Tuesday - April 05, 2011

When Even The Big Idea Is Not Enough

The budget proposal from the Republican chairman of the House Budget Committee will offer more than $6 trillion in cuts over the next decade, Fox News has confirmed.

Rep. Paul Ryan’s proposal, set to be unveiled Tuesday, will serve as the Republican’s official response to President Obama’s proposed $3.7 trillion budget for 2012. The White House claims its plan would cut deficits by $1.1 trillion over a decade.

But Ryan, R-Wis., in an interview with “Fox News Sunday,” accused Obama of “punting” and said Republicans’ plan would exceed the fiscal goals set by the president’s fiscal commission—which issued a report calling for $4 trillion in cuts. That report never made it out of committee.

“We can’t keep kicking this can down the road,” Ryan said. “The president has punted. We’re not going to follow suit.”

According to an op-ed written by the congressman for The Wall Street Journal on Tuesday, Ryan says the “Path to Prosperity” plan will brings federal spending to below 20 percent of gross domestic product, less than Obama’s 23 percent and consistent with the postwar average.

He added that a study released by the conservative Heritage Center for Data Analysis projects his plan will create nearly 1 million new private-sector jobs next year and 2.5 million, reduce the unemployment rate to 4 percent by 2015 and add 2.5 million more private-sector jobs in the last year of the decade.

“It spurs economic growth, with $1.5 trillion in additional real GDP over the decade. According to Heritage’s analysis, it would result in $1.1 trillion in higher wages and an average of $1,000 in additional family income each year,” Ryan wrote.

The plan, which Ryan outlines in a video made available on YouTube, also proposes welfare reforms in the way of Medicaid block grants, a consolidation of job training programs and changes to food-stamp distribution.

It also calls for reforms to the nation’s “outdated tax code, consolidating brackets, lowering tax rates, and assuming top individual and corporate rates of 25 percent,” Ryan wrote. “It maintains a revenue-neutral approach by clearing out a burdensome tangle of deductions and loopholes that distort economic activity and leave some corporations paying no income taxes at all.”

Among some of the likely more controversial plans are efforts to end the conservatorship of mortgage giants, an elimination of Wall Street bailout authority and a rollback of “expensive handouts for uncompetitive sources of energy.”

And the screaming, crying, foot stamping, the allegations of racism, and the claims that the aged and poor will be left out in the snow to starve and freeze begins in ... 3 ... 2 ... 1.

Nice idea Congressman Ryan, but it’s only a start. It’s not enough. Six trillion over a decade is only 600 billion a year, and while that cuts the level of federal deficit spending by about half, it doesn’t do diddly to reduce the level of outstanding debt we already have. Let’s look at some numbers, courtesy of Wikipedia.

2.162 trillion dollars coming in, 3.456 trillion dollars going out. This leaves a shortfall of 1.294 trillion dollars per year. A third of all federal spending is done with borrowed money! 600 billion a year in cuts does not close the gap. DOUBLE that amount to 1.2 trillion, and you still don’t close the gap. And we are currently wobbling on the ultimate debt precipice, the point where any new debt added to the old debt will put us in the position of never being able to pay the debt off EVER. The interest on that much debt is simply insurmountable. So the only idea that will actually work is one that not only cuts deficit spending to ZERO, it cuts federal spending to significantly less than the amount of tax revenue that comes in. All the extra tax money goes to paying down the debt. A balanced budget is merely a stop gap that doesn’t really even stop the gap, because those interest amounts continue to accrue. You have to pay the debt down to a more than sustainable level. You have to pay off half of it at the very least over the next 20 years, but you need a plan NOW to pay off more than a third of it in the next 10 years, and you need to stick to that plan as if it were made of Velcro and Epoxy. Nobody does an end run, not Democrats, not Republicans, not Libertarians. Nobody.

The USA already owes 14.266 trillion dollars; a debt load of $46,000 PER PERSON in a country where perhaps one person in three actually earns an income. Babies don’t work, school kids don’t work, nor do prisoners or those who live in hospitals of one kind or another. Welfare recipients aren’t paying taxes are they? And while the retired folks don’t hold down actual jobs, we hope that they have some investment income to live on. Let’s not debate whether government employees pay “real” taxes, since they are paid with tax money to begin with. The way the income tax system is currently set up, less than half the working people pay any net income taxes. So if only 1 in 3 have a job ... OK, let’s throw in a big pile of retirees who pay tax on their retirement income, and we’ll create a hypothetical number ... call it 1 in 2 people with money coming in. But less than half of them pay into the system, so that makes only 1 in 4 folks who are carrying that tax burden. That means that if you have a job that pays you enough so that come April 15 you don’t get back as much money as you put in, then your personal slice of the federal debt is $148,000. Plus whatever crazy debt your overspending state has created for you. As I’ve said before, the federal debt slice is akin to the mortgage on a small vacation home for each and every one of us who pays into the system.

We heard a whole bunch of noise about how Obama was spending like a madman and incurring new debt at a crazy rate. Before that we heard far more noise about how Bush was spending like a madman and incurring new debt at a crazy rate. BOTH ARE TRUE. You can easily find national debt graphs vs time on the internet. The blame game doesn’t really matter. What matters is that $14+ trillion in debt is way too much. It has to be brought down significantly. So pick a debt number that you feel is “sustainable”. My favorite number is 0, but let’s be realistic. 6? How about 8? How about 9? That’s still $9,000,000,000,000, and that’s still too much, but it’s good progress for only a decade’s effort. Let’s set a goal, a milestone, a hurdle, and say we want to do this in 10 years. Then we all pull together and make it happen. And then let’s get out the axes and sharpen them.

