Stopping the Budget "Death" Slide

Do we all understand that the federal government's slide toward default and bankruptcy is going to destroy the US economy if we don't stop it?  Do we?  Really?  I don't think so.

Someone I have known for a long time called the other day.  He had read a book that convinced him that the end was coming for the US.  Fortunately, he said, neither of us would be much bothered by the collapse.  The obvious reason would be our absence from this post-apocalyptic scene.

Nevertheless, a certain regard for the fate of the people he and I have both striven, however futiley, to protect caused us to discuss the matter.

IMO, the solution is apparent:

- Let the Bush tax cuts lapse.  The GAO reckons that would increase revenues by 3.3 trillion dollars over 10 years.  The beauty of this is that the "sunsetting" of these tax reductions does not require any action on the part of anyone.  Congess is good at that.

- Let the Grand sequester occur beginning on 1 January 2013.  Once again GAO thinks that would cut 1.3 trillion dollars from spending over ten years and once again no action is required.

- Set Medicare eand Social Security eligibility at 67 with reduced benefits for SS at 62 as an option.  Means test SS payments.

- Stop operations and spending in Iraq and Afghanistan.  This is costing the US more than 100 billion dollars a year.  BHO is now projecting our unfunded liabilities in Afghanistan out to 2024.  That would be 1.2 trillion.  The Operations and Maintenance costs of these wars is enormous.  Withdraw from Afghanistan.  Let the Afghans determine their own fate.  Tell the Afghan government, like all others, that harboring our enemies will bring violent retribution but not occupation.

- Reduce the US ground forces radically in line with prospects for future ground combats that are likely to be equipment intensive but limited in scope.  The sequester will force this anyway,  Why not get ahead of "the game?"  Keep SOF spending at present levels for the World wide CT effort.

- Stop subsidizing the Egyptian and Israeli governments.

All of that should add up to something like a 5 trillion dollar net change in our situation.  Would that not be helpful?  pl

Comments

[jonst]

If I had a quick vote in this I would yea to everything but the means test for SS. Nothing, I repeat, nothing, will kill it faster than turning it into something that COULD BE perceived as a program primarly for the 'poor'. Other than that...I could live with this.

[r whitman]

I tend to agree with you but please keep in mind the following:
1. If Congress gets more revenue from the end of the Bush tax cuts,they will try to spend it up, not apply it to the deficit.
2. The cut back in military operations will be ineffective without a complete reordering of the foreign policy of the US. This country needs a great debate over where we want to be in the world. Absent this, there will always be some country on the edge of the empire that will challange us and embroil us in a costly military adventure.

[steve g]

Col

Concur on all six of your suggestions.
Would make a terrific platform for one
of the parties in the next election cycle.
Of course, all the lobbies effected would
torpedo this immediately. So much for
realistic thought in this age of heightened
fear and greed for the betterment of the few.

[turcopolier]

jonst

OK. I see that. I was just volunteering to cut my SS payments. pl

[rjj]

Sounds a bit like that old guy who was running for president -- the one whose ideas were too zany to take seriously.

[turcopolier]

rjj

Dr Paul? Yes. I like most of his zanyness. pl

[steve]

The United States pays debts in its own currency and cannot default or go bankrupt unless it decides to.

[steve]

And I should add that social security contributes not one penny to the national debt.

[Ramojus]

I believe that a serious cost / benefit review of the post 9/11 domestic "security" apparatus would find significant amounts to cut as well.

It seems that the only "terrorism" defendants brought to trial are arrested by means of entrapment.

[turcopolier]

steve

Yes. We could endlessly debase the dollar and pay our debts with money as valuable as the Confederate dollar or the Euro as it may become, pl

[r whitman]

jonst and pl:
Social Security is already means tested indirectly. Over a threshhold, 44K for a couple I think, 85% is taxable as ordinary income. This money goes to the general treasury fund, not back to the Social Security Trust Fund.

[rjj]

Yes, him. Me too. It amazes me that a few of his ideas are regarded as fatal flaws but venality, stupidity and ineptitude are not.

