SOME IDEAS FOR CONSIDERATION BY THE BUREAU OF THE BUDGET WITH RESPECT TO REDUCING THE TRADE AND BUDGETARY DEFICITS D. B. Timmins, PhD New Revenue Enhancers Federal Road Tax For Foreign Users There are tens of thousands of users of the Federal Highway system who have not helped to pay through taxes for the construction and upkeep of the roads. Virtually every Mexican living in Sonora, Nuevo Leon, Baja California, or Chihuahua who wants to move from one part of northern Mexico to another, drives north to use the I-8 or I-10, cutting south again across the border when he approaches his destination. Ditto for Canadians living near the U.S. border. We've made it especially easy for them to do this by issuing "border crossing cards", for regular visitors. Similarly, there are several million Japanese and European visitors who visit the U.S. every year, renting cars and using the Interstate System. We got our ideas on limited access highways from the many GIs who lived in Germany after the war and came to admire Hitler's system of free autobahnen . The French, who also have a superior highway system, adopted a different approach. Autoroute construction is let out on bid to private concessionaires, who build the road, then pay for it (plus profit) from user charges, as with the Pennsylvania Turnpike and some New York and Connecticut tollways. The millions of Dutch, Belgian, German, Italian, Swiss, British, and American visitors to France pay their fair share of construction and upkeep costs through user fees. Clearly, having headed down the alternative route, making the Interstate System a fee-for-service enterprise is probably not possible (or desirable). But the inventive Swiss have discovered a neat alternative. At every port of entry, Swiss Immigration Officials distribute literature advising visitors that they must either buy a special annual permit (about US$20) giving them access to the autoroute system, or stick to the regular Swiss highway system. There are no special entry checks or other administrative paraphernalia, but if one is stopped by the Swiss highway police for not showing a sticker on the front windshield, the fine is a stiff one. Visitors to the U.S. from Mexico, Canada, or overseas, could be similarly advised of the need for a special window permit to use the Freeway System, with stamps available from U.S. Customs Agents, as another collection for dutied goods being imported. Foreigners attempting to rent cars would be required to pay a supplementary fee, graduated according to the period of rental, and prorated to cover average daily use of the Federal Highway system by rental car customers. Fees could be adjusted periodically according to experience. I say nothing about the possibility of a tax on oil imports since this is being currently debated in the Congress, though most economists would insist that this would retain the conservation effects of the earlier high oil prices imposed by OPEC action which is now being undercut by the (predictable) weakening of the cartel. User Fees for National Museums and Historic Sites A number of European countries with a dependency on tourism as a generator of foreign exchange have recently taken to charging substantial entrance fees to castles, museums, and other national monuments for foreigners. Nationals are exempt upon showing a student card or other form of national identity. With the increasing importance of Japanese and European tourism to the United States, this approach holds promise for generating substantial user fees. A four or five dollar fee for foreigners to visit the White House, National Capitol, or Smithsonian museums would not appear excessive. Perhaps a $20 comprehensive ticket could be sold affording entrance to all National Monuments, including the Capitol, White House, Ford Theater, Arlington Cemetery, as well as National Monuments located across the United States, as with the Stately Mansions ticket sold to tourists in Britain. VAT Surely the time has come for someone to vigorously espouse a Value Added Tax as a more efficient and effective substitute for at least part of the personal and corporate income taxes on which we now depend. Personal taxes are, if anything, an incentive to spend because so many types of expenditures and interest payments are deductible. Among major industrialized countries, the United States currently has the lowest savings rate of all, which is an enormous handicap in our attempt to restore our industry, invest in new products and processes, and otherwise compete with Japan and Germany. A Value Added Tax is inexpensive to administer and less subject to evasion than most other taxes; and, being directed at purchases, is a substantial incentive to save instead of spend, as confirmed by the experience of those countries which have adopted it. Under GATT rulings, VAT is, moreover, rebatable on exports, serving as a substantial subsidy to exporters. As such, it is a far preferable incentive to U.S. exports than continued devaluation of the dollar, which is increasing the cost of essential imports and otherwise contributing to inflationary pressures, as well as inhibiting use of the American capital market -- one of our most profitable industries -- by those afraid of seeing their savings diminished in value. Most of the opposition to a VAT comes from those concerned about competition with states which rely heavily on sales taxes for their revenue. There is however a solution. In Canada, the federal government collects the sales tax as a service to the provinces, distributing what it gathers, economizing on duplicative tax-gathering machinery. If the new VAT were set at perhaps 16 percent, about what it is in most other countries, this could be split 50/50 with the states, easing their relinquishment of