The following items are illustrative only and not intended to be all inclusive or a comprehensive solution.
They are meant to tell a simple story of basic choices we need to make relative to the government provided benefits we want to provide and are willing to fully fund. In other words, we must decide who gets what from the government, and who pays for it. So here we go.
First, we recognize our current financial and economic situation for what it is and how it came about. It's a mess for sure, but it's very much a mess of our own making.
If we just take the time to reflect on how we got ourselves into this condition, we'll know how to get out of it.
A few examples of simple "fixes" follow:
(1) Grow the economy by supporting in every reasonable way the efforts of the private sector, and especially emphasize manufacturing and exports.
(2) Wealth Creation and Debt Accumulation: We know that the private sector creates the wealth. The public sector, acting as a non-value added intermediary, taxes and then redistributes much of the wealth which has been created by the private sector. If the wealth isn't first created, it can't be redistributed. We need to remind the politicians of this simple fact.
(3) The government has to live within its means, and that's not optional. So do we as individuals and families, too. We need to remind ourselves and our political representatives of this simple fact.
(4) Higher taxation through higher tax rates will make the private sector grow at a slower rate than it would if the tax rates were lower. In turn the result will be less wealth created for taxation, redistribution or otherwise.
(5) That said, we need to raise enough funds through taxation to pay for the government we choose and the benefits we decide to grant to ourselves. That pay for the government we choose approach is a common sense based habit that we must employ.
(6) We must adopt a cost benefit, choice based approach to government goodie giving. Since we've not paid for all the free lunches we've provided these past many years, the "no free lunch" lesson should be an easy one for all of us to learn.
(7) In simple terms, if we want to continue the many entitlements we now plan to "enjoy," we'll have to fully pay for them through increased taxation.
(8) In any event, we'll have to pay for our past excess expenditures and commitments by repaying the already outstanding borrowings associated therewith.
(9) Republicans apparently insist on no new taxes. So let's ask them what benefits we're going to cut?
(10) Democrats want to tax the top 2% of earners at the rates they paid during the Clinton years? So let's ask them why not adopt the middle class Clinton tax rates, too? In fact, the top 2% would yield only ~$700 billion over ten years, but requiring the middle class to resume paying at Clinton rates would yield another ~$2.8 trillion or so over that same ten year timeframe.
(11) In other words, if we're going to raise tax rates back to Clinton times, we need to raise them on everyone so affected and not only on those 2% at the top. I wonder why the Democrats only want to raise rates on those at the top of the pay scale. Simple politics or sound fiscal policy?
(12) Or if we don't want to raise income tax rates, and we shouldn't, what about eliminating the mortgage interest deduction, charitable giving deductions, property tax deductions and such? If the government we choose needs money to deliver on our promises to ourselves, we must raise it while not killing economic growth at the same time.
(13) Or how about limiting public pension benefits and health care plans and pay rates to those of most private sector employees? Or would that make the unions not raise funds to encourage all of us citizens to vote properly-er-Democratic-at election time?
(14) Revenue raising is about raising the bridge as opposed to lowering the water level, or spending. Another way to raise the revenue bridge and also "reward" or incentivize appropriate individual behavior would be by taxing more of that which we want less of, such as gasoline use. If we raised gas taxes by ~$2 per gallon, we would increase government revenues, decrease emissions, have less driving and use less foreign oil. We would thereby start to look a little more like the Europeans that so many of our politicians seem to admire so much.
(15) The foregoing points all make the simple case that we can raise revenues if that's what we want to do. And lots of them.
(16) All that said, the only real way to raise the bridge and increase revenues sufficiently through taxation is to grow the economy by more than 1-2% annually. That means a resumption of strong private sector growth.
Now let's address spending. We'll call that lowering the water level, which is a nice accompaniment to bridge or revenue raising.
(17) To do that we must shoot, or at least seriously wound, some sacred cows. That mostly means a big revision to medicare, medicaid, social security and public education funding and spending.
(18) In addition, our existing approach to home buying must end. In the past, individuals bought homes and other things beyond their financial capability, even though they didn't have the money to do so. As a result, they borrowed almost all of the funds from lenders.
(19) The lenders expected to be repaid, with interest, and on time. We know what happened, and that's largely why we are where we are today. Since the bulk of our current financial problems today arose through real estate related transactions, that no-money-down habit has to change fundamentally and forever.
(20) These issues are not complex. In fact, each one is simple to understand and can be solved.
However, while simple, when put together these issues and the rest of our many problems won't be easy to solve. But solve them we must.
Thanks. Bob.
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