If only we had politicians that cared about the country more than themselves, this could be fixed fairly easily. All of the following are doable and releatively pain free. It would include certain safeguards though that might not be possible with our style of politics.
Start with the budget and using rough numbers:
Current revenue of $2.2T
Current Spending of $3.4T
Starting with revenue, it is going to be quite difficult to increase revenue very much through income taxes.
I would raise taxes on incomes over $500K by 5% for an estimated $75B in annual revenue.
I would allow multinational corps that can LEGALLY pay corporate income taxes in foreign countries at lower rates to pay an equivalent amount in US income taxes on that portion that is earned in the foreign country. If GE earns $1B in India and India has a corporate tax rate of 13%, then GE gets to pay that 13% to the US. Maybe India gets the jobs but at least the US gets the tax revenue. What this really amounts to is a repatriation of overseas profits/cash that are currently taxed at 35%. So currently the cash stays in the foreign countries and can not be used for US operations (like employment). This is a ridiculous stand that the US has taken. The estimated revenue from this simple manouver is over $400 B annually in additional corporate income taxes. $400B or $0B. Hmm.
These two steps alone should increase revenue $500B annually without causing harm to the economy. So that brings revenues to approximately $2.7T assuming no gdp growth.
On costs I would do the following:
1) Defense budget is currently $725B annually including about $160B for Iraq/Afghan wars. I would reduce operations in Iraq/Afghan significantly and leave an oversight force in the region. Projected savings here of $100B. I would re-bid and audit all current defense contracts with a mandate to shave an additional $50B from this sector (I suspect it could be done from cutting waste/graft/and spending on items we dont want or need). Total defense savings of $150B
2) SS in theory should pay for itself. There are a myriad of simple tweaks to the system that make it solvent going forward. I would raise the eligibility age from 65 to 68 for everyone under 50 years old and raise the tax cut off to $150K. This would make ss solvent for 75 years at least. In reality, ss funding should be adjusted every 2 years or so based on needs. Taxes should be adjusted up or down based on current levels of need. We will assume that SS will take care of itself s in my analysis, I am going to remove SS from the equation for both expenses and revenue.
3) Medicare is a big problem with limited solutions and it is likely going to continue to cost a lot of money. Right now it is around $486B annually. All I would do here, at first, is hire private companies across the country to audit all medicare payments/bills. There are already firms that audit for the insurance industry and they average saving about 25% per year just in things like double billings or mistyped billings and general bookkeeping errors. Id allow the firms to keep 8% of the savings as commission which, very conservatively, leaves 15% in savings or $73B in savings.
4) Medicaid and CHIP account for another $283B with matching funds from the states for a total outlay of $566B. This is truly an outrageous number. In any given month about 60 M people take benefits from this sector. This sector can be eliminated completely from the budget except as a funding mechanism. I disagree completely with most repubs about mandatory health insurance. We have rightly decided as a country that we will not let people go without medical care and, as a result, requiring people to have insurance should be mandatory. I would require basic health insurance for everyone from birth. Using the same means testing as is currently used to determine eligibility for medicaid and CHIP and the govt would pay for the insurance policy for these folks. There must be included a nominal $20 co-pay for services as well as coverage for mandatory semi-annual well checks. If you take 60 M as the number covered and give them even $200/month in premiums for their insurance (likely high) the total cost for the program is only $144B. Now every single person is covered and there is a federal savings of $139B plus state savings of the entire $283B they are currently paying. Massive savings.
4) Safety net programs cost about $466B annually. I personally think the benefits are a bit too high and are awarded in an ineffective way. Unemployment is a big one as well as welfare. There are disincentives to actually earn anything in the current system. Encourage work by allowing $.50 for every dollar earned up to a reasonable amount. This could easily trim $40B from the totals.
5) Interest on the debt is the other biggie at $230B anually. I have a plan for this and it will be eliminated from the equation completely.
6) Balance of spending is about $730B. I would take a look at these items and trim them 7% across the board for a savings of $50B or so.
So if we now tally everything up we get the following:
Revenue of $2.7T with costs of $2.7T (The numbers will actually each be reduced by the same amount from taking SS out of the process) Now you have a balanced budget except for interest on the debt.
Interest on the debt is about $230B. The country as a whole contributed to this problem and the country as a whole need to solve it. We have already raised taxes on the wealthy so now everyone has to pay, including illegals and tourists and foreign countries. I propose a 2 pronged approach:
1) We currently import $11T or so annually in goods. We are the biggest market in the world and I propose an import tax of 1% annually for a total of $110B in revenue. Foreign countries will not stop doing business with the US over a 1% hit to their margins. If they retaliate with an import tax of their own, so be it.
2) We have a gdp of about $15T annually. I prpose a national sales tax of 2% and figure it would get collected on about $10T in services for revenue of $200B. For an average family making $35,000 annually the sales tax would cost about $33/month
These 2 new revenue sources will produce $310B annually with $230B servicing the debt and $80B going to principal reduction. It will take a long time to eliminate the debt but at least we would be reducing it and stop all of the borrowing. This money MUST be earmarked only for this purpose.
So doing these very simple and actually pretty politically possible things will balance our budget and begin to reduce our debt. No more govt borrowing at all. Our economy would greatly increase and the tax revenue would actually be better than projected.
