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Wednesday, February 16, 2011

How Would You Balance The Federal Budget?

"Fascism should more appropriately be called Corporatism because it is a merger between state and corporate power" — Benito Mussolini

Last night I balanced the federal budget. I cut $1.4 trillion out of the budget out to 20310 and $200 billion by 2015. I did this in about 10 minutes using an interactive budget program provided by the New York Times. Of course this was a theoretical cut but if I could do it why can’t Congress. You can take a crack at it yourself by clicking here. Try it; it’s easy, informative and fun.

Here is how I balanced the budget with no tax increases. I have attempted to make my cuts in accordance with the 18 enumerated powers stated in Article I, Section 8 of the U.S. Constitution.

Eliminate earmarks: Earmarks are lawmaker-directed spending items, often to finance local projects favored by a member of Congress. While this is a small amount earmarks represent a path to corruption. Each program should be vetted in committee and put in the annual budget in accordance with the terms of the Constitution. Total savings: $14 billion dollars.

Eliminate farm subsidies: Many economists argue that farm subsidies distort the workings of the market and largely flow to big agricultural businesses. As the Congressional Budget Office has noted, advocates of reducing the subsidies argue that doing so “could help small farms indirectly, slowing the rate” of consolidation. Supporters argue that the subsidies help preserve the American agriculture industry. I believe farm subsidies do not help the small farmer as they are loaded with regulations that cost the small family farmer millions of dollars. The biggest benefactors of subsidies are the large corporate agri-businesses like Archer Daniel Midland and Dole. Total savings: $18 billion dollars.

Eliminate the Depart of Education:  This is not on the budget calculator, but I would take this action for two reasons. First; we don’t need a federal education department. Education is the responsibility of the state and local school boards. People pay local property taxes to support their school systems. With this tax they have local control of the education of their children, not the federal government. Over the years the billions of federal dollars tossed down he rat hole of education has done nothing to improve the education of our children. Please click here for more information on this issue. Why can private Catholic schools provide a better education for half the price?

Two; I have proposed a 10% reduction in the federal workforce and by eliminating the Department of Education we can cut the number of federal employees by 4,100. According to the Washington Times there 1.35 million civilian federal employees as of 2010 (according to Obama’s Deficit Commission he number is closer to 2 million) and the number is growing. While 4,100 represents a mere 0.3% but it’s a good place to start. Total savings: $107 billion dollars.

Cut pay of civilian federal workers by 5 percent: “During the Great Recession, most private-sector employees have seen their wages frozen, and some have even watched wages decline,” the chairmen of the deficit panel wrote. “In contrast, federal workers have seen their wages increase.” This option would be a one-time 5 percent cut in federal civilian workers’ pay; the chairmen called for a three-year freeze on pay, which would have a similar effect. In the past two years the pay of federal employees has risen almost 30% while the private sector has remained stagnant or declined. When I was a civil service employee I was always told that while I made on average 10% less than the private sector I had better benefits and job security. It’s time to go back to this policy. Total savings: $17 billion dollars.

Reduce the federal workforce by 10 percent: This proposal would reduce the size of the federal work force by 200,000, from its current level of more than 2 million. The chairmen of the fiscal commission noted that the federal work force peaked at about 2.3 million in the late 1960s and fell to a low of 1.8 million in 2000. “Under this proposal, the government could hire two new workers for every three who leave service,” the chairmen said. The proposal would not take effect until 2012. Total savings: $15 billion dollars.

Cut 250,000 government contractors: In the past decade, both the number of federal employees and the number of contractors rose. Recent estimates suggest that contractors outnumber federal employees by millions. The chairmen wrote, “While contractors provide useful services — sometimes at a lower cost than the federal government — their numbers are simply too high in light of the current budget deficit.” Total Savings: $17 billion dollars.