[stanleyhenning]

I wish my Brother Rat, Pat, were in a position where he could actually implement his suggestions. And, yes, we really don't need to continue supporting other countries
PERIOD!!! We are at a critical stage where we need to get our own house back in order before dishing out largess to others, especially in places where it is clear that it will go down the drain (most cases)

[Mark Logan]

I like them all except the raising of the SS age, based on an opinion that we need as many job openings as we can get for young people right at the moment. Unemployed people cost money, and many peoples work ethic is perishable.

Zooming out a bit, fix the economy and unemployment first, if that is doable. If it is not, then we must accept that reality. The earlier the better.

[JohnH]

How about a Constitutional Amendment that requires all military spending by funded by specifically identified, current revenues sources (no debt)--unless one of the 50 states were directly attacked by a foreign government?

This would avoid the current tendency to adventurism on credit. If taxes were raised to cover all of Bush/Obama's military expansion, that would reduce the deficit by about $5 Trillion over the next 10 years.

More important, if someone were forced to pay for Iraq, Afghanistan, Libya, etc., etc. there would be debate about US objectives and ambitions. Better yet, the rich and powerful, who would ultimately be forced to cough up some money, would not tolerate a whole lot of nonsense.

[GulfCoastPirate]

It's not necessarily correct that the dollar gets debased and if it did that wouldn't necessarily be a bad thing for manufacturers and for those who want fewer imports into this country which is really one of our biggest problems. I won't bore you but the mathematics of 'free' trade do not work. It's all been a big scam. In this regard Steve is correct.

The one thing I would do is separate out Social Security and Medicare into separate budgets since they have their own funding mechanisms. Each of the three budgets (SS, Medicare, all else) could then be dealt with separately and people would then begin to see where the money is going. I think people would be surprised to find out SS/Medicare are subsidizing things like defense and now in order to continue to hide that dirty little secret the Republicans want to cut into those programs so they can continue to siphon those monies off into other areas. If the budgets were separated and people wanted a balanced budget you would need to cut defense at least by half.

[turcopolier]

GCP

What you are talking about is a moderate "debasement" as a boat floater. What I was talking about is a sustained issue of fiat money virtually without limit. IMO that would be a disaster. pl

[bth]

Generally agree with your points. Additionally efforts need to focus on growth in private sector employment which by itself would diffuse many other issues. Second a reduction in dependence on middle eastern oil should also be a central focus of national policy. Third, a precipitous reduction in fiscal spending by itself will have a terrible impact on the economy.

[turcopolier]

bth

"...a precipitous reduction in fiscal spending by itself will have a terrible impact on the economy."

There will be some pain but right now we are engaged in a long term process of spending ourselves into prostration with borrowed money. pl

[N M salamon]

Colonel:
your statement that continous debasement of the USD would be a disaster. is putting it mildly,
I would suggest it would be fatal.
The reason is that the US economy can run on internally generated natural resources {oil most alloy metals etc come to mind].

The debasement serves the politician, for it allows the fairy tale of reducing debt with useless paper, while it destroys all savings, and thus the econmy.

As an aside, your analyses is correct [on the main entry] IF AND ONLY IF the interest rate on Treasuries et al does not rise. Return to the historical interest on Treasuries[5 % or 2% above REAL INFLATION - at present probably 5+%] would mean immediate [or nearly so within 3 years] economy crushing obligation to pay interest before any mandatory/discretory spending -OR DEFAULT]

[Walrus]

Good points Col. Lang, but pointless even if implemented. It won't help. There is too much economic damage.

What is required is to get money out of politics or the scams will continue.

If you did that, and then turned the economists loose, your problems would be largely behind you in Ten years.

You need the equivalent of a Meiji Restoration - slash and burn, and install worlds best practice everywhere.

To put that another way, do you understand what a million " New Hampshire beauticians registration Boards" are costing you?

[E L]

Col. Lang:
I basically agree. However, with economy appearing to stall, Romney chances have greatly approved. His budget and foreign policy proposals run exactly counter to yours. He would increase the Bush tax cuts, increase military spending, "win the war in Afghanistan," aggressively confront Russia and China as our great enemies, and join Bibi in a strike on Iran with unknown consequences.

