Chapter 67 Tax & Spend vs. Reducing Taxes
I think few of us would argue against tax reform that results in a much less complicated tax and less costly tax return process. However, tax reform usually involves political motives.
Past arguments regarding the role of taxation in stimulating the economy have been primarily two sided. A left leaning side argues for increasing taxes and using the proceeds to create jobs (as if we can trust our government to manage these funds), while a position to the right argues for a reduction in taxes. This will free up funds for investment which result in a stimulus to growth, employment and expansion of the tax base. Unfortunately, both of these tend to be politically motivated solutions that are focused on tax revenues and neither are especially effective in balancing the budget.
One additional factor is an expectation that our economy has the potential to return to the historical rates of the latter half of the 20th century (average of 4 -5 % in “real GDP” growth). Consider the rate of “real” growth for the past 17 years at just over 2 %. At best, we should not be planning on real growth rates much in excess of 2%. The good news is that slow growth can provide a more stable economic base while keeping inflation in check. Also, keep in mind that this rate has been further supported by artificially low interest rates. It should be apparent that we will not be able to “grow” the economy out of our financial dilemma. If we are serious about achieving financial stability the obvious focus ought to be on spending reductions.
So what can be done in this area. Here are a few suggestions:
The initial challenge is to require a budget that is close to being balanced. That is the deficit, if any, cannot exceed a rate in excess of the prior year’s rate of price inflation. Any Congress that fails to pass this form of a balanced budget would not be allowed to stand for re-election. The annualized budget deficit, 9 months into a republican controlled government (both administration & congress) is running at almost $700 million and accelerating. A private auditing firm would be contracted to audit all governmental administrative functions with a stated goal of improving any audited area’s productivity by a minimum of 10%. Documented adjustment recommendations would be binding and the audit would be funded out of savings. Since this process might well take many years or even a decade the process needs to be binding on all future administrations. Civil service wages need to be frozen at current levels and need to stay that way until they equate to levels for comparable positions in the private sector. Future incremental spending for new projects needs to be funded out of savings achieved through cost containment, but only after a balanced budget is achieved.
Quit making disability payments blindly. I am not opposed to assisting disabled persons, especially those that have been injured in service to their country. What we all know is that many folks who receive this payment are still able to perform productive tasks. Let’s require all, but the severely disabled, to perform some productive task either in service to the country or, in certain cases to industry (where they would actually make the payment), to qualify to receive these payments. Using this method, we could probably save 1/3 or more of this cost. The same review and requirement needs to apply to all income security areas including welfare.
Tax deductions need to be limited to two children.
We cannot afford to be the “cop” for the world. Bring our boys and girls home, especially those in harm’s way.
And finally, abandon our broken healthcare system in favor of a single payer system that will provide a higher level of care at half the cost. Examples would be those in France & Italy.
er 67 Tax & Spend vs. Reducing Taxes
I think few of us would argue against tax reform that results in a much less complicated tax and less costly tax return process. However, tax reform usually involves political motives.
Past arguments regarding the role of taxation in stimulating the economy have been primarily two sided. A left leaning side argues for increasing taxes and using the proceeds to create jobs (as if we can trust our government to manage these funds), while a position to the right argues for a reduction in taxes. This will free up funds for investment which result in a stimulus to growth, employment and expansion of the tax base. Unfortunately, both of these tend to be politically motivated solutions that are focused on tax revenues and neither are especially effective in balancing the budget.
One additional factor is an expectation that our economy has the potential to return to the historical rates of the latter half of the 20th century (average of 4 -5 % in “real GDP” growth). Consider the rate of “real” growth for the past 17 years at just over 2 %. At best, we should not be planning on real growth rates much in excess of 2%. The good news is that slow growth can provide a more stable economic base while keeping inflation in check. Also, keep in mind that this rate has been further supported by artificially low interest rates. It should be apparent that we will not be able to “grow” the economy out of our financial dilemma. If we are serious about achieving financial stability the obvious focus ought to be on spending reductions.
So what can be done in this area. Here are a few suggestions:
The initial challenge is to require a budget that is close to being balanced. That is the deficit, if any, cannot exceed a rate in excess of the prior year’s rate of price inflation. Any Congress that fails to pass this form of a balanced budget would not be allowed to stand for re-election. The annualized budget deficit, 9 months into a republican controlled government (both administration & congress) is running at almost $700 million and accelerating. A private auditing firm would be contracted to audit all governmental administrative functions with a stated goal of improving any audited area’s productivity by a minimum of 10%. Documented adjustment recommendations would be binding and the audit would be funded out of savings. Since this process might well take many years or even a decade the process needs to be binding on all future administrations. Civil service wages need to be frozen at current levels and need to stay that way until they equate to levels for comparable positions in the private sector. Future incremental spending for new projects needs to be funded out of savings achieved through cost containment, but only after a balanced budget is achieved.
Quit making disability payments blindly. I am not opposed to assisting disabled persons, especially those that have been injured in service to their country. What we all know is that many folks who receive this payment are still able to perform productive tasks. Let’s require all, but the severely disabled, to perform some productive task either in service to the country or, in certain cases to industry (where they would actually make the payment), to qualify to receive these payments. Using this method, we could probably save 1/3 or more of this cost. The same review and requirement needs to apply to all income security areas including welfare.
Tax deductions need to be limited to two children.
We cannot afford to be the “cop” for the world. Bring our boys and girls home, especially those in harm’s way.
And finally, abandon our broken healthcare system in favor of a single payer system that will provide a higher level of care at half the cost. Examples would be those in France & Italy.