don’t have a solution to either. There's a deal to be made somewhere between the two sides if both sides realize they will not get 100% of what they want.

There are a few misconceptions about 'The Wall' that no doubt arose from the truncated nature of political campaigning. 'Build The Wall' is a 3-word metaphor for 'Maximize American Border Security' which doesn't resonate in a speech with 30,000 supporters in attendance.

What will 'The Wall' mean in 21st century America?

'The Wall' will not be a continuous 1989-mile brick-and-mortar, concrete-and-cinder block physical barrier between the US and Mexico like the Great Wall of China, the Berlin Wall or even Hadrian's Wall between England and Scotland that the Romans built in 122 A.D. to keep the hot-tempered Scots out of England for hundreds of years.

The American 'Wall' will be a system of integrated technologies that closely resembles existing military capabilities such as unmanned aerial vehicles or drones (UAVs), cluster satellites, radar and infrared imaging now deployed in Iraq, Afghanistan, Pakistan, and elsewhere.  

These security technologies provide the real-time information needed to direct ground intercept units to interdict hostile enemy forces on the battlefield. In homeland security terms, these technologies will be used to interdict people trying to illegally enter the United States without a visa or passport and return them to their home of origin.

As in military theaters, the essential feature of these technologies is their 'stealth' characteristic which is something that physical barrier walls cannot offer.  People trying to enter the United States illegally cannot easily observe the location or configuration of these stealth security technologies and will find them quite difficult to defeat.

'The Wall' will include more than the physical security technologies needed for immediate homeland security operations.  'The Stealth Wall' would have the capability to coordinate with real-time banking information; rail, port, truck and warehouse logistics and dispatching; and government intelligence agencies.

Working with the Mexican government would allow access to banking, immigration/travel and logistics security information across the border.  Technological mechanisms could be added to stop the southward flow of laundered money and high-tech weaponry along with a promise of enhanced security for maquiladoras (foreign-owned manufacturing plants in Mexico) in support of Mexican economic development.

Building ‘The Wall’ will be expensive. Estimates range as high as $20 billion. 

We are going to spend $150 billion to clean up after Hurricanes Harvey and Irma for comparison’s sake. 

Finding a common solution for the DACA population is the price proponents of ‘The Wall’ will have to pay to ‘declare victory’ on their side and vice versa. 

Otherwise nothing will get done on any immigration issue. No DACA. No Wall.


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Wednesday, September 13, 2017

Should You Worry About Tax Reform?

(first published in North State Journal 9/13/17)

Not if you are one of the 103 million taxpayers who chooses the standard deduction instead of itemizing every deduction.

2/3rds of all American taxpayers are in this group. The only thing they have to worry about in tax reform is whether their tax rate is going up or down.

Chances are tax reform will not affect 103 million taxpayers very much one way or the other. Tax rates should go down for them when all is said and done based on comments from the Trump White House so far.

When they hear commentators bleating about 'tax fairness' and 'the rich paying their fair share of taxes!', they can and should watch football games, work in the yard, play with their kids or grandkids and get plenty of sleep this fall instead of worrying a whole lot about 'tax reform'.

1/3 of American taxpayers or 44 million households do itemize their deductions on their tax returns. According to the Tax Foundation, '(o)nly 6.0 percent of tax returns with under $25,000 in income chose to itemize deductions in 2013. On the flip side, 93.5 percent of tax returns with over $200,000 in income were itemizers.' *

Tax reform is very much a 'higher income' concern to between 20-25 million taxpayers then.

The question for higher-income taxpayers will be whether lower tax rates will offset the loss of some of the major tax deductions they have used to lower their tax liability over the years.

Why do we have tax deductions in the first place?

The income tax didn't become a reality until the Civil War and was then promptly declared unconstitutional. Income taxes became 'constitutional' in 1913 after ratification of the 16th Amendment. Class warfare almost immediately ensued as the highest tax rates exploded from 7% to 77% by 1918 to finance World War I to 94% during World War II.