I hope this is just election "trash talk," but a list of his advisors reveals only the most ardent neocons left over from the Bush carnival.

[Alba Etie]

Col Lang
I would also like to see more policy in place to bend the cost health care in general & medicare in particular ,
It is said that 5 to 10 percent of our patient populations run up eighty five percent of the annual health cost . I say have policies that means test personal responsibilty . For example the repeat offenders with diabetes , obesity , and congestive heart failure -should be asked to give up smoking , sugar , and and processed foods. A health care specialist that used to work in state health care here in Austin before she was 'lobbied' out of job believed that if we were to reward good behavior like exercise, fresh food choices , and free or low cost preventive quarterly check ups with nurse practioners-- we could actually save money by decreasing the five to ten per cent of the patients that cost eighty five percent of yearly money spent . And before someone throws the talking point" nanny state'canard at me ;- this prevention and reward policy could be couched in terms of the biker refusing to wear the helmet . Fine you can ride without a helmet but you cannot expect the rest of us to pay for your self inflicted trauma.( Yes live free or die just not on our budget money ) Over many years the Missus and me have returned to appopriate weight, quit smoking , and gone pretty much local fresh foods. It can be done - and if those in our society who must by circumstance be helped by the government - then lets put in place best practice policy to best spend those dollars .
The other part of this discussion must be how much will it cost to really care for all the returning veterans in a meaningful why ? And won't many of young Wounded Warriors be in our care for several decades hence ?
The money is there if we allocate wisely -and reward good behavior . I would much rather tax capital gains - then not have the money for the veterans .
And E L yes it is not trash talk a President Romney will mean again the rise of the Neo Cons - how does Sec Of State John Bolton grap you ? How much will an illegal war with Persia cost us in deficits ?

[MRW]

Steve is right and your alarmist friend needs to find out how the the monetary system works operationally before he reads books that he doesn't have the background to judge accurately.

The Euro may or may not survive. Since the ECB did not take Wynne Godley's 1992 warning into account, it's still debatable.
"Maastricht and All That"
Wynne Godley
http://www.lrb.co.uk/v14/n19/wynne-godley/maastricht-and-all-that

Still, we will never wind up like Greece or Spain or Portugal or Italy because we are (1) the reserve currency, and (2) we are a sovereign monopoly currency with a floating exchange rate. Our federal government is an issuer of currency.

Our states may wind up like Greece or Spain or Portugal or Italy, but the federal government cannot. Our states cannot issue currency. Just like you or me or any business or household in the country. You and I, every business and state, have to balance our budgets.

The smartest thing we did was unpeg our dollar to gold on August 15, 1971. The problem is that the American people did not understand what it meant, and the consequences of it, and so have been acting with defunct thinking (BRING BACK THE GOLD STANDARD! BRING BACK THE GOLD STANDARD!) in a new environment. A a result, we have failed to understand how regulating our currency, properly, is what makes our current system works. Wall Street does, and has been creaming our pants ever since.

Once Americans wake up and educate themselves how these things work operationally, it will be a different world in a jiffy.

[Paul Deavereaux]

1. Medicare for all from cradle to grave. You don't want it, don't use it.
2. Social Security at 60, full not reduced. .. and raise the rates. Put people to work.
3. Free PUBLIC education thru college. Got the grades, you're in.
4. Outsourcing of jobs to be taxed until it exceeds by 2X the cost of hiring US citizens.
5. Corporate personhood is repealed. One human, one vote.
6. One government pension per lifetime. Pick the one you like best. Enjoy.
7. Illegal immigrants get kicked out. Respectfully and with courtesy, but out.
8. Decriminalize drugs, massively fund drug education/rehabilitation. End the Prison State.
9. Public Funding for all elections. Personal contribution only to the election fund only. Find somebody in the private sector to bribe.
10. Get the military budget under control. Fold the Air Force & Marines into the Army. Fold the Navy into the Coast Guard. Close overseas bases. Keep a few Trident subs.
11. Build a big statue of Gen Smedley Butler.... and Crocodile Dundee.