Monday, August 1, 2011

Simple Budget Solutions

The  politicians are making our budget problems unnecessarily complicated  when in fact the problems can be solved relatively easily without damage to our economy,without draconian cut back in programs, and without  large tax increases. Here are some simple steps we need to take.]

1)  The politicians are fixated on the cost of Social Security and Medicare ( "Entitlements) so the first thing we need to do is set those two programs aside and discuss them separately. Neither entitlement program has a place in the discussion about the discretionary portion of the budget because they have a completely different funding mechanism and the money collected for both programs is supposed to be set aside in separate Trust Funds (even though it is common knowledge that the politicians have been taking money out of both Trust Funds to conceal deficit spending for the past several decades). Both Social Security and Medicare are funded by payroll taxes and it's obvious that as more people retire and need more health care those payroll taxes will need to be raised. However, the amount that those taxes will need to be raised to adequately fund Medicare in the future is relatively small compared to the cost of buying a decent health insurance policy in the private sector and it is obvious to even the most casual observer that covering every citizen with Medicare would save hundreds of billions of dollars annually by eliminating the need for Medicaid, SCHIP, and all of the numerous fragmented health care programs at the State and Federal Level. For example, a 4% payroll tax increase on a salary of $40,000 to fund the expansion of Medicare to cover everyone is only $1,600 per year compared to the cost of about $15,000 per year for a decent health care policy in the private sector. Politicians claim there is no "political will" to expand Medicare to cover everyone yet most physicians, health care workers, and voters favor doing so. It's the lobbyists who finance the campaigns of the politicians who object to expanding Medicare- not the majority of the voters or health care workers. We should mention in passing that expanding Medicare and eliminating Medicade would go a long way toward helping the 50 States balance their budgets.

Social Security will also require a slight increase in payroll taxes but that can be moderated by removing the cap on taxable payroll, and by making sure that only people below a certain income level are eligible for Social Security benefits.

2) Now that we've solved the Medicare and Social Security problem, we're faced with the discretionary part of the budget. The biggest component of that budget is the cost of funding our ever growing military industrial complex. Again, those budgets are largely driven by lobbyists for the Defense Contractors and in fact a lot of  money allocated to the Defense industry creates jobs here in American. Nevertheless, by any reasonable estimate there is at least 35% waste and corruptions in that area of the budget.

3) Finally we need to discuss ways to increase government revenues. There are two primary ways to do so. The first and most important is to get our economy back on track and create more jobs. The second is to make sure that every American, rich or poor, pays their fair share of taxes. Our economy has stalled in part because of an every increasing gap between those who have money to spend and those who do not. Currently less than 2% of our population control the majority of the money. There are reports that Corporations and financial institutions are holding cash reserves in excess of three trillion dollars. The Republicans, in a brilliant public relations ploy, call those people "job creators" when in fact the wealthy have taken so much money out of circulation over the past several decades that there isn't enough money in the hands of consumers to keep the economy healthy and vibrant. We've seen corporate profits reach record levels in the past two years while unemployment remains near ten percent. Where are the jobs the so called "job creators" are supposed to be creating? While cutting the size of government spending is generally an admirable goal it hardly seems appropriate during this recession to reduce the number of consumers by laying off several million government workers.  

The politicians have been extremely successful at hiding behind the cost of entitlement programs as a way to avoid taking responsibility for our budget problems. That's because during flush times they've basically been stealing money from both Trust funds to finance and conceal their deficit spending. They've done that by claiming that the money we've put into the Trust funds from our weekly payroll taxes is actually money they can spend instead of money that was supposed to be put aside in a Trust fund to cover Social Security and Medicare expenses for people who reach retirement age. Now that they've "borrowed" all that money from the Trusts they have nothing to hide behind so they're blaming the entitlement programs for the growing deficit. At the present time our Government is borrowing money to replace the money the politicians took out of Social Security and Medicare and the interest on that borrowing is rapidly becoming one of the biggest contributors to our rising deficit problem. Yet the politicians continue to blame the entitlement programs,, instead of their own mismanagement of the money we paid into those programs , for our budget problems. We'll probably never solve our budget problems until we find a way to keep our tax money out of the hands of the politicians. In the meantime write to your elected representatives and tell them the best way to get our financial house in order  is to stop stealing money from the Social Security and Medicare Trust funds and replace "Obama Care" by expanding Medicare to cover everyone. Every poll reveals that this is what the majority of us want. The politicians won't listen if we don't talk to them. It's that simple folks. Get on your phones. Write letters and email. Nothing will change unless we speak up in mass. It's important that "political will" be defined and the will of the people not the will of the lobbyists.

Friday, July 15, 2011

Job Creation

While Congress indulges itself by playing a partisan game of "chicken" with the debt ceiling, most Americans are more concerned with reducing our unemployment rate and finding ways to get people back to work. The highly romanticized concept that the way to stimulate the economy is to reduce taxes on the wealthy doesn't hold up to inspection. It's called the "Trickle Down" effect and is aptly named when one considers the meaning of the word trickle. The concept revolves around the fantasy that the rich will voluntarily use their money to create jobs if we reduce their taxes. Given the fact that the folks on Wall Street, and many of our large corporations, have been making record profits during the current recession, and are reportedly sitting on trillions of dollars in idle cash, one can only ask where are the jobs?

The best way to create jobs is to get more money into the hands of consumers because businesses can't hire unless they have more customers. During the past several decades enormous amounts of cash have been withdrawn from circulation by the wealthy. Without a method of putting some of that money back in circulation our economy becomes a deadly game of Monopoly, where a small group of individuals end up with most of the money and our free enterprise system bogs down.