the sales tax. Few states tax more than 6 or 8 percent anyway. And the federal share could substitute for close to half existing corporate and individual income taxes. The VAT concept has never been debated in these terms. If it were, with the savings on state tax collection costs, I am confident most if not all states would find it acceptable. Stamp Tax on Legal Documents The concept of stamp taxes has a bad press in the U.S. because of the Townshend Act and the Boston Tea Party. Stamp taxes have, however, many things to recommend them. They are highly effective, self-policing, and the collection costs are minimal. And they can be viewed in the light of user fees, a currently highly popular concept. At the present time small businessmen in the U.S. are experiencing severe problems with bad checks since the courts have banned use of forceful collection methods. Stamp taxes are still used in many democratic societies, e.g. Great Britain, where a two pence tax is imposed on every personal check written. The fee is collected by the bank, with the stamp embossed on the check at time of printing. The cost to the user is minimal and the benefits substantial. By carrying a "Crown stamp", a personal check is considered a government document. Forgery, kiting, and alteration of checks are severely punished by the state. In the U.S., by contrast, misuse of personal checks is at best a misdemeanor and most police forces can't even be bothered to assist merchants in collecting on rubber checks. From the dozens and dozens of merchants I have interviewed in preparing my ideas on introducing such a tax in the United States, I'm convinced small retailers would uniformly favor the use of a stamp-taxed check if the law introducing them also made it a federal offense to misuse a federally protected check. To minimize any remaining objections, legislation could be made permissive, allowing use of untaxed checks for those willing to run the risk of having their check refused by a distrustful shopkeeper, or by shopkeepers willing to accept an unstamped check that might bounce. Shirt cuff calculation suggests that a dime tax on each personal check written in the U.S. would raise a minimum of $20 billion a year -- a good start towards reducing the federal budget deficit. And it would e an incentive to many small businessmen driven out of business by bad checks to try again, or remain in business instead of folding. The concept could be readily extended to other legal documents, e.g. deeds, wills, IOU's, and commercial paper which might later be required to be introduced in evidence in a probate or civil court, a practice already widespread in many other countries. As can be seen, the stamp tax concept is also applicable to stock market transactions. And, because of its flexibility and the deterrent effect it would have on illegal transactions, it seems to me a better idea than that being put forward by some for a simple tax on stock market transactions. Program Modifications Welfare Reform - Negative Income Tax Revisited Any number of new proposals have been made in recent years to reduce the dependency-inducing effects of existing welfare programs as well as administrative costs. None would appear to have the chances of success of Milton Friedman's "negative income tax". As will be remembered, Friedman suggested eliminating all existing welfare programs, with their enormous bureaucratic overhead, in favor of requiring each family in the U.S. to complete a (modified) annual IRS Form 1040. Most would pay the normal income tax as at present. Those falling below the (legislatively adjusted) poverty line would be sent a monthly government check through regular tax refund channels to compensate. The system would be essentially self-policing (with spot check audits, as with other income taxes), relying on citizen respect for the honesty and severity of the IRS. Instead of the widespread disregard for public welfare workers, who are known for merely slapping fraud artists on the wrist, often simply deducting part of future benefit checks to make up for past overpayment, cheaters would be faced with fines and prison, as with present income tax fraud. IRS workers have an entirely different psychological attitude towards their clients, which could go a long way under a system of Negative Income Taxes to reduce welfare dependency, while still providing the social safety net which an enlightened, humanitarian society correctly thinks is right in a rich nation. The concept is readily adaptable to incorporate any number of special programs, e.g. student loans to underprivileged but otherwise qualified college students, supplemental assistance to the handicapped, training aid for single mothers, etc., etc., simply be filing a "negative income" claim for any such special qualifications. Indeed, the program could be extended to cover special veterans' benefits, reducing if not eliminating the Bureau of Veterans Affairs, instead of elevating it to Cabinet status. Only the food distribution program would appear beyond the scope of the Negative Income Tax approach to welfare administration -- and perhaps this could be handled by USDA directly. Or it could be administered by State welfare agencies, which would probably have to be continued to provide for special situations approved by state legislatures, but beyond the scope of the federal program. On the other hand, perhaps with such a federal program as the Negative Income Tax, many or even most states would choose to go out of the welfare business, with additional enormous savings in resources, which could then be devoted to more productive activities. Variable Social Security for Eligible Aliens Living Abroad Somehow Social Security reform always seems beyond political reach, though the recent