A Controversial Proposal

Let me challenge the conventiaonal wisdom of economic bootstrapping
with this posting. Sometimes it helps to look at things from a
different perspective. I'd appreciate the groups help in pointing
out the flaws in either the premises I put forth and the proposal
that flows from them. I've been mulling this over for some time,
mostly as an intellectual exercise to challenge the conventional
wisdom and see where it leads my own thinking, but lately I feel the
need for a fresh input of ideas.

Premise #1.) Government will not support a high frontier development
scheme as a "plant the flag" endeavor.

Premise #2.) Business will not support a high frontier development
scheme without a means to make a profit.

Premise #3.) A high frontier society cannot count on earth subsidies
to sustain it.

Premise #4.) A habitat of 10,000 people cannot be self-sustaining.

Premise #5.) A habitat of 250,000 people can be self sustaining.

Therefore, for a high frontier society to develop we have to go for
the gusto and in our first attempt develop all of the industrial
infrastructer required for a primarily self-sustaining society with
the balance made up from a positive balance of trade relationship
with the earth.

Phew! That's a big undertaking. And it goes against conventional
wisdom. And it is very expensive.

What led me to investigate this propostion? Frankly, it was the
thought of the myraid industries that would have to pop up and
sustain themselves off a miniscule population of 5,000-10,000 in the
first habitat. Factories to make toothbrushes, shampoo, soap,
dishes, carpets, furniture, stereos, tv's, lightbulbs, socks,
eyeglasses, razors, frying pans, watches, band-aids, etc, etc,
etc . . . quite staggering when you think about all of the things
that we will need up there that would bankrupt any endeavor that had
to supply them solely from earth. This led me to consider starting
with a critical mass of population sufficient to supply themselves
with these necessitities and do so reasonably economically. I admit,
I'm basing my 250,000 figure on some research that I came across
years ago that said that was a minimum number of people required to
replicate most of the critical functions of an industrial
civilization. If pushed on this number I coundn't defend it very
well.

So, here's the scenario.

The US President, it a rare moment of clarity, isolated from the oil
industry influenced advisors, decides that the strategic interests
of the US are best served by severing the country's dependence on
oil. His options are boxed in by a number of constraints. The
influential environmental lobby will not endorse a growing reliance
on Nuclear power, nor on the further use of coal. They'll back wind
and solar power, but not hydro power. The President knows that solar
and wind are not robust enough to replace oil. To us ordinary folk,
the President may appeared to be stymied, but what we don't know is
that the President hasn't forgotten his participation from his
he's in a position to do something do something concrete.

But what can he do? There's no room in the budget to fund an
ambitious High Frontier development. And over the years business has
shown no willingness to develop the frontier. He can only use the
moral suasion of government and its powers of policy and taxation to
shape events.

So, using all of the skill the brought him to office he embarks on
an effort to change the course of his country, define the tenure of
his Presidency and bring energy freedom to his fellow citizens.

After much analysis by the Office of Management and Budget, State
Department, the National Science Advisor, and other experts he
announces the following initiatives:

1.) The US government will entertain proposals from various US
consortiums to place into orbit a small LEO platform. Once in orbit,
the US government will recognize this structure as seperate nation
and award foreign aid to assist in nation building and helping the
roots of democracy take hold. A few billion dollars will be awarded
when recognition is granted.

2.) For US business to gain a competitve edge over their foreign
competitors, the US will give a tax credit for the development costs
of industrial infrastructure and launch costs associated with
placing such material and personnel into orbit. Thereafter, the
business will be taxed as US corporations on their operations.

3.) The State Department and Commerce Department will sign Tax
Treaties with this new nation wherein US Companies operating in
orbit and servicing the markets of this new nation will not be taxed
for a period of 25 years after "hatch opening." Therafter, the tax
treaty will be renegotiated.

4.) The economic cost, by way of foregone tax revenue to the US
Internal Revenue Service, of all this new infrastructure having to
be developed in space will have to be offset by new economic
activity that is required to get all of this activity off the
ground, so to speak. Specifically, this means all launch activities,
personnel, fabrication of components, etc, must be done by US
companies. This will incrase employment in the launch business, new
rockets, freed from US Government purchasing conditions and design
criteria, will be designed, and launch capacity will have to
increase dramitically. A free market in launch services will develop.

