Entire contents copyright 2020 by Terry E. Nager, CFP®
1. What is the greatest single benefit that the U.S. Government would derive from the implementation of the Plan For America (PFA)?
Although there are numerous benefits to the U.S. Government, the greatest single benefit from the implementation of the Plan For America would be the relief from an estimated $163 trillion in unfunded liabilities from the Social Security and Medicare programs.
Presently, the U.S. does not even have a plan on the “drawing board” for dealing with this problem. Even the so-called trust funds for Social Security and Medicare are nothing but U.S. Government notes which means they represent more government debt, not cash or investments.
$163 trillion is such a staggering sum of money that dealing with it, using the old method of just taking on more and more debt, is out of the question. The only economic engine powerful enough to carry such a load is corporate America. The For America Security Trust (FAST)
will enable working-class Americans to enjoy widespread ownership in corporate America through the U.S. stock market.
In addition, the contract with the FAST provides for a U.S. Government guarantee so that the participants would have the best of both worlds: the stock market for growth and the U.S. Government for an ultimate guarantee.
The PFA contract with the Federal and State governments will relieve the governments of the obligations that they cannot meet and protect the American people from the past sins of the government.
2. Why is it essential that the For America Security Trust (FAST) be primarily established through a contractual agreement with the Federal Government and each of the 50 states rather than merely through legislation?
A contract is needed to protect us from the government. Any bill that is passed by the House of Representatives and the Senate and is then signed into law by the President can be changed or done away with by an opposite bill passed by the House of Representatives and the Senate and signed into law by the President. In other words, if we put in place a plan that solves America’s retirement, health care, and debt funding problems but do not put in safeguards, then the government could do the same things that got us into this mess.
- It is absolutely essential that there be an inviolable iron-clad contractual agreement among the United States Government along with each of the fifty state governments and the For America Security Trust (FAST).
- The sacred trust of the people that the government has so egregiously violated must be safeguarded and taken permanently out of the government’s hands.
- An independent board of trustees who answer only to the participants and beneficiaries of the FAST would have the responsibility for the custody, administration, and investment of the FAST assets.
- There must be no government influence or ties to the board members or any of the key employees of the FAST.
- The strength and enforcement of this contract is the key to the permanency of the solution. If the Plan For America (PFA) strategy is implemented and the long-term obligations are handled, but the government is allowed back in, then “We the People” could find ourselves with an even more severe problem sometime in the future.
- If the government breaches the contract, then it should have to pay the $163 trillion (the amount of unfunded liabilities) to the FAST as the remedy.
An even more secure approach would be to make a constitutional amendment that keeps the people’s retirement and health care funds separate from and off limits to the government.
3. What is the second greatest and immediate benefit to the Federal and State governments from the implementation of the Plan For America (PFA)?
The second greatest and immediate benefit to the Federal and State governments is being relieved of the Medicaid obligations.
- In 2019, the Federal Government spent about $406 billion on Medicaid and Obamacare. It is expected to grow 5.4% each year and reach $557 billion by 2025.
- The individual states would be relieved of their portion of the Medicaid cost which in some states runs up to 17% of their annual expenditures.
- It might be possible for some states to balance their budgets with the removal of this large expenditure.
4. What is the best way to protect the Plan For America (PFA) benefits from the government?
A constitutional amendment is the best way because it would even further remove the PFA benefits from government access than a contractual agreement.
5. What would be the greatest ultimate benefit from the Plan For America (PFA) to the Federal and State governments?
The ultimate benefit to the Federal and State governments is the provision in the contract with the For America Security Trust (FAST) that calls for the cash flows from the FAST, once it has retired and paid off all of its bonds, to be paid to the Federal Government 50% and to the State governments 50%.
The annual cash flows from the FAST will retire its bonds between 2059–2079 depending on market returns. This amounts to trillions of dollars every year. These enormous cash flows will eliminate Federal and State debt and then ultimately replace taxation as the primary revenue source for government funding.
6. Why would the United States Government be willing to back the bonds issued for the For America Security Trust (FAST), pay the interest of the bonds, grant all of the various tax concessions in the contract, get out of the retirement and health care providing business as well as divesting itself of all equity stakes in any private enterprise that it holds?
The U.S. Government and the State governments should be ecstatic with this arrangement because they are getting a great deal.
- They will be relieved of almost $163 trillion in unfunded liabilities as well as the current Medicaid and Obamacare expenditures that are such a burden to the State governments.
- Additionally, a high-quality social safety net will be provided for all U.S. citizens without the enormous budget-busting outlays that are currently projected.
- The ultimate cash flows to government coffers to retire all debt and replace taxation as the primary revenue source should bring on outright jubilation from the Administration, Congress, and State politicians.
This deal would probably be regarded historically in the same league with the purchase of Manhattan Island for $24 in value, the Louisiana Purchase, or “Seward’s Folly” — the purchase of Alaska.
7. How would the Plan For America (PFA) eliminate the legal controversy regarding the “commerce clause” and the mandate to purchase health insurance?