requirement that foreign recipients spend at least six months physically present in the US and to establish eligibility and at least one month a year thereafter to maintain eligibility shows some inclination on the part of the Congress to undertake limited program modifications. it is in this spirit that the further limited modifications outlined below are put forward. Tens of thousands of Americans and dozens of thousands of former alien residents of the U.S., live abroad because their Social Security benefits go further. This is a drain on both the U.S. Budget and the U.S. Balance of Payments. As a case example, a Mexican widow of an illegal alien U.S. worker who acquired U.S. Social Security coverage before his death, can live the life of a bank president or highly successful businessman on her US$750 a month benefits. As shown by the recently adopted prior residence requirement, there would be relatively little domestic objection to indexing Social Security benefits paid abroad to the prevailing foreign standard of living, if USCits travelling abroad on business or pleasure were exempted for, say, up to ninety days to provide for visits and vacations. Those electing to live abroad permanently would, however, at the end of ninety (or whatever) days, have to choose between accepting a local standard of life, where their lower payments would ease the US budget and B/P deficits, or returning to the US where there would at least be no balance of payments drain. Ancillary to this program, the US Foreign Service might be instructed to verify citizenship or prior legal residence before mailing benefit checks. The Social Security Administration is supposed to verify legal status before issuing a SS card, but experience shows many drawing benefits abroad are doing so based on wages earned while in illegal status, and this double check for non-cits residing abroad, should more than pay for costs in catching the many cases in which legal residence had not been acquired before entering the Social Security program. Very few other countries in the world even permit state pensioners to draw benefits abroad. The United States can perhaps afford to be more generous. But we don't have to be foolhardy, enabling beneficiaries especially illegal beneficiaries, to live like millionaires at the cost of the US budget and balance of payments. New Concepts A New U.S. Dollar Inflation over the past fifty years has seriously sapped the value of the dollar. As a result, it has become easy for manufacturers, wholesalers, and retailers to raise prices. Increasing the price of a box of Wheaties a penney in 1945, when a box cost 18 cents meant an increase of almost six percent, giving both merchants and customers cause to think twice before risking customers. Now, when a movie costs $7, anything less than a quarter rise seems inconsequential. Remember when manufacturers held the price of a candy bar at a nickel for years, before finally reducing slightly the traditional size of the bar. Eventually they began selling three bars for twenty cents, and at last jumped the size of the bar substantially when the price went up to a dime. A "heavy" currency can thus be an important disincentive to raising prices. In the late 1950's inflation in France was quickly turning from a trot to a gallup, and the French Franc was trading at over 600 to a dollar. When DeGaulle came to power, one of the first things he did was adopt the monetary reform Adenauer had used to stop inflation in post-War Germany; Le Grand Charles introduced a New Franc valued at 5 to a dollar. It took Frenchmen a few months to accustom themselves to the new value system, but bakers, butchers, and candlestick makers were afraid to lose customers by continuing to raise prices (with each new centime worth a previous franc), and housewives began careful comparison shopping again. A heavy currency is no magic solution, but is an important psychological tool. After twenty-five years the value of the FF is virtually unchanged vs . the U.S. dollar. Moreover, a new currency could be combined with the introduction of multi-colored, multi sized denominations with metallic inserts and water marks, like much of the rest of the world, to make forgery more difficult. We could even adopt a copper-based dollar coin, as suggested by Congressman Udall, similar to the new Canadian dollar, British one pound coin, and Norwegian kronur, considerably thicker than other coins and yellow-hued, to avoid the catastrophe of the Susan B. which people avoided because it was so easily confused with a quarter. Introduction of a new currency, in addition to assisting foreign users and the vision-impaired (not to mention many of the rest of us who not infrequently confuse ones with tens, to our loss), would be a heavy blow to narcotics traffickers and other money launderers who would have at most three or four days to account for and convert their enormous stashes into the New Dollars or forfeit their ill-gotten hoard forever. Regrettably, the PR for redenominated new currencies is not good at the moment, the most recent example of introducing a new heavy money being Nicaragua where the tactic was used to wipe out the financing of the "Contras". None of which means it would not be a highly useful tool to restrain current neo-inflationary pressures, help with the competitiveness of U.S. industry, and wipe out millions, if not billions, or illegally acquired drug profits. Indeed, it is reported that Japan is toying with just this idea with respect to the yen for the purpose of giving it greater prestige in international trade and finance as a means of increasing Tokyo's competitive edge vs. Wall Street. Perhaps redenomination of the dollar could even serve as the opening salvo in President Bush's war on