5.) To effect an orderly energy market, the President proposes that
any new power plants that contribute pollution to the environment
will be taxed to take pollution remediation into account. But any
investment into SPS construction will receive a tax holiday of 25
years on the revenue streams from that SPS, will receive an
accelerated depreciation schedule that commences from the moment of
investment rather than from the commencement of operations for the
SPS, and once the first SPS becomes operational, then all existing
power generation facilities will be increasingly taxed on their
pollution compenent based on the growing contribution of SPS power.
Also, on a dollar for dollar basis, any pollution tax owed to the
government can be offset by investing into an SPS venture.
Therefore, the utilities have incentive now to invest in the
construction of SPS for their future needs.

6.) The US State Department will hold the position that this new
nation, not being of the Earth, and not a signatory to any treaties
is exempt from all treaties, including the Common Heritage of
Mankind Provisions of the Outer Space Treaty and the Moon Treaty.
Surely, the signers of these treaties didn't mean to imply that the
humans inhabiting the Earth were the common owners of planets in
other solar systems. That nations and civilizations that were not of
this earth were to be under the dominion of the United Nations. This
interpretation would be as pompous as the Treaty of Tordesillas,
wherein Pope Alexander VI, in 1494 decreed that the new world west
of 46 degrees longtiude belonged to Spain and that to the east
belonged to Portugal, completely disregarding the peoples already
living there. The US position is that the Outer Space Treaty and the
Moon Treaty only apply to the nations of the Earth, and prohibits
any one nation from claiming dominion over a clestial body. These
two treaties do not apply to nations not of this earth, and the US
will recognize the new nation's right to claim material resources in
space.

7.) If any other nation of the earth wishes to assist in the
creation of this new nation then they are welcome to come forward
with their financial contributions.

8.) The US Government will recognize the property rights of
individuals and corporations domiciled under the laws of this new
nation. The US will not have any right to tax the profits of the
individuals or corporations. The US will tax any income that is
repatriated back into the American economy. Therfore, any profits
that are reinvested into further space activites will remain
untaxed, but once the profit are brought back to benefit the
American shareholders, by way of dividend, they will be taxed.
Capital gains will be treated no differently than other companies.

So, under from these initiatives, duly passed by the Congress, a
number of competing initiatives will be launched. Individual
companies, for instance Proctor and Gamble, Gillette, GE, and reduce
their immediate taxes by investing in infrastructure in space, that
in the future will earn them income. They will be free of the myriad
competive forces which diminish their profits in earthside markets,
because there will be fewer competitors. So, while there is no
immediate economic benefit, there is also no immediate economic
cost, but the prospect of future economic returns drives these
corporate decision makers to approve plans for the design of space
factories and the research into how space industrial process will be
changed by the new environment they'll be facing. The result is that
the US industrial sector develops new expertise at the expense of
the US treasury.

To counter this drain of tax dollars, the existing aerospace
companies use their own capital to develop new launch vehicles
because they see the market will flourish with all of the required
launches to come. All of the people to be employed will be taxed,
the profits earned will be taxed, and this sector of the economy
will continue to grow over the years of habitat construction. These
economic forces will draw in new competitors, drive down the cost,
increase development, and all of this activity will somewhat offset
the cost of foregone tax revenue. Also, the technological lead of
the US will increase in the launch market, the designs won't be
driven by government procurement policies and all of the launches
must be US based to qualify for tax relief.

Forecasting the profit to be made from selling volitiles to the
orbital manufacturing facilities, a few American backed consortium
will incorporate a new company under the laws of this new orbital
nation, and launch missions to some NEO's. Their claim to the
resources will be acknowledged by the laws of the new nation, and
the US won't challenge such claims. Other earthly nations will have
difficulty challenging because the new nation, (heck, let's just
call it Solara) because Solara isn't a signatory to any Treaties.
The companies will embark on this effort because their shareholder
capital would otherwise be used to pay taxes. So, all of the mining
equipment, propulsion, fuel etc is in a sense free. However, to
belabor my point, the companies who manufacture this equipment will
have to pay takes on their profits, employ workers who otherwise
wouldn't be working in the field, and get to launch the equipment
where there would be no launches otherwise.