The U.S. Supreme Court decided that ObamaCare was a tax and therefore the law was constitutional. The Court did not rule on the constitutionality under the “commerce clause.”
The PFA should not have any problem with this issue for the following two reasons:
- First, the PFA is voluntary, therefore it does not rely upon a mandate to attract enrollees.
- Second, the benefits offered under the PFA are so overwhelmingly superior to those offered by Social Security, Medicare, Medicaid, and ObamaCare that the choice will be obvious.
The ultimate guarantee behind both the PFA and the existing Federal programs is the “full faith and credit” of the U.S. Government, but the PFA also has as a powerful funding source, the
U.S. stock market, as its first line of defense; therefore, it is the safer approach.
8. How does the Plan For America (PFA) handle the issues of corporate governance and out-of-control executive compensation?
The PFA handles the corporate governance and out-of-control executive compensation through the proxy-voting process in contrast to the legislative approach.
Legislation is almost always done in response to a scandalous event that comes too late and is aimed at dealing with the previous problem, whereas the financial engineers, lawyers, and accountants on Wall Street are working on the next legal loophole to exploit.
In contrast, the proxy process established within the PFA would keep the corporations in the PFA portfolio under close scrutiny on a continuous basis and the penalties for improprieties would be swift and severe.
A proxy vote against the Board of Directors could terminate the board members and the top executives without waiting for a long and drawn out legal process. Transparency and accountability are the key elements in the PFA to make sure the corporate members of the PFA portfolio operate as good corporate citizens.
Let’s look at the Proxy Vote and its Process:
The Proxy Vote and the two great imperatives
The For America Security Trust (FAST) stock ownership brings the solemn responsibility to vote the proxies in a way that is most beneficial to the participants and beneficiaries.
The proxy is an authorization that is given to a representative to vote the shares (usually at a corporation’s annual meeting). These corporate elections determine the make-up of the board of directors and other important policy decisions. The sanctity and transparency of this process is of critical importance to the long-term success and independence of the FAST.
The two great imperatives to protect the future of the FAST are:
- Complete independence from any governmental control or influence
- Having safeguards in place that prevent corruption and self-dealing
Once each year each participant/beneficiary of the FAST will be sent a proxy (ballot) to vote for one of the five trustees that would serve five-year terms (term limit — one term only).
The number of votes that the participant/beneficiary would have would be determined by the number of dollars (rounded to the nearest dollar) in his/her FAST account.
The initial board would have terms that would run one year, two years, three years, four years, and one full five-year term. The initial board members with one, two, and three- year terms would be the exception to the one-term policy; they would be eligible to run for a full five-year term of their own after being off of the board for a period of three years.
- The other exception would come about when a board member resigned or was removed before his/her term was completed. If the unfinished term was three years or less, then the incoming board member could serve a full five-year term after being off of the board for a period of at least three years.
These board members would have the responsibility for administering the entire FAST including the retirement, life, health, and disability insurance and any other functions or aspects of these programs.
- They are not government workers; they would be paid in line with private industry because “We the People” want the best talent available in order to get the best results.
- These trustees would be held to the highest standards and any breach of trust, malfeasance or ethical misconduct would be dealt with in the most severe criminal and civil prosecution.
- Since these board members serve at the pleasure of the participants, then an appropriate apparatus would be set up in order to have a special election to remove and replace any or all board members if the participants deem it to be necessary.
- The board members should have strong backgrounds, a wealth of experience, and a history of accomplishment as well as character that is impeccable.
- They must be free and independent from any government influence or control.
The board would appoint three-person mini-boards that would have the responsibility of analyzing, monitoring, reporting on, and voting the proxies of the companies in the FAST portfolio that they were assigned to.
- The exact number of companies these mini-boards could handle would be determined by the board itself.
- The specific companies that the mini-boards would have under their authority should change every 3 to 5 years in order to prevent corruption from developing as a consequence of a prolonged relationship between the corporation and the overseeing mini-board.
- The mini-board members should have expertise in finance, corporate governance, a good knowledge of the industries of the companies that they are overseeing, and a history of impeccable character.
- They should be well compensated in consideration of the tremendous responsibility that is placed upon them as well as the capabilities that they must possess.
- As is the case with the FAST board itself, these mini-board members would be held to the strictest standards and any misconduct or corruption would be dealt with harshly and prosecuted to the fullest extent of the law both criminally and civilly.
The FAST board will be responsible for hiring independent accounting and consulting firms to compile reports annually on the management and boards of directors of each company in the FAST portfolio.
- These comprehensive reports will evaluate the performance of the management and boards from the standpoint of long-term policies, financial condition, ethical behavior, compensation, and a host of additional criteria that these firms would devise to compare the quality of management that the investors are getting and the price (level of management and board compensation) that they are paying for it.
- Each comparison category- such as financial condition or long-term policies -would receive a letter grade as well as a composite letter grade for the company as a whole.
- The three-person mini-boards that vote the proxies on these companies for the FAST would be given these reports which they would use in addition to their own information to help them decide how to cast the proxy votes.
- They would then write up a report about how they intend to vote and why.
