As I'm sure you've heard, Obama will announce a spending freeze for discretionary spending. This is understandably disappointing to many progressives. Billions of dollars for education, infrastructure, and health care will not be provided. Bridges will fall into disrepair. Schools will be underfunded and understaffed. Fewer underprivileged people will get the assistance for housing that they need.
However, despite these unfortunate realities, this is a good decision.
More below the fold.
Our government has been on a long and unsustainable road to financial insolvency. We started n this road during the 'fiscally conservative' Reagan administration, where taxes were slashed, yet more programs were created, and military spending increased exponentially. Apparently, Ronald Reagan and his term of supposed experts could not understand that if you cut taxes, and increase spending, there's going to be deficits. And if you keep cutting taxes, and keep increasing spending, there'll be more deficits. And if you keep doing that for decades and decades, you'll go bankrupt. It is simple math.
Republicans don't seem to understand this, however. In their world, you can cut taxes as much as possible, and keep starting more wars, and giving away more no bid contracts, and keep funding more useless programs, and somehow everyone will be happy and we'll just cut taxes into surpluses.
Certain progressives, unfortunately, also have a similar belief. If you keep spending more, and keep taxing the rich, eventually, you'll become solvent. Despite the wishes of many, this is not correct. Our budget deficits for the next decade are in the order of hundreds of billions. Taxing the rich, while an important step in the alleviation of our deficit crisis, will not solve it alone, or come anywhere near alone.
In FY 2007, the top 5% payed 60% of the income taxes. The tax rate on this top 5% is around 33% and up. The federal income tax brought in around 1 trillion in FY 2007. Even if we doubled the income tax on the top 5% (making them pay around 70% in federal income tax alone, not taking into account payroll, state and local taxes), that would still give us 'just' 600 billion extra. It sounds like a lot of money. But it's not enough.
Even if this impossible tax hike passed, we would still likely be in a deficit every single year for the next decade and beyond. And as I'm sure you know, thanks to the nature of this country, such a tax hike will never occur. Ever.
So, keeping that in mind, how do we balance the budget? We will need to either raise taxes on the middle class, or cut spending. As I'm sure many of you know, the former option is not very appealing, and would be completely catastrophic politically for at least the next three years and probably beyond. It's off the table for now.
Keeping that in mind, let's explore the second option. Spending cuts. The first, and most obvious place, is the military. Our combined spending on the military, DHS and the wars nears a trillion dollars. It's a bloated, unnecessary, mess. However, we are fighting two wars currently. While I disagree on whether we should be fighting them, the fact is, we are, and in the case of Afghanistan, we'll likely be fighting there for years and years to come.
Keep in mind the political realities of this country as well. The GOP and other military apologists in the Democratic party would spin it as Obama hating the troops, wanting them dead, and making Americans unsafe, and it would be effective with the American people. It is an inconvenient truth (heh) but a truth it is. We have to take military cuts off the table for now.
How about entitlement cuts? Well, it would certainly help the deficit more than any other cut or tax hike, but it would leave millions of poor and elderly out on the streets and dying, and it would completely devastate our society. That's off the table for, well, basically, eternity.
So that leaves us with one more area. Discretionary spending. Yes, much of this is extremely important, and I recognize it's importance. Money for infrastructure, education, energy independence, national parks programs, labor unions, green jobs, community investment, and thousands of other projects that greatly enhance our country.
But despite the benefits that these projects and programs provide to our country and our communities, many of them are overfunded, not vital, wasteful, or ineffective. Much of our discretionary spending is just throwing money at a problem.
For example, as important as education funding is, providing a failing school with a renovated building, computers for every student, pay hikes for teachers, and state of the line, well, everything, will not solve the problem alone, and we cannot pretend it will.
So to get back to my original point, when you look at all of the various options for reducing the deficit, it is fairly clear which one we can start with in the near term, and that is discretionary spending. Obama and his advisers realize this, and so they have taken action.
That action, though, is not even as radical as some on here seem to be indicated. It is not a budgetary cut. It is a budgetary freeze. All it does is ensure that no increases in our already bloated discretionary budget will occur. It is a simple, efficient and obvious way to make certain that our nation will begin addressing the dire and looming threat of our unsustainable deficits, and debt.
(sorry if this is incoherent, it's my first diary)