Tax deductions became very popular almost immediately as well simply because the top rate was so high. No one in their right mind was going to work in America and give 94% of it back to the government without a fight.

The tax deduction for employer-sponsored health plans started during World War II because of the wage-and-price freezes imposed by FDR. Providing health care coverage was a way to use the corporate tax code to deduct the 'cost of doing business' which included fringe benefits such as health care coverage for workers.

The corporate tax deduction for health care accounts for the largest net loss of taxes ($235 billion) to the federal treasury of any tax deduction on the books today and also covers almost twice as many people as Medicare and Medicaid combined.

If learning about and understanding the inequities in the tax code today doesn't make you want to throw your hands in the air and start praying for a consumption tax to replace it, nothing will.

Compressing the tax code to squeeze out as many deductions, exemptions and credits as humanly possible in return for lower rates across the board makes sense for all of us.

* 'Who Itemizes Deductions?' by Scott Greenberg

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Wednesday, September 6, 2017

One Small Step for Social Security

'Can you BUH-LEEVE how much money these fans are going to pay us for this show???'

(first published in North State Journal 9/6/17)

Did you pay $100 to watch the Mayweather-McGregor fight?

Such a small amount could be the key to saving Social Security for future generations.

A major obstacle to transitioning to any new Social Security system with even a smidgen of private investment for each person has been how to pay for it all without blowing the budget deficits through the roof.

$100 could be the beginning.

Suppose you are 24 years old and invested the $100 you blew on the fight in a basic stock mutual fund. What would it be worth in 2067 if it appreciated at the historical average rate of return of 9.05% of the stock market for the past 150 years?

$7608.23. Inflation will account for 1/2 to 2/3rds of that amount but investing $100 for yourself for 50 years instead of giving it to 2 showboating boxers today means more money in your pocket, not theirs.

What if we had a provision in our current Social Security system that allowed for such a direct investment of $100 for every child born in America each year on the date of birth?

$100 compounded at 9.05% for 75 years will become $66,684 before adjustments for inflation.

It is just math.

One way to pay for it would be to not pay current benefits to the very wealthiest of Social Security beneficiaries. 47,500 millionaires received full Social Security benefits in 2010 at a total cost of $1.4 billion.

Set aside for the moment the question of whether a person should get everything out of Social Security they put in during their working career or whether it is a bonafide retirement plan to begin with.

It should be mighty tough for any political party or group to defend the 'constitutional right!' of billionaires such as Bill Gates and Warren Buffett to keep receiving $2700/month in SS benefits when they should not be on any federal transfer payment program in the first place.

Many very wealthy people stop paying into Social Security through payroll taxes when they start making most of their income from capital gains, dividends and interest from investments which are exempt from SS payroll taxes. Many are not paying into the system today as every wage-earner is obligated but they will receive virtually full benefits based on payroll taxes paid earlier in life.

If $1.4 billion in SS benefits was not paid to the wealthy retirees this year, 14 million children can have $100 deposited into their personal retirement accounts at birth. Roughly 4 million children are born in America each year. 3.5 years of annual births in America can be funded from one single year of suspension of benefits paid to the very wealthiest of citizens.

The budget deficits will not be increased. The national debt will not be increased. The money that would have gone to pay the benefits of very wealthy seniors who do not need federal help will have been spent to help transition a future generation from a defined benefit plan to a defined contribution plan much like the rest of corporate America has gone in the last 25 years.

Each child will have $66,684 in their own personal account at age 75 from that one single payment of $100 into a private account when they were born.

Imagine what the total would be if each person could invest substantial parts of all of their lifetime SS payroll tax payments in it as well.

The time for tired status quo talk about Social Security has expired. Budget reality and math has guaranteed as much.

Allowing small portions of Social Security payroll tax payments to be invested in personal defined contribution plans is the public policy equivalent of ‘one small step for man; one giant leap for American taxpayers’.

*chart courtesy of

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