- The FAST board would then publish that report along with the report prepared by the accounting/consulting firm with the letter grades so that it would be public information and help other shareholders to make informed decisions when voting their shares.
- This process should go a long way in curbing excess management/board compensation and corporate abuse without government interference or mandate- because as the old expression goes, “SUN LIGHT IS THE BEST DISINFECTANT.”
9. How could the Plan For America (PFA) resolve the dilemma of the unfunded retirement systems that plague many of the individual states?
The For America Security Trust (FAST) could resolve the underfunded retirement system’s problems by taking over the state pension obligations. The takeover steps would be as follows:
The state would turn over its existing pension assets to the FAST and end its defined benefit pension plan.
The future pension contributions would be made by the state to the FAST on behalf of the retirement plan participant. The contribution amount would be a negotiated amount representing the change from an underfunded-defined benefit plan to a fully-funded defined contribution plan.
The state would be relieved of its pension obligations.
This arrangement would be completely independent of the 15.3% payroll reduction that would be unaffected by this pension takeover.
The state workers would receive:
- A guaranteed benefit (backed by the “full faith and credit” of the U.S. Government) at retirement of 4% annually of the value of his/her account based upon a 4% compounded annual rate of return on all contributions made on his/her behalf.
- The 4% minimum return guarantee would extend permanently, and there would be a high probability that the returns would be significantly higher over time because the account would earn stock market returns less 2% (for the FAST charge) and the annual payout would be 4% of the previous year’s ending account balance or the minimum guarantee whichever is greater.
- When the state employee retires (as early as age 60 at his/her option) then he/she would receive the monthly payout both federal and state tax free.
- When the retiree passes away, his/her heirs would receive the tax-free cash flow that the retiree was receiving and it would pass to them without any estate or inheritance taxation instead of being forfeited as are most pension benefits currently.
- If the state was unable to convince its workers to accept the tradeoff of their partially-funded pension in exchange for the PFA, then the state could sweeten it by an additional amount added to the initial FAST contribution via a 2% interest rate deferred loan from the FAST to bring the participant’s account up to the level that would make the deal acceptable. The loan would not require any annual payment by the state above the renegotiated pension contribution. The loan would accrue 2% interest compounded annually and would ultimately be paid off out of the state’s share of the revenue sharing from the FAST after it had retired all of its bonds. No revenue sharing would be paid out to that state until the indebtedness and interest was paid in full. Of course, the state would have the option of paying the loan off earlier if the state chose to do so.
10. What advantages and disadvantages would the states incur under the Plan For America (PFA)?
The advantages would be:
- Each state would be relieved of its Medicaid obligations to the extent that its citizens participate in the PFA (participation is likely to be nearly universal).
- Each state, if it elects, could be relieved of all of its pension liabilities both the funded and unfunded portions.
- Each state will receive its share of the For America Security Trust (FAST) revenues after all FAST bonds have been retired which will enable the state to ultimately retire all of its debt and reduce reliance on the taxation of its citizens.
The disadvantages would be:
- The loss of tax revenues (if the state has an income tax) on the FAST contributions representing 7.65% of the participant’s earned income. If the participant’s earned income is in excess of $147,000 then at his/her option 15.3% would be tax deductible on contributions all the way up to the full amount of earned income, and those 15.3% of earnings would not be taxable by the state.
- The loss of tax revenue (if the state has an income tax) on the elective contributions (regardless of earnings) of up to $100,000 annually that a participant could contribute to the FAST on a tax-deductible basis.
- Each state’s tax-free municipal bonds would have to compete with the tax-free dividends from the U.S. domiciled publicly-held corporations.
11. How will adopting the Plan For America (PFA) affect the goal of balancing the U.S. federal budget?
Adopting the PFA will affect the goal of balancing the US federal budget by removing the number one obstacle, which is spending on entitlements. If spending on Social Security, Medicare, Medicaid, and ObamaCare are removed from the present and future budgets, then the excuses for deficit spending would be greatly diminished.
12. How will adopting the Plan For America (PFA) affect the goal of balancing the individual state budget?
Adopting the PFA will affect the goal of balancing the individual state budgets in the near-term by removing Medicaid costs. In the longer-term, eliminating the unfunded pension liabilities along with Medicaid costs should take away the obstacles to balancing their budgets.
13. What happens to the enormous and building cash flows from the For America Security Trust (FAST) after all the federal and state debt is retired and the annual cash needs of the federal and state governments have been met?
The surplus cash flows generated from the FAST revenue-sharing would be refunded to all FAST accounts on a pro-rata basis from the federal surplus after all cash flow needs have been met.
The surplus cash flows from each state generated from the FAST revenue-sharing would be refunded to all FAST accounts in that state on a pro-rata basis from the state’s surplus. This is important because, when that point in time comes, if the politicians are left with access to those gigantic cash flows, those politicians could once again become intoxicated with the ability to spend.
The people need to be aware that any excess spending is coming out of money that would otherwise be placed in their FAST accounts. This awareness and the tension between the people’s interest and the politician’s interest will hopefully keep spending in check.