drugs, being -- at least for PR purposes -- the announced reason for redenomination. The Notion of Sump Industries There has been much recent brouhaha about the need to protect U.S. smokestack industry. Most of the reasoning is specious. But there is one basis for considering the preservation of what might be called "sump industries" which has not been adequately considered. The normal curve of distribution of heights, weights, skin color, and native talent cannot be overcome by good will, argument, or legislation. It is a given of nature. Particularly with regard to intellect and talent. Sixteen percent of every population is one standard deviation above (or below) the norm. Two percent is two standard deviations above, or below, the norm. In a nation the size of the U.S. this means there are close to 26 million people unable by definition to participate in the high tech industries we are told are the "free market" solution to our problems. The two percent truly "exceptional" (as they are now called) are taken care of in sheltered workshops. As we evolve more and more into high tech and service industries, many who could have performed adequately as farmers or steel mill workers forty years ago, or simple production line types twenty years ago, are now frozen out of the labor market. Has no one ever thought that the sixteen per cent which constitute the "marginal workforce", may also require a "semi-protected workshop", i.e. the preservation -- by subsidy, quota, or other device -- of some way to earn a living while maintaining their human dignity. Letting "buggywhip industries" die is one thing. Letting "buggywhip humans" languish without hope is something else. The Europeans have for years protected their agriculture and much of their small industry for no other purpose than to reduce social misery. Ditto the Japanese. Free Trader as one may be, it must be recognized that "man does not live by bread alone", that "welfare" is not good enough. Regular work is essential to the preservation of a sense of self-worth and as an example to the upcoming generation. As the Japanese plan to identify new products, processes, and markets, putting the weight of the government and the financial system behind private enterprise to assure success, perhaps the U.S. should seek to identify reasonably labor intensive industries essential to the operation of our economy in times of political stress, with the government offering to match private sector wages on some sort of agreed scale, as a substitute for some forms of welfare. Perhaps payment of the Negative Income Tax could be made dependent upon willingness to accept work in one of these sump industries until better-paid regular work came along. If nothing else, this is a more practical formula for "workfare" than mere leaf raking. Wage payments and federal subsidies could be manipulated to attract the needed amount of labor by industry and region, being increased or diminished with the level of unemployment created by the normal business cycle as is done with the bank rediscount rate by the FRB. Indeed, the Fed might even be authorized to adjust the "Sump Industry" wage subsidy together with its other policy tools. Perhaps significantly, the noted liberal journal The Economist has recently (September 10, 1994) endorsed the notion of subsidized employment salvage restore the morale of the chronically unemployed, and restore a work ethic for the rising generation, breaking multi-generational welfare dependency. Transborder Free Trade Areas1 On January 1, 1989 the U.S. and Canada implemented a Free Trade Area in many products. Senator Gramm has introduced a proposal to extend the FTA to Mexico. There was considerable opposition to the agreement during the national election in Canada. And (Post-Mexican "melt-down" note: Mexico was clearly not ready for it). Supporters of the FTA won by a narrow margin in Canada, resolving the issue with our neighbor to the North. While the problem with Mexico appears more intractable, there is an alternative solution which offers much the same benefits with perhaps less political fallout. Following the Second World War, France, Germany, and Luxemburg formed the European Coal and Steel Community, which involved only adjoining provinces of the three countries which happened to form a natural transborder economic region. In part based on the success of the ECSC example, the Netherlands joined Belgium and Luxemburg shortly afterwards in forming the Benelux common market. These arrangements in turn proved so successful that they were later expanded into the European Economic Community, including the entire territories of the initially Six, now twelve nations comprising the EC. Regrettably, in the adulation of the EC success in joining together entire economies, the concept of permitting adjoining provinces to cooperate across national borders was lost sight of, though it remains fully applicable in other limited cases. Possibly recalling the ECSC example (though as with many other politico-economic matters, it may simply be a case of parallel invention), parts of the old Austro-Hungarian empire which for hundreds of years had formed a natural economic region, but which are now divided by the war-formed artificial borders of Austria, Czechoslovakia, Italy, and Yugoslavia, have recently formed a transborder Free Trade Area of their own called Alpe-Adria . And, in somewhat similar fashion, though within the borders of its own country, Belgium has similarly just legislated to devolve economic, trade, and border controls to the two language regions of the country, reserving only foreign affairs, defense, monetary policy, and welfare to the central government. So, as can be seen, the transborder approach to trade might be applied to natural economic