The Federal Budget, the non-political view.

The United States Federal Budget

Fact:

We spend more money, as a country, than we have revenue.

The indisputable solution:

Spend Less.

The disputable solution:

Tax More.

My Solution:

Stop making it legal to spend more than our revenue.

I would like to propose an amendment to the United States Constitution. It would read:

1)Congress may not pass a budget to spend more than projected revenue in any fiscal year This item will take effect ten years after ratification of this Amendment.

2)Congress will not pass any budget that does not reduce deficit spending by at least two tenths of the prior year’s budget deficit without a vote of nine tenths of Congress. This item will take effect immediately upon ratification.

That would force a balanced budget. A balanced budget means lower taxes, at least in the long run. However, we’d have to add a provision to such an amendment so that a very high percent of Congress agreeing would be able to spend more in the events of actual need to go into debt, for instance, in the event of a national emergency.

That’s the easy part: Agreeing we need to balance the budget. The hard part is identifying where to cut. The trick with passing the amendment is that this gets a whole lot easier if there is no choice but to cut spending or raise taxes.

It is a responsible choice to raise taxes. This should be done. This should be done at the absolute minimum amount after everything that can be cut from the budget is cut.

What can be cut?

First: Identify what the government is doing that a private company could do without needing government financial support, such as we did with the postal service. Cut it from the federal budget.

Caveat: Don’t outsource something to the private sector if the only customer is the government unless there are multiple companies involved in performing the tasks and they are bidding against each other to reduce the costs below what the government would pay to do the task itself. Maintain the potential to change suppliers at anytime doing so would reduce costs.

Second: Identify what the government is doing that is not benefiting anyone. Cut it. Why is this second? If a private company wants to do something that doesn’t benefit anyone and can make a profit doing it…let them.

Third: Under no circumstances cut programs that provide food and shelter to the needy. That’s not to say such programs can’t see hefty reform to make them more efficient and to always include a goal to reduce the need of such programs. Again this comes after item 1 because any private enterprise that can figure a way to do this for a profit should be allowed to do so.

Fourth: Understanding that every budget cut is going to cut jobs somewhere, identify what the government is doing that is providing the least value in terms of keeping people employed. Figure into this equation that three people making 40k per year are more valuable to the country than one making 120k, simply by acknowledging that that means two less people on unemployment. (one person making $120k pays the same into the “unemployment fund” as one person making $40k.) Also the three people making 40k are probably spending every penny back into the economy, while the one making 120k would be buying more luxury items, which have a luxury mark-up, which ends up in a smaller number of pockets. Again, the plan is to reduce spending on programs like unemployment. That guy making 120k is making that much because he has a skill set that deserves that much. It deserves that much because there is a demand for it. He should have an easier time finding other work, possibly with a little bit of a pay-cut, than the lesser skilled workers.

Fifth: After everything that can be cut has been cut, raise taxes to cover the deficit. Clearly cuts have to happen first. We’d have to pay 100% of our personal income as tax to cover the current budget deficit. I’m thinking I’d rather see very heavy cuts and suffer a still painful 2-3% tax increase.

At a personal level, imagine making $3000 a month in take home pay, but spending $5000. How long do you think you could keep that up, using credit cards to cover the difference? At some point you have to cut back on the cable, forego the new car, maybe even sell the house and get a smaller one and pay off the credit cards. As a country, we’re honestly not quite at that point, but we’re damned close. There’s no sense in waiting until it’s too late and we start to wonder if a country can declare bankruptcy. (They can’t, they just print more money, pay off their debt with that, and that $3000 per month you were making would then be worth $1800 a month in terms of what it could pay for. Governments do this in small scale all the time. On a large scale it kills economies, for obvious reasons.) I don’t know about you, but I’d rather have that $3000 cut to $2900 through a small tax hike than to $1800 through haphazard money printing.

There are some things I would be hesitant to cut:

Education Programs for primary, secondary and even baccalaureate programs should not be cut. Education is what will keep us competitive. Creative development of new technologies, products and services will help ensure we survive economically in the world. Note the word “Creative”. Arts education is important to broadening the thought process. More creativity means more options to analyze and choose the best from when it comes to developing ideas. I tend to be of the opinion that people getting degrees beyond that should have to work for it and either pay for it themselves or be sponsored by the private sector and not via government grants, either directly or indirectly. Government sponsored student loans are fine. The government makes sure they get paid back.

Military R&D. Superior firepower is almost always better than superior numbers until an obnoxious ratio is surpassed. There are no stories of antiquated military forces successfully standing up to advanced technology without a huge advantage in numbers. That only happens in science-fiction movies. I’m not saying to keep upgrading our weaponry constantly. Upgrade just often enough to stay on top and keep working equipment, but keep upgrading our potential weaponry so we can produce something better when we need it.

The one area that could see heavy cuts?

Non Military R&D. – The kind of stuff that doesn’t have to be secret.

Prizes such as the X-Prize can go a long way to stimulating the economy at the cost, not of the American tax payer but of the American Entrepreneur. I have friends who are distressed by the constant flow of wealth upward to the richest of the rich. Rather than funding research, offer prizes for the people who accomplish the research and development goals for us. The prizes don’t cover all the costs of the research and development, the commercial prospects eventually must do that, but they do incite companies and wealthy folks to invest. Those investments create jobs. This really is the best way to develop space travel/exploration.

But the bottom line is that we need a smaller bottom line. We’d really like a black bottom line and not a red one. The best way to guarantee low taxes is to stop paying interest on the massive loans the government takes. I’m certain the jobs to investment ratio on that interest is incredibly low. To pay less interest, we have to stop borrowing as much and pay down the debts we have. We can’t do that and still continue to spend more than we have revenue.

Every penny the government doesn’t spend will have a negative effect on the job market. The trick is to figure out which pennies we can hold onto while affecting the job market the least.  Unfortunately, I suspect that such cuts won’t be able to follow along the party-line platforms, so we’re in for several more years of harsh budgeting.

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About wilogden

Wil Ogden was destined to be a wastrel but thwarted fate. During his second junior year in high school he discovered he had a muse and a talent for writing. Despite taking almost a decade to complete a bachelor's degree by changing majors eleven times, he managed to grow up. Along the way he worked as a blacksmith, a record store manager, a candy store manager, too many years in food service, a four year stint in the USAF, and finally settled down into Information Technology, which he uses to pay the bills and support his family of himself, his wife, son, seven daughters, two dogs, three cats, six chickens, a snake, a ferret and two parakeets.

Posted on April 14, 2011, in Tripe, Uncategorized. Bookmark the permalink. Leave a comment.

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