The Arrow

There are no answers; only choices.

How I Fixed America’s Budget Deficit

Posted by thearrow on December 3, 2010

The New York Times‘ website has a very nifty tool that lets you choose what you want to cut or what taxes you want to raise:

Budget Puzzle: You Fix the Budget
“Today, you’re in charge of the nation’s finances. Some of your options have more short-term savings and some have more long-term savings. When you have closed the budget gaps for both 2015 and 2030, you are done. Make your own plan, then share it online.”

Which is exactly what I’m doing below:

Eliminate farm subsidies. Of course I was going to choose this since big agribusiness is profiting from it. As in, they’re probably a billion-dollar industry AND they are subsidized by the federal government at the same time. A government intervention Republicans like while thinking the health care reform is socialized medicine and not getting a brain short because of the contradiction. How crazy is that?

– Cut pay of civilian federal workers by 5%. I figured it’s less painful to have this across-the-board cut rather than layoffs. We have enough unemployment already.

– Cut 250,000 government contractors. A drop in the bucket.

Reduce military to pre-Iraq War size and further reduce troops in Asia and Europe. We’ve got too much military spending anyway.

Cancel or delay some weapons programs. If you go to the online tool, you’ll see that those weapons would be replaced with others just as effective but cheaper, so, for Republicans out there, I’m not against America defending itself.

– Reduce noncombat military compensation and overhead. This “would change health-care plan for veterans who had not been wounded in battle” and “reduce the length and frequency of combat tours.” What’s not to like?

Reduce the number of troops in Iraq and Afghanistan to 30,000 by 2013. Let’s face it, however you want to call what’s going on at least in Afghanistan, is not winnable with troops. It will probably take generations of international development to see the slightest changes and even then I’m not optimistic.

– Enact medical malpractice reform. This is one thing I actually agree with Republicans about. “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.” Also, it’s unacceptable to have malpractice insurance costs for life-saving specialties, like ob-gyn or pediatrics, so high that it might prevent doctors from going into those fields. I would use some of those savings to increase pay for primary care physicians, though, which fewer and fewer medical students choose because it doesn’t pay well enough for them to repay their enormous student loans. What a vicious circle.

– Reduce the tax break for employer-provided health insurance. Let me say I have GREAT health insurance coverage and I wouldn’t mind paying taxes on it. Health insurance is a non-taxable benefit now and it benefits mostly the middle-class. I know the middle-class has been seriously battered by the recession, but they are the people who have jobs that offer this because their employers are large enough. Not to mention that employers write this cost off as a business expense (some of the terms I’m using might not be very accurate but you get the idea). Well, people in low-paying jobs usually don’t have ANY health insurance (or paid leave, for that matter) or have something completely inadequate that doesn’t help in case of catastrophic health problems (cancer, anyone?). So, not only they’re paid crap for hard jobs, but they don’t get the benefits higher-paid employees do. And we wonder why there’s so much poverty and 50 million uninsured people in America.

– Cap Medicare growth starting in 2013. Medicare is universal health insurance for those 65 and over. Something nobody else gets here. Some will say that the poor get Medicaid, but the reimbursement rates for Medicaid are much lower than for Medicare, and therefore fewer doctors are willing to accept poor people as their patients. The elephant in this budget are ever-increasing health care costs, a.k.a Medicare. Something has to be done to get them under control. According to NYT, “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.” I’m not against the elderly, I’m against excessive costs. This measure alone would save $562 billion by 2030.

– Reduce Social Security benefits for those with high incomes. I don’t think I need to say why rich people don’t really need high pensions, something they don’t rely on for their retirement anyway.

– Return the estate tax to Clinton-era levels. For my friends outside the U.S., this is the tax on inheritance. I think a $1 million exemption from this is more than enough.

– Return investment-gains rates to Clinton-era levels. Low-income people would be taxes less than the rest on capital gains, which I like. Dividends are not exactly like wages (for which you work your ass off), so they should be taxed at the same rate as the latter. One reason we’ve seen 20% of the country’s income go to the top 1% of earners (otherwise known as the growing income inequality) is that those people don’t draw much from salaries; they have investments taxed very low. Enough of that.

– Allow expiration of Bush tax cuts for income above $250,000 a year. Do I need to explain why? Because it would add $700 billion to the deficit, that’s why. Rich people don’t need more money than they’ve already amassed.

– Payroll tax: Subject some incomes above $106,000 to tax. Payroll tax is what supports Social Security and Medicare but only part of the salary is taxed for the former.

And, believe it or not, I didn’t event need to close tax loopholes!

Here is why I DIDN’T choose some of the other options:

– Cut foreign aid in half. Not when most people on Earth can barely feed themselves.

– Eliminate earmarks. A drop in the bucket. I’d rather not bother with it.

– Other cuts to the federal government. Nope. Not when it comes to the chronically underfunded National Park Service or the Smithsonian. No way.

– Cut aid to states by 5 percent. You’ve got to be kidding me. Not in this economy, when they had to fire teachers and firefighters because of dismal revenues and deep budget cuts.

– Reduce Navy and Air Force fleets. I don’t think those weigh that heavy on the budget and, in a world full of threats, they should probably be left alone.

– Increase Medicare eligibility age to 68 or 70. You can’t be serious. People 55 and over who have lost their jobs, and therefore their health insurance, are scrambling to have their health care needs met until they reach 65.

– Raise the Social Security retirement age to 68 or 70. And soon you’ll have to work from your grave, right? Oh, wait. You can’t really come back from there. The most I would do would be to raise the early retirement age to maybe 65 instead of 62, like it is right now, but not without some serious protection for low-income and disabled people. Some people can work into their 70s, others have too many health issues to be able to do it.