So, 5 trillion in debt reduction over a decade is 500 billion per year. Assuming no other changes in the tax structure, that means the federal budget needs to take in $500,000,000,000 more each year than it spends on all programs other than paying down the debt. With 2,162 billion coming in, that means that the feds can’t spend a penny more than 1,662 billion - $1.662 trillion - per year. Allowing for some disaster contingency spending, cost overruns, and so forth ... the actual budget should be no more than $1.5 trillion. Currently it is $3.5 trillion. To get out of this mess, the federal budget has to be cut by 60% (Ok, 57.143%) right now, and has to stay at that level for 10 years. This is simple “kitchen table” budgeting. It is not complicated. We owe too much, we aren’t earning enough, we are spending too much. Cuts have to be made. Big ones. Right now. Congress Ryan’s plan needs to cut 20 trillion, not 6. And 20 is a bare minimum; 25 would be even better because a $4 trillion national debt is much better than an $9 trillion one. The bottom line cuts need to be more than 3 times as much as his plan calls for in it’s original version (and you saw what happened to Boener’s “$100 Billion” proposal: it’s at $30 billion now, and falling). Or more. Right here, right now.

So do we cut every department by 60%, or do we save some sacred cows? Well, the cost of holy bovine rescue means that the other departments will have to be cut even more. Cut to the point of elimination. Farm subsidies? GONE. Corn ethanol program? GONE. Department of Education? Have your 50 best people draw up a set of achievement standards for reading, writing, history, mathematics, civics, art appreciation, and social interaction. Whatever. Make them tough, because America is way behind the rest of the world in terms of primary education. Publish them, and let the States do their best to meet them. Set up test banks for the primary grades. Let the colleges know that they’d better be looking at the high school scores as part of their admissions process, because there will also be both a general collegiate exit exam and one for each major, and those scores will be available to the job market. Colleges who turn out graduates who can’t score well on those exams will quickly be out of business. Then you disband the Department of Education, or at least cut it down to no more than 200 employees, who keep the tests and the scores databases up to date, and put them in the Department of the Interior. Every other Department would go through the same process: preserve the standards, publish, then go away.

Naturally we’d have to find a way to realistically push for energy independence. And I mean realistically. Carter set up the Department of Energy back when Chris Matthews wrote him his “malaise” speech. They had two goals: R&D for alternative energy methods, and push for national energy independence via more drilling, more nukes, more natural gas. That was 34 years ago and we have almost nothing to show for it. Not one new reactor, not one new oil refinery, no real cost effective solar, tidal, or wind energy technology. But untold billions spent on government salaries. Set some standards, publish them, and go away. Disband the department.

Bring the military home. All of them. Park the ships and the tanks and the jets, and have the troops patrol the borders and inspect cargo for bombs and contraband. It’s all part of securing the border, which is what they are there for in the first place. When enlistments run out, scale down the military. They will probably have to take a pay cut as well. Secure world peace by crazy mad levels of retaliation against the first several bad guys. Do this half a dozen times and the message will be received. Do it once every couple years after that as needed and the little dictators and tyrants around the globe will learn. But none of our boots on their ground. Blow the crap out of them and then leave them in the rubble to sort things out, or rot, without a cent in foreign aid. Rebuild your little country the right way, or be prepared to get blasted back to the stone age once again. Hey, I know! Publish a set of standards, and then disband 90% of the State Department. Send the UN to some other country. Bring home all our ambassadors. We don’t need them. Really, we don’t. Foreign countries will know they’re in good with us because we’re doing business with them. That’s all they need. Bombs falling from the sky would be a good indication that they’ve screwed up, but a few generic nasty form letters beforehand would at least give them a chance to mend their ways.

It will be a tough ten years. Sadly some people will die. There might be riots at first. It’s going to be really hard on the illegals once the welfare dollars start getting the axe and the layabouts find that they have to work. Maybe the illegals will just have to leave and Americans take on the cooking, cleaning, lawn mowing, painting, home construction, crop harvesting, and fishing jobs they now do.

Cut the small business tax rate to a token 2%, and cut the corporate tax rate by 2/3, unless the business exists primarily to import foreign goods and/or export American jobs. They don’t get a tax cut at all, and most of their loopholes get closed. You put the word out that the thing to do is Buy American so that you and your neighbors have a job. And all the laid off government workers will have to learn how to build widgets in the factories, and the new corporate philosophy will have to become “we employ this many citizens, and this many of them make a living wage or better, and we still pay some dividends to our shareholders, and our company has no outstanding debt whatsoever” because the only real investment that matters is the people. Screw the day traders. Stocks will have to become the long term investments that they once were. Beneficent Capitalism.

This isn’t Muslim Outreach rocket science. It really is quite simple. The federal government needs to be reduced by more than half. Period. Do it now, make it the new normal.

PS - one of the side benefits of cutting the debt by vast amounts is that the value of a US Dollar is going to skyrocket. Especially when business taxes are drastically reduced. Money and jobs will come rolling in like a tsunami. It might take 6 or 8 years for that to happen, for the world to believe that America actually has a plan and the intention of keeping it for once. But a decade down the road, 20 years from tomorrow, we will own the world.

Posted by Drew458     on 04/05/2011 at 09:28 AM   
Filed Under: • Economics • Government •  
• Comments (9) • Trackbacks(0)  Permalink •  

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