regions elsewhere, e.g. Sonora/Arizona; Baja California/California; and Chihuahua/Nuevo Leon/Texas. From the U.S. point of view negotiation of such a selective, transborder zone could be authorized by treaty, permitting the governments of the three states mentioned to negotiate a satisfactory agreement 1 Paper making this proposal was written well before NAFTA was proposed and published in the Journal of the Southwest Economic association. , A modified version was later published in the Foreign Service Journal and distributed to all members of Congress. This treatment has been modified to take NAFTA into account with their Mexican counterpart states. Indeed, by the same treaty, these states could be authorized to establish their own border control rules, much as is done in Switzerland (and now Belgium) where decisions regarding entry and citizenship is left to Canton initiative rather than to federal initiative. Already there are dozens of thousands of families in Northern Mexico/Southwest US with members living on both sides of the border. These states know their needs better than Washington. And whatever might benefit them in the economic positive sum game could only similarly benefit the nations to which these provinces belong. It should be no harder to police the southern borders of Utah, Colorado, California, Oregon, and Oklahoma to prevent Mexicans admitted for work or business within the Arizona/Sonora or Chihuahua/Texas Free Trade Areas from preceding outside of the region, than it now is for the INS to police the U.S./Mexico border. Indeed, it should be easier, since few aliens would wish to move beyond the natural economic region embraced by the treaty. The only major issue at stake is the citizenship of children born to temporary workers within the Transborder FTA. Perhaps the concept of jus sanguina could be included in treaty provisions as a substitute for the jus soli provisions of the US Constitution. While this is proposal will not be easily or quickly understood by many, for those with the understanding and courage to promote it, it is the modern, non-aggressive, substitute for the "Manifest Destiny" of the last century. Both nations could enjoy all the benefits of limited merger of California with Baja California, Arizona with Sonora, Nuevo Leon, and Chihuahua with Texas, with none of the bad neighbor side effects of territorial seizure or exchange. Solid economic growth could be promoted in the border region of our most important neighbor, putting Marxist propagandists out of business for good and helping to resolve the Mexican debt problem which is one of the major problems confronting the new Bush Administration. With rising political unrest in Mexico, someone, sometime will have to address the politico/economic problems of the region, and this may very well be an effective way to do it. Alan Riding, the New York Times political correspondent who wrote the well-reviewed book "Distant Neighbors" has reviewed the proposal and thinks highly of it, though he warns that few will have the political prescience to understand or accept its implications. An OECD, Mark II The Organization for Economic Cooperation and Development is the successor to the Organization for European Economic Cooperation, the operating arm of the hugely successful Marshall Plan which brought about the miraculous reconstruction of Europe following the destruction of WW II. Created in December 1962 to preserve the highly useful International Secretariat, which was for the first time in world history publishing accurate, timely, and comparable data for all participating European countries, as well as to maintain the nascent international forum the OEEC had provided in which Trade, Finance, and Economics Ministers could exchange thoughts, ideas, plans, and experiences; the new OECD, now included the United States and Canada. Soon Australia and New Zealand adhered. Shortly thereafter Japan joined. The OECD now accounts for upwards of 70 percent of Free World trade. In recent years there has emerged a group of Newly Industrialized Countries, the NICs, a number of which have expressed interest in joining the OECD. Unfortunately the OECD now numbers twenty-four member states, already too many to permit the free debate and exchange of ideas it had in its earlier days. Admission of new members would overly dilute membership, inhibiting achievement of its essential functions. But, again, there are alternatives. Setting an example of what might be done in this regard, Harvard University School of Business some twenty years ago entered into cooperative arrangements with INSEE, near Fontainebleau, France, and the University of Navarre in Barcelona, Spain, to help create two new overseas schools of business. Recognizing the need for better schooling to prepare business managers for the European economy, Harvard invited French and Spanish professors to visit Cambridge to observe and learn, while a number of Harvard professors spent sabbatical leaves in Fontainebleau and Barcelona helping to reinforce the HBS methodology. Both INSEAD and INSEE are today resounding successes. A similar approach could be adopted to create a new OECD, Mark II. The OECD could invite a carefully selected group of NICs to an organizing session in Paris. The new Mark II Secretariat could undertake a six months or one year training program, participating in OECD meetings and report drafting sessions. As the new Mark II got underway, present OECD Staff could be seconded for periods of one or two years to work with the new group, assuring transfer of techniques and esprit. As need arises, a further Mark III, and, if necessary Mark IV, could be created. Instead of brutally cutting off Taiwan, Singapore, and Korea's participation in the U.S. Generalized System