– Tighten eligibility for disability. Yes. Let’s hit the crippled, I say. Should be fun.

– National sales tax. A really stupid idea. I know it’s proposed by economists I (a non-economist) deeply respect, but I know from my Romanian experience how it can wreak havoc on a family’s budget. I wish them to pay 24% on all their purchases–which is what VAT is now in Romania–and tell me how they feel about it. Or, better, they should give me those 24%.

What I didn’t need to choose because I’ve already solved them problem but I would like to add anyway:

– Millionaire’s tax on income above $1 million. I believe $1 million should be enough to make you comfortable. Anything beyond that cannot be comprehended by the human mind and could probably feed, clothe, educate, etc. a lot of poor people and save their lives in the process.

– Reduce mortgage deduction and others for high-income households. Being able to deduct your mortgage interest from your taxable income is probably a big help for middle-class families. When you get a second home, though, that shouldn’t come at the expense of lost revenue. Or when you get a McMansion. I would both reduce it for high-income people AND cap it at some reasonable level.

– Carbon tax. By all means, yes! We need to feel the direct effect of our global-warming activities, otherwise we’ll never be inclined to switch to cleaner options. The tax should fund R&D for clean energy, of course.

So this was today’s deficit reduction lesson, kids.

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3 Responses to “How I Fixed America’s Budget Deficit”

  1. alexedi said

    i really do hope you posted that to nytimes, because it’s great stuff.

  2. thearrow said

    I tweeted the plan to them. After you make your choices you can do that, so they know about it. But I’ll post my explanations in the comments section of the blog post that explains the project,
    http://economix.blogs.nytimes.com/2010/11/13/behind-the-timess-deficit-project.

    Thanks for suggesting it!

  3. Rick said

    This is an outline of a possible economic plan aimed at making the economy work for all Americans.
    ITEM 1
    Federal Revenue Stream: Make all electric and natural gas companies federal agencies

    Energy is the one thing that all America use. It would not matter if you are rich or poor, a small company or large corporation, everybody pays there gas & electric bills. The more you use the more you pay. The old argument that the poor don’t pay taxes and the rich don’t pay enough disappears. This would eliminate income taxes, capital gains tax, and corporate tax. All of these entities will pay though their utility bills. Collecting this revenue becomes more efficient also, almost elimating the IRS. The federal government has a real problem collecting taxes with the current system, this is resolved, also with the history of private energy companies with their disregard to safety for profit, and the Enron debacle, this seems to be a no brainer.

    This does not eliminate consumer taxes. (Sales taxes) this will still need to be sources revenue for government. This does not eliminate social security or state taxes, but it possibly could.

    ITEM 2
    Gasoline Tax
    An increase in gasoline tax will be necessary; this increase will be 15 cents per gallon for federal, and 5 cents for state. This tax will not affect diesel, this will also create incentive for better transportation systems.

    ITEM 3
    Insurance
    People should buy insurance for themselves. (Similar to no fault)
    You buy your own medical for you and your family,
    You by car insurance to protect your investment into your car;
    You buy home owners insurance to protect your investment into your home.
    It is about protecting you. If you have a $100,000 dollar car, then buy enough to protect that car. If you have a $30,000 car they buy that much. So buy as much as you need or as much as you want.
    If you cause an accsedent (your fault) you’re insurance protect you only, the others evolved should have their own insurance to protect them.
    Medical cost is very high in part because doctors are practicing medicine to prevent malpractice law suits.
    If you have a claim it is against your insurance company.
    This would also, all but eliminate fraud against the insurance companies.
    The result of which, would be, much lower rates.

    ITEM 4
    Military
    Build on the military, it provides two important services
    1) Keeps our military strong
    2) Provides an education for those who could not afford one.
    Also
    These companies’ that provide services in the war effort, get rid of them. these contracts on a no bid deal (Really). That’s not capitalistism, it screams corruption.
    Moreover
    I think that cilvians have no place in a war effort. They are not held accountable. It creates a moral problem with our soldiers, knowing that the guy next to them is getting 4 times the pay. These companies are looting the government.

    ITEM 5
    Illegal Immigration
    Illegal aliens are, after all, “ILLEGAL “. Go after those company’s that employ them, and make the punishment a real deterrent. Use a database to validate their status.
    This is not to say that we couldn’t review our immigration laws and/or polices to see if there is a better way.
    It seems to me that many of the immigrants are fine people but too many of them are undesirable.

    ITEM 6
    Spending
    There are billions of dollars going to subsidize lots of companies and/or industries.
    Is this really nessaseory or is this another qidproquo from polations.

    There are many (and I mean MANY) projects that get approval in the federal budget that offer no real benefits to the people. If a state wants a bridge or needs help funding something then the feds should either finance it for them at a very low rate or offer a funds matching program, but this spending, that for no other reason, just another works project, is silly.

    ITEM 7
    Legalize Hemp
    Legalizing hemp for industrial purposes. Here are some benefits to this remarkable plant.
    I invite you to research this amazing plant. The benefits are too many to describe in this document.

    ALSO
    Release all prisoners that are incarcerated for hemp related crimes. This will lighten the expense that is burdening our prison system. With the space that would be created, crack down on other types of crime and NO early release for prisoners, because of over crowding. This would also lighten the load of the parole system.

    Summary;
    I am sure there are many other things we can do, like get out of the war just to mention one.
    Implementing these items, and some government policies changes, and America can be great for everybody.
    Not just the very rich and corporations.

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