My goal to single-handedly balance the federal budget has encountered a couple of obstacles.
First is time. It requires a lot of research to try to make sense of the numbers involved. Second, to try to reconcile the many differing opinions about the best ways to address both the short- and the long-term U.S. debt is daunting. There is, as one might imagine, an especially strong disagreement about tax increases and their overall affect on the economy.
In the interest of promoting ideas and discussion, I am posting some of my current thoughts, with the caveat that none of them are carved in stone, and I reserve the right to change or revise my ideas as I continue forward, without being pilloried as a "flip-flopper," God forbid.
- Control and lower health care costs.
Some ideas to achieve this are already built into the new health care reform bill, but from what I can tell, the bill does not go nearly far enough.
A recent story on MPR illustrates the nature of the problem: <span style="font-style:italic;">one</span> doctor at <span style="font-style:italic;">one</span> hospital is under pressure from a family to perform what he is 99% certain are unnecessary tests on their teenage child. As the doctor describes it, every incentive built into our current system dictates that he should do the tests. From his point of view, the only thing stopping him from doing the tests is the pledge he made when he graduated medical school that the welfare of the patient comes before all other considerations.
He declined to perform the tests.
Estimates are that one-third of the procedures done in our health care system are unnecessary. If this trend can be reversed, or better yet, completely stopped, the savings to the government from Medicaid and Medicare would be tremendous.
- A 2% tax on all health care providers.
In Minnesota, a 2% health care provider tax pays for MinnesotaCare, an inexpensive health insurance program. If this were expanded nationwide, it would help offset some of the rise in costs that will be associated with all the new people joining Medicaid or being subsidized to buy health insurance under the individual mandate. This tax could be phased out in 2014, when some of the other elements of the health care bill kick in.
2a. Between now and 2014, require that all increases in insurance premiums be indexed to the rate of inflation.
- Allow the Bush tax cuts on upper income families to expire.
- Raise the cap on income that is subject to Social Security tax.
Obama would have to break one of his campaign promises, but I believe he will have to do some version of this.
It is interesting how much disagreement there is around this subject. The most convincing argument, I found was made by Bernard Wasow at the Century Foundation.
The 25% marginal tax rate ends at $137, 000. Income levels above this level are not considered "middle-class."
So, we should immediately raise the cap on income subject to social security tax to 90% on earnings above $137, 000 - which is where Ronald Reagan thought it ought to be - and eliminate the cap entirely on earnings above $500, 000.
Something will have to be done on the benefit side, also, but my sense is that whatever this is can be phased in over time to help minimize the economic adjustment some seniors will be required to make.
- Cut the defense budget.
Our defense budget is obscenely high. We are no longer fighting a global war against Communism. We are facing other very different threats that require a different use of military force. There is also, as every one knows, incredible amounts of waste and inefficiency in our defense procurement practices and in the types of projects that are still being funded.
Is it a "jobs killer"? Maybe. But perhaps if we simultaneously accelerate our transfer to a clean energy economy, many of those same workers now building unnecessary weapons systems can be re-trained to build the new energy infrastructure of the 21st Century.
I haven't crunched the numbers, so I can't be specific about how much debt this would eliminate. Suffice to say, from everything I have been able to read and digest, it is huge.
Two additional items to add: 1.) the expected increase in revenue as the economy recovers, and; 2) the likely increase in revenue if some sort of immigration "amnesty" bill ever gets passed.
I look forward to hearing comments, criticisms, suggestions, etc.
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