Start with the budget and using rough numbers:
Current revenue of $2.2T
Current Spending of $3.4T
Starting with revenue, it is going to be quite difficult to increase revenue very much through income taxes.
I would raise taxes on incomes over $500K by 5% for an estimated $75B in annual revenue.
I would allow multinational corps that can LEGALLY pay corporate income taxes in foreign countries at lower rates to pay an equivalent amount in US income taxes on that portion that is earned in the foreign country. If GE earns $1B in India and India has a corporate tax rate of 13%, then GE gets to pay that 13% to the US. Maybe India gets the jobs but at least the US gets the tax revenue. What this really amounts to is a repatriation of overseas profits/cash that are currently taxed at 35%. So currently the cash stays in the foreign countries and can not be used for US operations (like employment). This is a ridiculous stand that the US has taken. The estimated revenue from this simple manouver is over $400 B annually in additional corporate income taxes. $400B or $0B. Hmm.
These two steps alone should increase revenue $500B annually without causing harm to the economy. So that brings revenues to approximately $2.7T assuming no gdp growth.
On costs I would do the following:
1) Defense budget is currently $725B annually including about $160B for Iraq/Afghan wars. I would reduce operations in Iraq/Afghan significantly and leave an oversight force in the region. Projected savings here of $100B. I would re-bid and audit all current defense contracts with a mandate to shave an additional $50B from this sector (I suspect it could be done from cutting waste/graft/and spending on items we dont want or need). Total defense savings of $150B
2) SS in theory should pay for itself. There are a myriad of simple tweaks to the system that make it solvent going forward. I would raise the eligibility age from 65 to 68 for everyone under 50 years old and raise the tax cut off to $150K. This would make ss solvent for 75 years at least. In reality, ss funding should be adjusted every 2 years or so based on needs. Taxes should be adjusted up or down based on current levels of need. We will assume that SS will take care of itself s in my analysis, I am going to remove SS from the equation for both expenses and revenue.
3) Medicare is a big problem with limited solutions and it is likely going to continue to cost a lot of money. Right now it is around $486B annually. All I would do here, at first, is hire private companies across the country to audit all medicare payments/bills. There are already firms that audit for the insurance industry and they average saving about 25% per year just in things like double billings or mistyped billings and general bookkeeping errors. Id allow the firms to keep 8% of the savings as commission which, very conservatively, leaves 15% in savings or $73B in savings.
4) Medicaid and CHIP account for another $283B with matching funds from the states for a total outlay of $566B. This is truly an outrageous number. In any given month about 60 M people take benefits from this sector. This sector can be eliminated completely from the budget except as a funding mechanism. I disagree completely with most repubs about mandatory health insurance. We have rightly decided as a country that we will not let people go without medical care and, as a result, requiring people to have insurance should be mandatory. I would require basic health insurance for everyone from birth. Using the same means testing as is currently used to determine eligibility for medicaid and CHIP and the govt would pay for the insurance policy for these folks. There must be included a nominal $20 co-pay for services as well as coverage for mandatory semi-annual well checks. If you take 60 M as the number covered and give them even $200/month in premiums for their insurance (likely high) the total cost for the program is only $144B. Now every single person is covered and there is a federal savings of $139B plus state savings of the entire $283B they are currently paying. Massive savings.
4) Safety net programs cost about $466B annually. I personally think the benefits are a bit too high and are awarded in an ineffective way. Unemployment is a big one as well as welfare. There are disincentives to actually earn anything in the current system. Encourage work by allowing $.50 for every dollar earned up to a reasonable amount. This could easily trim $40B from the totals.
5) Interest on the debt is the other biggie at $230B anually. I have a plan for this and it will be eliminated from the equation completely.
6) Balance of spending is about $730B. I would take a look at these items and trim them 7% across the board for a savings of $50B or so.
So if we now tally everything up we get the following:
Revenue of $2.7T with costs of $2.7T (The numbers will actually each be reduced by the same amount from taking SS out of the process) Now you have a balanced budget except for interest on the debt.
Interest on the debt is about $230B. The country as a whole contributed to this problem and the country as a whole need to solve it. We have already raised taxes on the wealthy so now everyone has to pay, including illegals and tourists and foreign countries. I propose a 2 pronged approach:
1) We currently import $11T or so annually in goods. We are the biggest market in the world and I propose an import tax of 1% annually for a total of $110B in revenue. Foreign countries will not stop doing business with the US over a 1% hit to their margins. If they retaliate with an import tax of their own, so be it.
2) We have a gdp of about $15T annually. I prpose a national sales tax of 2% and figure it would get collected on about $10T in services for revenue of $200B. For an average family making $35,000 annually the sales tax would cost about $33/month
These 2 new revenue sources will produce $310B annually with $230B servicing the debt and $80B going to principal reduction. It will take a long time to eliminate the debt but at least we would be reducing it and stop all of the borrowing. This money MUST be earmarked only for this purpose.
So doing these very simple and actually pretty politically possible things will balance our budget and begin to reduce our debt. No more govt borrowing at all. Our economy would greatly increase and the tax revenue would actually be better than projected.
