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Posts tagged with Spending

Congress Should Pass Measure Nobody Likes

Congress has been having trouble coming up with a debt limit measure because members want something they like. It's difficult to pass such a measure because the wants of the different Senators and Representatives conflict too much.

Members of Congress need to recognize that the"tooth ache" they are dealing with isn't likely to have a pleasant solution. Instead of looking for a measure they like they should concentrate on passing a temporary measure that includes provisions they know their opponents will dislike. This approach would allow members of each party to console their supporters by pointing out what the opposition had to give up. It would also provide an incentive to negotiate a solution to the current deficit situation.

I realize Congress is unlikely to consider any measure from outside, but I feel I should at least take a chance. If you think this proposal is worth considering you might email it to your Representative and Senators.

The provisions involving spending or taxes would be temporary based on certain budget deficit "triggers". Each provision would have a different trigger. When the deficit falls below a trigger, that provision would no long apply. Spending on a certain program could be resumed or a tax would be reduced on eliminated.

Congress would not necessarily eliminate any spending programs (tax credits would be considered as spending programs). Instead spending would be suspended until sufficient money was available for the program. Prior to the next deadline, Congress would determine the triggers for individual provisions.

I suggest the following unpopular provisions. The unpopular provision for Republicans would be extension of the payroll (FICA) tax to all income received from an employer including all the income received by athletes and entertainers. Business owners would not pay a higher tax on their incomes. Employers would not pay the matching tax on the higher employee income. This tax might be phased out as the deficit declines or another tax might be reduced.

An unpopular provision with Democrats would be to delay spending on new programs including Obamacare. Spending wouldn't begin until spending on the program wouldn't adversely affect the deficit. The deficit wouldn't need to be eliminated, only reduced. Elitist Democrats still don't understand that many Republican House members were able to defeat Democrats in 2010 because their constituents strongly opposed Obamacare.

Spending for grant programs to non-profit groups along with state and local governments would be suspended beginning January 1, 2014. The amount of spending involved could reduce the deficit sufficiently that many of those programs with a higher priority (as determined by Congress) could be continued. Others programs would be resumed as funds became available.

All tax credit programs would be suspended. Those credits already approved might be claimable at some future date. An exception would be for programs that benefit individuals making less than $50,000 per year. Tax credit programs in general would be the last of the "spending programs" to be resumed. Energy related credits might be the first to be reauthorized.

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S & P’s Decision Appears Justified

Standard and Poor's decision to downgrade the U.S. debt rating appears justified because of the inadequacy of the U.S. response to the debt issue. Allowing the U.S. to keep the top rating would falsely indicate the U.S. is doing the best it can to correct its debt problem. American voters are choosing politicians who lack the ability or willingness to deal realistically with the U.S. debt problem.

I waited to write about Standard and Poor's decision to downgrade the U.S. debt rating because I wanted to think about it for awhile instead of taking a knee jerk reaction.

Dealing with a major crisis requires a strong experienced president. Unfortunately, Barack Obama is the weakest president since Gerald Ford. Obama's only apparent skill is an ability to read a teleprompter.

A smart president would have recognized he couldn't change the minds of House members and ended the debate early so he could prepare for a return match later.

Obama won the election because neither the voters nor the media understand the qualifications for an effective president. The President is the chief executive officer of the most powerful country in the world. Electing an president without executive experience makes no more sense then asking a high school quarterback to play quarterback in the Super Bowl.

Too many voters will support someone who promises to do "this, that and the other thing" even though the candidate has never demonstrated an ability to deliver on his promises. It's easy to make promises, but delivering on those promises can be difficult. Any quarterback can say he will win the Super Bowl, but very few are capable of doing so.

Unfortunately, many Republicans want to make the same mistake the Democrats did. These Republicans support Michele Bachmann who is just as inexperienced and unprepared for the presidency as Obama was.

The deficit debate was what we used to call the game of chicken. Two cars would approach each other in the same lane. The driver who veered off first was "chicken". Both sides seemed more interested in scoring political points than in conducting a serious discussion of the issue. They reminded me of the old beer commercials in which one side yelled "less filling" and the other side yelled "great taste".

One editorial cartoonist suggested the old Looney Tunes cartoon debate in which Daffy Duck says "Rabbit Season" and Bugs Bunny says "Duck Season". Bugs eventually gets Daffy to say "Duck Season", but Obama doesn't have Bugs Bunny's ability.

Too many members of Congress are either incapable of understanding the nature of the deficit crisis or don't care about dealing with the deficit in a realistic manner. Fixing the deficit will require an increase in revenue, preferably a tax on those with surplus income.

Cutting spending won't reduce the deficit as much as some expect because the federal government gets a kickback in the form of Social Security and income taxes from those it employs or from businesses government, and its employees, purchases from. Money given to welfare recipients goes to those they purchase goods and services from who in turn pay taxes.

If unemployment increases due to spending cuts, the next Congress may feel it needs to spend even more borrowed money to stimulate the economy.

Republicans and their supporters seem incapable of understanding the fact that it is not the amount of money someone has, but the financial status of the United States that is important. The financial health of the U.S. determines what its money is worth. For the rich, taxes are an investment in the financial health of the United States. Reducing the deficit would improve the financial health of the U.S. and make the money the rich have worth more.

There is a danger if the "rich" have too much money. Money can be addictive. As people obtain a certain amount of money they start wanting more and more. Like alcoholics they need more and more money to be satisfied.

