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I like to think of the government as a giant, non-profit business. Every single American is a customer. As customers, the government’s job is to keep us happy. As a business it is responsible for keeping itself “profitable” and viable for the future.
I am sure many of you would be disturbed at that idea. When I say government profitability, I mean the government should have to run like a business. If you run a giant deficit in the corporate world, you go bankrupt and out of business. Obviously most of us (sorry Libertarians and uber Republicans) don’t want the government to go out of business.
So, what does the government need to do? Like in the Clinton era and many Presidents before him, the government needs to run without a deficit. There are three ways to turn around from the terrible deficit situation we are in.
- Option one: increase revenue (raise taxes)
- Option two: cut costs
- Option three: print money
This is a fairly simple concept. I once had someone argue with me that this is not true. That person obviously has no understanding of economics. Just like a business, the way to keep from having deficits is to increase income or decrease spending. That’s it. The government, unlike businesses, can also print money to pay for things, but that would be worse than having a deficit.
How to do it
A giant increase in taxes would shatter our now weak, but improving, economy. Similarly, a major cut in vital services would devastate millions of families. We need, as a country, to find a middle ground. In Washington, this is proving very difficult. While I definitely support one party over the other, we can safely place the blame on everyone that has run our country for the last ten years for what is going on now.
The national debt as it is today did not begin to rapidly grow until the Regan administration. “Reganomics” led to skyrocketing debt. For someone who believed in small government, he sure used the government to spend our way to greater economic growth. That spending is unsustainable in the long run, and all Presidents since Regan, except for Clinton, have helped build on our enormous deficit.
This country is going to have to go through a painful change to fix the problem. Unfortunately for all of us, as a whole we are stupid. We vote for our checkbooks and not for our long-term well-being and future of the country. If any congress were to make the necessary changes to our system to fix the problem, they would most likely be voted out of office in the next round of elections. This leaves us in a “catch 22” situation where no one is willing to fix the problem.
My ideas for what could really work
Raise Taxes on the Super Rich
The two richest people in the United States, Bill Gates and Warren Buffet said we should raise taxes on the top two percent. Buffet had this to say:
“If anything, taxes for the lower and middle class and maybe even the upper middle class should even probably be cut further,” Buffett said in an interview with ABC’s “This Week With Christiane Amanpour” that is scheduled to air on Nov. 28. “But I think that people at the high end — people like myself — should be paying a lot more in taxes. We have it better than we’ve ever had it.”
This would not impact 98% of Americans. Billionaires and multi-millionaires are not creating jobs for the average American. Raising taxes on super rich people would not impact job growth and would not kill the economy. Period.
I am personally against increases in the estate tax, as that is double taxation on the same income. I think they should drop the estate tax and raise the rich income tax bracket level. People would not earn less for making more money, as a friend once told me. If you don’t understand how the US income tax system works, here is a good primer.
Cut Spending on Waste
President Thomas Whitmore: I don't understand, where does all this come from? How do you get funding for something like this?
Julius Levinson: You don't actually think they spend $20,000.00 on a hammer, $30,000.00 on a toilet seat do you?
That quote from Independence Day hits the nail right on the head. The government doesn’t actually spend $20,000 on a hammer. So why do they charge the tax payers that much? The government needs to put very strict measures in place to ensure the lowest price is accepted on projects. No bid contracts should be a thing of the past.
The IRS should require electronic filing. The army should not spend billions of dollars a month on unnecessary bases around the world. Administrative costs at all major government agencies should be cut. The TSA should waste less time on “touching my junk” and spend more time on what really works.
Some jobs will have to be cut too, which is not good for the short-term economy, but I don’t want to have the country worrying about their paycheck for the next four generations.
Overhaul Social Security
Allan Sloan at Fortune wrote one of the best articles I have ever read on the Social Security problem. I am not going to re-write the entire article here, but I will summarize the important parts.
- We are going to be paying for people’s retirement by borrowing money for foreign governments in about five years. This is a serious problem.
- The average life expectancy in the United States has risen dramatically since Social Security was implemented but the benefit has remained about the same.
- The government will have to resort to inflation or increased borrowing to pay for this if something does not change very soon.
I suggest we do something here that will not be good for me, but we have to think as a country if we are going to have long-term economic success. We have to raise the retirement age to qualify for social security (slowly over time allowing people in or near retirement to be “grandfathered” in to current expectations), increase the cap on payroll taxes that fund Social Security, and decrease the benefit. That will suck for all of us, but it is the only way I can come up with for this to work.
This is gonna suck
Our country is going to go through dramatic changes either way. We can have our currency and economy collapse or we can be pre-emptive and fix the problem before we end up like Greece, Ireland, and Spain.
I know this is controversial and many people will not like my ideas, so please keep comments constructive and civil. You can critique my ideas and other people’s comments, but I don’t tolerate mean people.
Please give your thoughts, ideas, comments, and solutions in the comments.