THE NATIONAL DEBT (SEE BELOW THE Simpson and Bowles COMMISSION REPORT)

SOME POSSIBLE ANSWERS TO OUR NATIONAL FINANCIAL PROBLEMS
Of course these answers are not entirely easy, but they are practical and fair, and could put a major brake on our current slide into national fiscal insolvency. Our $14 trillion deficit, about $80,000 for every man, woman, and child in the USA, is near the top of the list of problems we all face. We need to cut government spending, and increase government income in a fair manner, but we do not need any new types of taxes. Here are some suggestions, somewhat in order of importance:

1    Cheer on the budget cut of 5%. At certain times there is only one practical way to limit and cut the Federal budget, and that is to agree on an overall cut of 5% of the total budget next year , and probably every year for 2-3 years. Social Security funds have to be omitted from the cut, but that leaves 88% of the total to be affected. The 2015 budget is estimated to be above $3,550,000,000,000 (3.550 trillion).  Thus the potential cut at 5% would be about 178 billion. We know for sure that if we start by arguing about funding for every program, the process goes on forever. But just cut the total by 5%, and after approval of the total budget, let all Department heads, under Presidential direction, negotiate on how to distribute bigger or smaller cuts. And let us not kid ourselves. Every aspect of the US government, including (or especially) current Medicare and Medicaid payments, and Defense can readily survive a 5% reduction in funding. This is a truly hatchet approach, but seems to be the only way that will bring opposing factions in Congress to propose a more logical budget. We can not continue to spend way beyond our means, and borrow 32 cents of every dollar we spend from the Chinese.

2    Make the income tax more “progressive”. Currently the tax rate on top dollars of income maxes out at 38%, although the total tax bill is rarely above 18% of income, and is less for those with high income. We had top tax rates of near 90% in the 1950s. A reasonable approach would be to tax income above $250 thousand at 40%, above $500,000 at 50%, above 1 million at 60%, and above 5 million at 70%.. I can not accurately estimate the increment in tax income, perhaps 150 billion. While this will not solve our national budget crisis, it will make a very big improvement, and is fair. Massive personal incomes are finally derived from the sweat of the many. For those who insist that a carrot is needed to drive the economic performance of our free economy, we may note that a progressive tax rate as suggested still leaves a very large carrot.

3    Take the cap off social security taxed income. Currently earnings above $110,000 are not subject to the SS tax. The burden of supporting Social Security thus falls disproportionately on lower and middle income workers. We do not need a new tax. Simply tax all income as is currently done on the first $$110,000, and Social Security will be solvent long into the future.

4    Drop the exclusion of employer-paid medical benefits from taxation. Currently people who must buy their own medical insurance do so with after-tax income, while those who get insurance via their employment pay no tax on these benefits. Obviously this is unfair. The cost in lost tax dollars was $264 billion last year..

5    Cap the home-mortgage exclusion from taxation to the first $500,000 in cost. We do want to support home ownership, despite recent debacles in the housing market.  This cap would not affect the majority of home owners, since the median cost of a single family home in the USA is not far from $200,000. Individuals who can afford a home requiring a mortgage of over $500,000 do not need the additional benefit of having their taste for a large home financed by the working people of the USA. 

6    Stop the 25 billion annual subsidy to the oil industry, a group that hardly needs our public support.

The changes suggested, with decreased spending and increased income from current tax laws, could provide almost a trillion dollar improvement in our federal balance, plus salvaging the SS system.. Not a bad start. And finally a last thought, just for fun,. Lobbyists should register. Many people feel that lobbyists  have far too much influence on Congress. So, I suggest a charge be made for annual registration to lobby Congress, just as beauticians, plumbers, and doctors, must pay a registration fee. A logical fee might be $200,000 each year, although I would not object to a fee of $500,000. We tax cigarettes enormously to stop smoking. Maybe this fee could have a similar effect on lobbying, and let our Congressmen work in a less clouded atmosphere

 

 

DRAFT REPORT FROM THE COMMISSION ON NATIONAL DEBT
The commission consists of equal numbers of Democrats and Republicans, and is to present its final report by 12/1/2010. A draft has been released by the commission chairs. The overarching goal, Co-Chairmen Simpson and Bowles write, is to achieve "nearly $4 trillion in deficit reduction through 2020" while reducing "the deficit to 2.2% of GDP by 2015." Here are a few of their more noteworthy suggestions.

A more detailed list of discretionary spending cuts proposed by Simpson and Bowles includes the following-
Reduce Congressional & White House budgets by 15 percent;

THESE ARE BRILLIANT AND CORAGEOUS SUGGESTIONS, AND MOST FIT WELL WITH A RESPONSIBLE REPUBLICAN AGENDA. BASICALLY EVERYONE HAS TO SHARE THE PAIN OF GETTING OUR ECONOMY BACK ON A SAFE TRACK. WE PREFER SOME ALTERATIONS IN THE PROGRAM. -FOR EXAMPLE--

--INSTITUTE A HIGHLY PROGRESSIVE INCOME TAX RATE WITH TOP RATES OF 50% ABOVE 1 MILLION, 70% ABOVE 5 MILLION, AND 80% ABOVE 10 MILLION TAXABLE INCOME.

--CONTROL MEDICAL COSTS BY A SERIOUS REDUCTION IN FEES PAID FOR MOST PROCEEDURES, CAT SCANS AND MRIs, SEVERELY CUTTING HOSPITAL REIMBURSEMENT , SHARPLY REDUCING REIMBURSEMENT FOR OUT-OF-HOSPITAL CARE, AND NEGOTIATING DRUG COSTS FOR MEDICARE AND MEDICAID.