Combating America’s “Perfect Villain”

Our spending and future promises ARE our taxes. The IRS code is simply how we pay for those taxes. Deficit spending is not a means of cutting taxes – it's a means of deferring them ... to our children.  We must right-size our government by voting out representatives who fail to recognize that the money they're spending is real – that EVERY bill must be judged by the values it advances, its tradeoffs, unintended consequences, and ultimately, the value it adds for the costs it demands.

The task before us is not to decide whether we will live better with “high” taxes or “low” taxes – that is a false dichotomy.  Everyone is FOR Education, Public Safety, Environment, Low Taxes, Public Services, Transportation/Infrastructure, Social Support, Strong Defense, Health Care, etc.—that’s not the issue.  The issue is how to hit the maximum point of “greatest good,” when choosing from a broad list of needs and wants, based upon what we can actually afford. 

What we can actually afford

ONCE UPON A TIME, a U.S. Vice-President analyzed a former President’s fiscal record and concluded, “Deficits don’t matter.” What he meant by that seemingly ludicrous statement was that as long as America’s economy grows faster than its national debt, then the country’s collective debt burden – debt as a percentage of annual output – actually shrinks. It’s analogous to someone getting a 10% raise AND going 5% deeper in debt actually coming out financially better off.

Vice-President Cheney made this conclusion about deficits in 2004, after analyzing the consequences of the sizeable annual deficits President Ronald Reagan incurred during his administration. And Reagan was a good President to study, because he ultimately increased America’s “per capita debt burden” – the national debt divided by the U.S. population – by a larger percentage than any other U.S. President, either before or since…

[No wonder the 1980’s were so much fun:  we ran up our National Credit Card in the absence of any significant national emergency. What could be more fun than that??!!]

Today, our national debt is larger – and growing faster – than our annual economic output. In other words:  deficits finally matter. They matter because debt service spending “crowds out” out essential government spending. And absent significant fiscal reforms, by 2027 we will be spending over a trillion dollars a year on debt service – not infrastructure, not education, not security...but over a thousand billion dollars a year…on nothing. It will be America’s “perfect villain.”

And that’s unacceptable.

It’s the unemployment, stupid

So how did Bill Clinton manage to rein in his deficits? Well, if you ask him – and many people have – he’ll tell you it was by simultaneously reducing spending and increasing revenues; not rocket science, right?  But actually, President Clinton’s explanation ignores the primary driver of fiscal balance:  low unemployment.

The unemployment rate matters because our government’s primary roles are universal services and social insurance. And whenever the economy is strong – people can afford to pay for the services their government provides them. More importantly:  the “insurance premiums” the government collects grow larger than the hardship benefits it must disburse.

So Ronald Reagan, the father of villainous debt, was right about one thing: “The best social program is a good job.” And to successfully combat America’s fiscal challenges going forward, we need some substantive pro-growth reforms. Here are 25 reforms that would be a great start:

25 Radically Moderate Reforms:

1.    Fix our political process by instituting Independent State Redistricting Commissions to put an end to Gerrymandering

2.    Reform Medicare and Social Security with up or down votes on comprehensive sustainability packages submitted by bi-partisan commissions

3.    Apply “Chained” Consumer Price Index government-wide for inflation adjustments

4.    Give Congress 45 day Authority to vote on line item budget rescissions proposed by the President

5.    Limit the mortgage interest deduction to 100% deductibility on the first $250K of a primary residence mortgage, 50% on the next $250K. Phase in changes and grandfather current mortgages

6.    Eliminate backlog of Continuing Disability Reviews (CDRs) for Supplemental Security Income (SSI, aka “Disability”) recipients— Every dollar spent gleans over $8 in savings

7.    Repair Affordable Care Act  

8.    Pass the comprehensive immigration reform bill currently before Congress

9.    Embrace North American energy, building interstate energy infrastructure, while surging scientific research on renewable energies and ending energy production tax credits

10. Extend the tax favored exclusion for health insurance “consumption” to small business owners, and raise the deductibility cap on health savings accounts

11. Index Alternative Minimum Tax brackets to inflation

12. Replace unlimited federal matching funding of state Medicaid benefits with block grants— This incentivizes states to weed out fraud, i.e. stop paying dead people & illegals

13. Reduce corporate tax rate by 20% (to 28%) to make U.S. corporations more competitive in the global economy

14. End tax subsidies for oil companies, ethanol manufacturers, and hedge fund managers

15. “Sunset” most all subsidies, as a rule, so they will be subject to automatic future costs-benefits review

16. Eliminate assorted 20 year Tax Exemptions granted to TARP Bailout Recipients (GM, AIG, and Citigroup)

17. Make charitable giving 110% deductible (although not “refundable”)

18. Audit Pentagon & Federal Reserve

19. Sell excess government real estate and buildings— See Map

20. Repair Davis-Bacon Act— Project labor agreements raise government contractor wages by 22%

21. Tax corporate income earned abroad at 50% (instead of current 100%) as an incentive for American corporations to re-invest their foreign profits in America

22.  Promote high quality preschool

23.  Require those unemployed >52 weeks to enroll in community college or online education courses in order to continue receiving benefits

24. Permit Corporation for Public Broadcasting to Advertise— End its 15% federal subsidy

25. Provide Option to Pay More— Congress should allow taxpayers who want to pay more income taxes an option to do so on their 1040 forms

By instituting the above reforms, we can regain control of our growing debt burden and consciously decide to LIVE HAPPILY EVER AFTER.