Other cuts to the federal government: The chairmen of the Deficit Commission called for a series of smaller cuts, including eliminating some agencies, cutting research funds for fossil fuels, reducing funds for the Smithsonian and the National Park Service, eliminating certain regional subsidies, and eliminating the Office of Safe and Drug-Free Schools. I think we can go farther with the elimination of payments to NPR, the National Endowment for the Arts, funding of high speed rail and many other departments. Total savings: $30 billion dollars. (This figure would be much higher with the cuts I would make, but for now I will use the cuts recommended by the Deficit Commission)

Cut aid to states by 5 percent: In the past decade, even before the stimulus bill, state aid rose significantly, as a share of the economy. In 2005, it equaled 3.4 percent of gross domestic product, compared with 2.3 percent in 1990 and 3.3 percent in 1980. Cutting state aid, advocates say, would persuade states to spend more efficiently and reduce waste. Opponents worry about the effects on education, poverty and public safety.

I believe the federal government has coerced states with federal dollars thus allowing states to take irresponsible and financially unsound actions. With less federal dollars to depend upon states will be more responsible with their taxpayer’s dollars. Total savings: $42 billion dollars.

Reduce nuclear arsenal and space spending: Would reduce number of nuclear warheads to 1,050, from 1,968. Would also reduce the number of Minuteman missiles and funding for nuclear research and development, missile development and space-based missile defense. Right now we have enough atomic weapons to wipe out the world. The Cold War is over and our biggest threat now comes from Islamic terrorist where nuclear weapons are useless. Total savings: $38 billion dollars.

Reduce military to pre-Iraq War size and further reduce troops in Asia and Europe: “This option,” according to the bipartisan Sustainable Defense Task Force, “would cap routine U.S. military presence in Europe and Asia at 100,000 personnel, which is 26 percent below the current level and 33 percent below the level planned for the future. All told, 50,000 personnel would be withdrawn.” The option would also reduce the standing size of the military as the wars in Iraq and Afghanistan wind down. Why do we need old WWII bases in Europe where the largest benefit accrues to the local civilian employees? We have supported the NATO nations far too long allowing them to spend what would be defense dollars on their domestic programs. As for Korea, they are a rich nation and our 30,000 troops would not be anywhere near adequate if North Korea decided to break the armistice and cross the 38th parallel. Total savings: $49 billion dollars.

Cancel or delay some weapons programs: This option would cancel the purchase of some expensive equipment, like the F35 fighter jet and MV-22 Osprey, with less expensive equipment that the bipartisan Sustainable Defense Task Force judged to have similar capability. It would delay other purchases. Research and development spending, which the task force considered a relic of the cold war arms race, would be reduced. There is an old saying that goes; “the Pentagon has never seen a weapon system it did not like.” While I favor R&D for weapons and systems our fighting men and women can use there are many programs that are pushed by the big defense contractors like Boeing, Lockheed Martin and others. Total savings: $18 billion dollars.

Reduce noncombat military compensation and overhead: This would change the health-care plan for veterans who had not been wounded in battle. Premiums, which have not risen in a decade, would rise. More veterans would receive health insurance from employers. This option would also take some benefits, like housing allowances, into account when tying military raises to civilian pay raises. Currently, increases in those benefits come on top of pay raises. The military would also reduce the length and frequency of combat tours. No unit or person will be sent to a combat zone for longer than a year, and they will not be sent back involuntarily without spending at least two years at home. Total savings: $51 billion dollars. This one is controversial and I can be easily persuaded to eschew this cut if we can fines $51 billion somewhere else. Perhaps the elimination of the Department of Education can cover this proposed cut, but it’s not on the Times’ calculator.

Reduce the number of troops in Iraq and Afghanistan to 60,000 by 2015: Reduce the number of troops in Iraq and Afghanistan to 60,000 by 2015 Today, the United States military has 100,000 troops in Afghanistan and 50,000 in Iraq. The Obama Administration plans to reduce these numbers in coming years but has not specified troop levels. Defense and budget experts say this 60,000 option would be faster than what is now planned. The savings is the difference between the administration's projected spending and the spending under this option. I believe we are wasting a lives and money in Afghanistan. This is a no win war the way we are executing it and we would do much better with covert operations and drones. Total savings: $149 billion dollars.

Enact medical malpractice reform: Many doctors believe so-called defensive medicine – ordering tests and procedures to avoid lawsuits – is a major reason health costs are so high. This option would begin to reduce the chances of large malpractice verdicts, and supporters believe, also reduce rising medical costs. Opponents say it could reduce doctors’ incentives to avoid errors. The savings estimate comes from the Congressional Budget Office. While this is a small amount I believe it is a moral imperative to make this reform and allow doctors to make the best medical decisions for their patients without the fear of being sued by a John Edwards. Total savings: $13 billion dollars.

