New Executive Order: National Emergency to Stabilize U.S. Financial Crisis

It is usual to provide an incoming President with a hundred days following the inauguration. This common courtesy permits the electorate to see and feel first-hand the substance of the chief executive’s leadership potential. Unfortunately, the country does not appear to have that luxury of time.

President Barack Obama is obviously cognizant of his role as chief executive and the power contained in Executive Orders. His first orders dealt with morality and ethics in the halls of the government, including the White House. He also emphasized the role of law in his order to the Guatanamo military establishment.

He could, however, take a major – perhaps unprecedented – step forward to assure the nation of his boldness of leadership and incisiveness of economic options. Despite the Democratic Party’s majority in both the House and Senate, partisan bickering already continues the rift concerning the proposed “stimulus package.” Pork-barrel bills under the guise of “make-work” programs may eventually help an incumbent in his or her constituency in two years. It is doubtful whether they can institute rapid employment or renewed investment to help solve the current crisis. From many sections of the document it is obvious that it is pet projects, rather than meaningful emergency legislation, that are intended.

Obama could handily issue an executive order labeling the current economic crisis as a “national emergency,” operate with a minimum of federal bureaucracy, and continue his effectiveness and popularity with the electorate.

The executive order would be based on existing precedents.

It would immediately suspend the Federal Income Tax in its entirety.

It would simultaneously institute a flat, national sales tax to offset the loss of federal revenues to continue smooth operation of existing governmental infrastructure and mandated programs.

It would allow the President a minimum of six months without Congressional interference and partisan bickering to establish the priority of needs and wants of the country in the national, not merely partisan, interest.

The main benefit of such an executive order would be to renew the confidence of the electorate in the stability and predictability of government leadership. Markets thrive and prosper on predictability, rather than chaos.

It would free individuals from the time and money involved in complying with the complex and unpredictable legislation affecting the annual tax codes.

It would permit the individual to decide where and how to spend his or her own money, instead of working for roughly four months each year for income tax withholdings. The various states could emulate the federal program within their own jurisdictions if they so desired. California’s Governor Arnold Schwarzenegger took the way of a state executive order on December 19, 2008 to stave off immediate bankruptcy. While taking various steps to stop that state’s hemorrhaging spending, Schwarzenegger stopped just short of mandating a change from the state’s income tax to a consumption tax.

Strict constitutionalists, no doubt, will immediately howl and point to the potential danger inherent in the chief executive’s application of such an executive order. They have done so from George Washington to George W. Bush and every President in between. The existence of Executive Orders now applies to physical dangers to the country, as well as less defined “national emergencies.” Few, if any, have been effectively challenged.

Previous Executive Orders set ample precedent. Qualified attorneys can point out the obvious benefits and drawbacks for President Obama.

From his campaign to his inauguration, Barack Obama has often invoked the image of Abraham Lincoln. Perhaps he can take the step further by emulating Lincoln’s courageous use of executive orders to solve today’s crisis in the United States.

2 comments to New Executive Order: National Emergency to Stabilize U.S. Financial Crisis

  • Dirk

    I don’t think this is gonna happen, lol. And as much as I prefer your idea to the ones coming out of Congress, I don’t think they’d restore much confidence, at least not right away.

    But what’s killing me is that Ben Bernanke and his governors actually have much of the power you’re referring to. We are caught in a deflationary cycle, and Dr. Bernanke made a career out of studying and proclaiming he knew the solution to deflationary cycles. He said he knew how to escape depressions sooner. And he could push it through if he really believed- but he hasn’t.

    Yes, more money, in the right places. I know the Fed has expanded it’s balance sheet, but much of that money has gone to foreign governments and banks that are hording it. What would be better is to use that money to purchase Treasuries and mortgage-backed securities to further lower interest rates, and then perhaps buy oil as a hedge against inflation. And inflation, we want.

    The sooner we’re worried about new and alternate sources of supply to counter price increases- the better. And we don’t need Obama to have some lawyers interpret new powers for policies we both know he’d never implement. Ben can do it now.

  • Dirk – I’m sure Ben Bernanke has a set of potential solutions and some of the powers you mention. Unfortunately, many are likely to be subject to the very partisan bickering and outright opposition on a political or philosophic basis.

    The very reason for suggesting an Executive Order instead of continuous Congressional debate is that it can be immediately effective with the flourish of a pen.

    It can avoid bureaucratic entanglements through the will and power and determination of the chief executive.

    An outright elimination of the national income tax can do more for consumer spending than one or even several “stimulus” packages.

    It can provide visible evidence of the extra monthly cash remaining directly with an employee, whether a barber on Main Street or an honest, hard-working executive on Wall Street.

    They can individually choose whether to spend or save. The recent financial debacle on Wall Street has given many a sufficient pause to see the folly of their ways. If they choose to save, so much the better for investment. After all, there are only two choices between spending and saving!

    What’s more, the elimination of the income tax is understandable. It doesn’t need to be “sold.” No more income tax. Simple.

    Most of the nation hardly understands the actions of the Federal Reserve, Worse, almost any proclamation by the chairman of the Fed is likely to be treated with hostility and suspicion – no matter how well thought out and designed.

    If President Obama’s landslide by popular support is an indicator, an elimination of the federal income tax will be overwhelmingly welcomed by the majority of voters.

    An Executive Order gives the President both the power and the freedom from the bureaucracy with “politics as usual” to permit swift and sure execution of the policy.

    Even more enticing: the numbers for the proposed national sales tax are far smaller than the median income tax burden on the average, working taxpayer!

    This is not the idle dream of an armchair philosopher or retired professor. It does not depend on bi-partisan “willingness” … it depends only on executive ability and leadership to act swiftely and decisively..

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