Meanwhile. the utility company executives are meeting to try to come
up with a strategy on how to best cope with the new tax regime that
now incorporates pollution penalties. They quickly conclude a
utility that does invest in SPS will have an advantage over its
competitor because any pollution tax owed can instead be diverted
into SPS construction. Once diverted, it can be depreciated at an
accelerated rate, even before the construction of the SPS begins.
Then when the SPS is functioning, the revenue it generates will be
tax free for 25 years, which will help the utility retire existing
power plants and invest in more SPS, no matter whether the
incentives will still be as attractive. The future investment in SPS
will relieve them of the pollution tax. Their competitor utilities
that don't invest in SPS will have to pay taxes on their future
income from the polluting plants, and once SPS's start gearing up,
will also have to pay the tax on the plants existing today, and will
as a result be always at a competitive disadvantage to those
utilities that invested their capital in SPS construction early.
Therefore, the executives are prepared to commit hundreds of
billions of dollars over the next 20 years to bring the SPS's online.

Meanwhile, the large American construction companies sense a new
market opening for them. Bechtel, Flour, Peter Kiewit and Sons, etc
start putting together plans for different constructions projects in
orbit.

Meanwhile, the large mining companies have also paid attention to
the President's major announcements. They all establish subisdiaries
under Solaran law. The activities that they embark on in the near
future will all serve to reduce their taxes and their future profits
can be tax sheltered by reinvesting in further operations in space,
and as a worst case scenario, if brought back to earth, they'll be
taxed no worse than domestically earned profit.

These mining companies realize the sheer immensity of the mining
tasks ahead of them, and they form a consortium to share the burden
of development costs. Those costs will be offset by the constracts
they sign with the large construction firms that their key marketing
personnel have already identified as willing to spend hundreds of
billions of dollars for raw materials that'll be needed to construct
the SPS's that the utilities will pay for, and the monies that the
domestic firms will pay for the construction of their factories in
orbit.

Meanwhile, the large property developers are keeping a keen eye on
all that is developing. All those people in orbit will have to live
in houses. So they embark on their own schemes and join the efforts
of construction and they will develop the engineering for habitat
interior while the Bechtels etc. handle the actual habitat
construction, the SPS constrcution, the moon base etc, etc.

The launch companies are seeing all of this activity and they're
running the numbers. All that equipment that needs to go to orbit.
That'll overwhelm our existing capacity. And then when the first
phase is all done, just think, 250,000 people will have to go to
orbit in a short period of time. We better start developing some
passenger capdcity rather than just relying on heavy lift.

But they too see the profit potential of orbital operations, so they
too incorporate under Solaran laws, so that they can operate orbital
shuttles and charge all of the other companies up there for their
services.

Meanwhile, the other nations of the earth see all of this new
economic activity in the US and they don't like it a bit. So in
order to prevent the US from developing a huge competitive advantage
they develop similar tax schemes so that their nationals can play a
part in the development of space. They may not be too happy with the
idea of Solara, so they'll try to keep all the economic activity as
part of their national economies, but the other nations will have
all sorts of diplomatic problems and claim violations of the
treaties. The UN may try to get involved but the Solaran leaders,
BEING VERY WISE, will not consent to UN oversight, correctly
pointing out that on a vast spectrum of issues, the interests of
Solara and the interests of the nations of the Earth do not
intersect. No, Solara will be an observer at the UN, but not a full
member. However, Solara will invite citizens and companies from all
of earth's nations if they can offer something of value to Solara.
It's funny how some of the earliest citizens of Solara may turn out
to be the diplomats.

Well, my fingers are all cramping up from this typing. I think I'll
stop for now.

Rip into people. Help me identify the flaws.

Thanks for your patience in reading this tome.

Cheers.