Increase the Medicare eligibility age to 68: Those who favor raising the eligibility age for Medicare often say that Americans are living longer and should work longer. And, some say, the new health-care bill will allow people in their late 60s without employer-provided insurance to buy a policy through an exchange. Opponents say that low-income workers have experienced the lowest increases in longevity, and they need Medicare the most. As a person on Medicare I realize that this program cannot be sustained unless we make some changes in the program. Total savings: $56 billion dollars.

Reduce the tax break for employer-provided health insurance: This option would reduce the tax break for employer-provided health insurance, by slowly adjusting the cap, so that it increases at the rate of economic growth, rather than the growth in health costs – which tends to be significantly faster. Over time, more employer spending on health insurance would be taxed. Total savings: $157 billion dollars.

Cap Medicare growth starting in 2013:  This is a big one. This option would cap the Medicare growth at G.D.P. growth plus 1 percentage point, starting in 2013. Among other things, this would crack down on many hospitals and doctors with the highest costs. Total savings: $562 billion dollars.

Raise the Social Security retirement age to 70: This option would gradually raise the age to 70, potentially saving an additional $175 billion.

Tighten eligibility for disability: The costs of the disability insurance program, which is administrated by the Social Security Administration, have been rising rapidly. This option would cut disability spending by 5 percent by focusing on states with the loosest standards. Supporters note that growing numbers of workers are classified as disabled, though the average job is less physically taxing. Opponents worry that injured or ill workers with few good job prospects would be harmed. Total savings: $17 billion dollars.

Payroll tax: Subject some incomes above $106,000 to tax: When the payroll tax – which finances Social Security and Medicare – was created, it covered 90 percent of all income. Today, with a ceiling at $106,800, it covers closer to 80 percent. This option would gradually raise the ceiling, until 90 percent of income was again subject to the tax. Total savings: $100 billion dollars.

Here is an alternative choice if you do not like the payroll tax increase.

Eliminate loopholes, reduce rates (Bowles-Simpson plan): The deficit commission proposed a series of tax overhaul plans. Each one would reduce tax breaks for companies and individuals, while lowering tax rates. On the whole, the plans would raise revenue. One plan would cut all tax breaks other than the child and earned-income tax credits and those for mortgages, health and retirement benefits. The corporate tax would then be cut to 28 percent, from 35 percent, while individual tax rates would be cut for all brackets too.

The way I read this plan, while shown as a tax increase, it looks more like an adjustment in the manner taxes are levied. It maintains the mortgage interest deduction and health and retirement benefits. It also lowers the corporate tax rate to 28%, which is on line with the rest of the industrialized world. Total savings: $175 billion dollars.

Without this tax reduction I could not balance the short term budget (2015 budget( shortfall by $43 billion dollars. I could, however, exceed the requirements to balance the long term shortfall (2030) of $1.345 trillion dollars by $163 billion dollars. By adding in this tax rate adjustment I Exceed the short term requirement by $32 billion and the long term by $336 billion.

If you use these choices you will balance ort national budget for both the short and long terms. If we eliminate some federal departments such as Education, Agriculture, HUD, EPA and Homeland Security we can eliminate another $500 billion in spending each year. Not only will spending reduced but many overbearing and redundant regulations will be eliminated. Many of these regulations (especially EPA) have a direct effect on businesses and consumers causing rising costs and inflation, which is nothing more than a hidden tax. We can now begin working on the debt and lowering our interest payments and reliance on China for money.

Reasonable men of good faith working without a political agenda can do this. They need to take a page from the actions of our Founding Fathers and work in good faith for the common good of the entire nation, not just their political agendas and constituents. No posturing for the cameras, no spin on the Sunday talk shows and no pointing fingers at past leaders. They must roll up their sleeves, go into seclusion and get the job done. Can this be done in the political climate we have today? I doubt it. Perhaps with pressure exerted by the American taxpayers (not the recipient class) it can be done. If we look at what the Tea Party did in the 2010 congressional elections we may see a few rays of hope. Support the legislators who will do this and throw out the ones who won’t.

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