of Preferences, as was recently done as a "reward" for their progress, membership in Mark II could in future be offered not merely as compensation, but as distinguished graduation recognition for those nations achieving NIC status. There would be associated political benefits from such a new organization. Greece and Turkey, for years hereditary enemies (but also associates in the OECD), have recently announced an accord reducing tension in the Aegian. Perhaps with sufficient association in a Mark II (or Mark III), Israel, Egypt, Lebanon, Morocco, and Tunisia would be afforded opportunity to weigh the pocketbook benefits of cooperation. Perhaps even South Africa, Nigeria and some other African states could learn to get along together -- not always to agree, but at least to cooperate in mutually beneficial ways. Indeed, a Pacific OECD might provide the forum for bringing together the United States, Japan, Hong Kong, Taiwan, Singapore and the USSR to assist Chairman Gorbachev in his recent hesitant initiative to coopt the Asian NICs in the development of Soviet Siberia. Again, this might prove just the vehicle needed to put the Chairman's new "kinder, gentler international community" initiative to the test. Even if this proves too much to hope for, the possibilities of reducing international policy surprises through regular OECD-like exchange of economic plans, thinking, and experiences among the NIC members of a Mark II should offer at least the same benefits as those offered by the OEEC, which achieved the miracle European recovery, and its successor the OECD which has produced the two longest spells of uninterrupted economic growth in recorded history, together accounting for almost half the entire period since the end of WW II. Detailed papers exist on each of these concepts. If you or the NEC staff have interest in reading one or more of them, please do not hesitate to ask. I thought at this point that merely a brief sketch of each concept would be sufficient to plant some seeds for Commission reflection. Regulator The major new proposal I'm raising in this letter, however, relates to a British tax notion which the Brits call "The Regulator". Parliament has legislated a pre-approved list of excise taxes, which it has authorized the Cabinet to vary without further reference to Parliament for purposes of "fine tuning" the economy. The list includes taxes on beer and wines, cigarettes, radio and television fees, and many, many more items. Forty years ago such a proposal would have been a non-starter in the United States because of Supreme Court decisions barring delegation of Congressional authority. More recent decisions make it possible that the Court would approve tightly drafted legislation permitting the President to raise or lower specified excises within defined limits, enabling him to react to economic needs without the "recognition delay" and "legislation delay" involved in going to Congress. We live in a climate of accelerating economic change. Because of programmed buying and selling which computer technology has made possible, even the stockmarket has had to adopt policies to enable it to react more quickly to stampeding events. It would seem that given the independence of the Federal Reserve Board from White House or Treasury guidance -- unlike the Bank of England which is subject to British Treasury guidance regarding reserve requirements, discount policy, and Open Market operations -- such legislation is even more important in the United States than in Britain if the President is realistically to be expected to avoid high unemployment. If a President (or the Treasury -- or even the Fed) could raise or lower the luxury tax on specified items by ten or twenty per cent, similarly increase or decrease the child deduction of the income tax, permitted IRA deductions, vary the level of federal gasoline taxes, or broaden or narrow the imposition of a stamp tax on legal documents, we could avoid the recognition delay and the protracted legislation delays in resolving problems like the current stalled economy. Experience has shown that when we have to go to Congress every time we enter a recession or face heated overemployment, action is so protracted that, as noted, we often end up worsening the succeeding cyclical upturn or downturn. American "Regulator" legislation could importantly contribute to solving this problem . And if I were a Congressman, I think I'd be happy to see this tool available to short-stop inflation, while passing the buck to the President to implement it so I wouldn't have to face voters in my District over higher beer taxes. An Investment Reserve Fund The Swedes have another clever form of economic control which enables the Administration to achieve marginal influence over their economy independently of the Central Bank. A determined proportion of profits must be paid into a Treasury account which is held in trust for the company in question. During periodic downturns, the Treasury announces an investment "open season" during which companies can draw on their account for new investment in plant and equipment. Once the downturn is considered under control, such authorization is withdrawn, enabling Central Authorities to manipulate the rate of expansion of the economy both during periods of downturn and recovery, moderating overheated recoveries and easing the underemployment of downturns. Together with adoption of a Regulator , such Investment Reserve Fund could give the White House a measure of independence from the Fed, enabling it to affect marginally the operations of the economy without being subject to the delays of discovery, legislative education, enactment, and application which have in the past made the attempt to employ legislation contra-cyclical in its effects.