When the "rich" obtain too much money a boom psychology can develop in which investors ignore the possibility of risk. They don't think they can lose money. They may think the stock market can only go up as many believed in the 20's.

The crisis of 2008 occurred because the rich had too much money and had bid stock prices up too high because too many expected everything to go up "forever". Many invested money in garbage like mortgage derivatives or gave it to crooks like Bernie Madoff who promised to make them even richer. If they had invested it in taxes, the country's financial health would be better today and many of them wouldn't have lost so much.

Talk about defaulting on debts incurred in the past raises concerns that the U.S. might default on newer debts. Those who started working 40 some years ago were told the Social Security taxes they were paying were for a pension program. They were loaning money to the federal government in return for a promise to provide them with retirement income. Congress may have handled Social Security funds like the program was a Ponzi scheme, but "investors" (Social Security taxpayers) were told they were investing in a pension plan.

Social Security and Medicare are debts, not entitlements. Benefits go to those who have paid in advance for them.

If the current Congress decides to default on the promise of Social Security payments to those who will be retiring in the next few years because the program was poorly administered by previous Congresses, how can those who purchase U.S. government securities today be sure that a future Congress won't decide to default on that debt because Congress in 2011 was not borrowing responsibly.

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The Perfect Tax Increase

Republicans oppose tax increases for higher income groups because Republicans suffer from the delusion that the group consists solely of small business owners. Many in the higher income group do not own small businesses and thus are not going to reduce hiring if their taxes go up or increase hiring if taxes are reduced.

Minimum wage dishwashers pay a Social Security tax. Business executives should be able to pay a tax on their income above some amount (for example, $200,000). This tax could be imposed as a temporary tax until the deficit is eliminated and the country begins paying off its debt.

The tax would be paid on gross income like the Social Security tax. Executives of "non profit" organizations would be subject to the tax as well as executives of for profit organizations.

Business owners wouldn't be subject to the tax. It would be limited to those who are employed by others, including the highly paid "employees" of sports teams and television and movie production companies. I doubt that Charlie Sheen will cut back on his female companionship and drug use if he has to pay a few more dollars in taxes.

Business executives aren't going to invest their money in new equipment for their employers even if they don't pay any income taxes. Raising their taxes won't keep them from creating jobs as Republicans claim is the case with business owners. Raising their taxes would help reduce the federal deficit.

President Barack Obama calls tax provisions allowing companies to deduct the cost of aircraft are "loopholes" even though allowing companies to deduct the cost of new equipment creates jobs in other businesses particularly in American businesses as is the case with most aircraft purchases.

If Obama wants to eliminate loopholes he should eliminate the ability of corporations to deduct the full cost of the salaries of their highly paid executives when figuring taxes. Government might allow a deduction only for the first $200,000 of each executive's pay when determining profit. Alternatively, government might allow deduction of executive salaries when determining profit, but impose a special tax on executive pay comparable to the Social Security tax.

Corporate income has traditionally been viewed in terms of profits which are the stockholders' income. However, the corporation is more than stockholders. Its financial beneficiaries include the people the corporation pays, particularly executives who can receive huge incomes even if the stockholders receive no incomes from the corporation.

Companies already pay taxes on their hourly employees through the Social Security system. Why should executive salaries get a tax break? Perhaps this tax provision could be temporary depending upon the size of the deficit.

Congress should replace the capital gains tax associated with stock and commodities trading with a transaction tax. Such a tax would provide a more predictable source of revenue and simplify tax collection while facilitating a tax increase during periods of high trading. There would be no provision for a capital loss deduction on stocks held less than a period of years. This change would not effect the number of jobs. The stock market in recent decades has at times been more of a gambling device than an investment facility.

The markets might drop briefly when the tax is implemented, but the markets would quickly adjust to the new cost and then ignore it.

Congress should increase the tax on casino gambling revenue and winnings. Congress should eliminate any deduction for casino and race track gambling losses on visits when losses are greater than wins. Increases in these taxes won't impact jobs. Most people visit casinos for entertainment rather than income.

Cutting spending without adversely impacting the economy isn't as easy as Republicans believe. For example, cutting Department of Defense purchases of equipment would mean the companies that produced the equipment would have to lay off workers. Most Social Security recipients spend all the money they receive. Cutting benefits would reduce their purchases forcing layoffs in businesses that recipients purchase goods and services from.

Major cuts will require Congress taking the time to evaluate each program to determine how to cut spending without cutting jobs in the private sector. Some programs could be dropped because the private sector could take over financing. Until that happens Congress shouldn't start any new funding programs and should delay the implementation of major health care changes such as Obamacare until the deficit is under control.

Groups like Planned Parenthood could be financed by private donations if there is sufficient support in the private sector. Programming for the Public Broadcast system could be financed by donations or by giving commercial stations the option of broadcasting a broader range of programming or providing programming to PBS.

Many of those who study climate claim that climate science is settled. Thus there is no reason to continue spending tax money on climate research. The only reason to spend tax money on science research is to learn something new.

Since the days of Senator William Proxmire politicians and journalists have often ridiculed some federally funded "science" research. Many of these projects may have been legitimate topics of research, but there was no real reason for the federal government to borrow money to fund them. Congress should consider a moratorium on science research until it can establish guidelines for what can be funded.

Congress should immediately end all funding for operations in Libya. If the Europeans want to spend money taking control of Libyan oil they should spend their own money. Bombing campaigns are notoriously ineffective in causing countries to surrender. Many historians believe even the atomic bombs dropped on Japan in WWII were not responsible for Japan's surrender because the government was about to surrender anyway.

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