Dealing with our $1.65 Trillion budget deficit and our $14 Trillion debt will take dramatic actions which will be unpopular with one group or another, maybe all. Clearly, with social security, medicare and medicaid, comprising 60% of our national expenditures, there is no way to balance our budget and reduce our unsustainable debt without addressing these programs. Discretionary spending only accounts for about 12% of spending. However there are a number of steps which can be taken to help.
While there is a great deal of discussion about the 2012 Budget, we have not yet passed the budget for FY 2011, and we are already half way through the year. I wonder how many businesses operate their budgetary process like this? With a $14 Billion debt, the Democrats in the Congress proposed cuts in the FY 2011 Budget of $6 Billion, of which $2Billion was smoke and mirrors. The Republicans proposed a cut of $61 Billion. A lot bigger cut, one would say. In fact, when dealing with a $14 Billion debt and a $1.65 Trillion FY 2011 deficit, both are chump change. By the way, this does not even take into consideration the $103 Billion we have learned the Congress hid here and there in the ObamaCare legislation last year. More on that in a later paper.
For FY 2012, the Administration has proposed that we limit spending to the levels of 2008. The Republican proposal has not been made. If we are to truly engage in adult conversation, we must find solutions to our entitlement programs, including social security and medicare. We must find “cuts” in the tax code. We must also find big cuts in the Defense budget. There is no reason why this cannot be begun in dealing with FY 2011 and carried forward in dealing with FY 2012. For example, since there is little threat from a Russian invasion of Europe, why not close our facilities in England, France, Germany, Italy and others? Savings of billions of dollars will be achieved. With the threat of North Korea and our presence in South Korea, removing military assets from Asia requires a bit more analysis. Nonetheless, assets in Asia should be on the table. More on this in a later paper. How about dropping whole weapon systems? The F-35 program to provide a jet with multiple uses for all of the military services was initially rejected by the services. It continued to have life because it was pushed by members of Congress whose constituents had much to gain. Interestingly, the alternative engine for the F-35 was recently rejected though it would have benefited Speaker Boehner’s constituents. Let’s get rid of the F-35 and not hurt our defense resources, but more on this in a later paper.
How about the tax code? One would think that the purpose of the tax code and tax system would be to raise funds to support important governmental programs. Too often, however, the tax code has been written to accomplish other goals, social and otherwise. We allow billions of dollars in tax breaks for the “oil depletion allowance”. This is intended to encourage drilling for new sources of oil. Two problems. If someone were to propose that we take billions of dollars from our treasury and give it to the oil companies to drill wells, it would not get past the laughter. Second, the oil companies are not drilling. Why is this massive gift still on the books? How about farm subsidies? Probably the same fate of massive laughter. This subsidy is not enjoyed by small farmers. Rather, agribusiness, major corporations, benefit from the farm subsidies. How about the $5.4 billion in lost revenues to encourage the production of ethanol. Ethanol not only took money out of your pocket, it is probably rusting the fuel system of your car as you read this. Definitely more on this later. There are many deductions that most would be more familiar with. How about deductions for interest, medical expenses and the like. All are popular, but very expensive. There must be some attention to this if we are going to corral our expenditures. More on this in a later paper.
This is not to say we should not keep up the pressure on discretionary programs. A recent report from the Government Accountability Office found dozens of overlapping and duplicative programs in virtually all departments and agencies of the federal government. It was estimated that by ending duplicative programs could save $100 Billion to $200 Billion annually. Interestingly, there even seemed to be bipartisan support for such cuts.
If we are serious about cutting our deficit spending and reducing our massive debt, we have to look everywhere. Everything must be on the table. When everything is on the table, those proposing cuts will be either joined by the other party and both will work toward solutions. Or, those of one party will take the lead and the other party will use the opportunity for political advantage. They will claim that the party proposing the cuts is mean-spirited and the cuts are not really necessary. I think it will be obvious who are the leaders and who seek political expediency. You need to watch to see who wants to save the nation and who wants to be reelected.
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