The debate over the economy and jobs is really all about one
thing. If the economy were growing
faster than our debt, we would be okay. People
would stop worrying, relax and spend more. Companies would invest, problems would work
themselves out and we could focus on what some regard as the only important
issues, having to do with society and the environment. But debt is growing faster than the economy;
in fact our debt is growing faster than ever while the economy is stagnant.
Still, things aren’t all that bad. The silver lining to a 9% unemployment rate is
that 91% of all ready, willing and able workers do have a job. US companies are expanding markets overseas,
thanks to a weak dollar. Given stable
government policies and a change in consumer attitude, companies will begin to
hire. And our problems are solvable with
a little common sense. No, things aren’t
all that bad – yet.
In the past the government spent money to create jobs. This time it hasn’t worked for a very simple
reason. Economic research provides a
very strong case that, as our total government debt exceeds 90% of an economy’s
Gross Domestic Product, economic growth slows down dramatically. By most measures, we have reached that
point. Excess government spending has brought
about our current economic difficulties, so more of the same only creates more
of the same. At the same time, cutting
back will also cause our economy to slow, or even to decline. Thus we have a conundrum.
The solution is not very complicated, but it does involve
complicated choices. Congress and the
President need to agree upon a plan in which spending decreases so that debt
grows more slowly than GDP. Since we’re
experiencing near zero economic growth, that means balancing the budget until
further notice.
The debate over whether to do this with tax or budget cuts
is one that our leaders will have to figure out. Higher taxes tend to slow the economy. Government cutbacks will have the same
impact. It’s pretty clear that under any
sensible plan our government will need to end the pattern of constantly
expanding budgets. Take your choice. Mix and match. Just balance the budget.
Voters may make a difference, as the political environment calls
for change. Some still want the
government to do more for them, but tax the other guy. Some want it to do less for the other guy,
and don’t raise my taxes. While no one
course of action makes everyone happy, its pretty clear the current situation pleases
no one. Just balance the budget.
What should we cut?
First of all, the math has to take into account the fact that without
any increases our budget will still increase, as Social Security and Medicare
are determined by formulas with built-in increases. So we have to either change the formula or
cut back even more in other areas.
Personally I would rapidly decrease our strategic forces
overseas, particularly in the Middle East , and
only deploy tactical forces as required.
Then I would cut back every area of the government budget – except interest
payments on our debt - by the percentage required until we reach
equilibrium. If that involves decreasing
everything from Social Security benefits to the Labor Department’s budget by eight
or nine percent, so be it. As time goes
by we might find it more palatable to eliminate entire branches of the
government than to cut them all back. Get
rid of HUD, merge the Marines with the Navy, outsource Medicare and Social
Security to a private contractor. As for
taxes, I’d be in favor of eliminating all deductions, exemptions and
credits. No more mortgage deduction,
charitable or personal exemption. No
more tax exempt municipal bonds. No more
Lifetime Learning Credits, Hope Scholarship Credits, Earned Income Credit, or “refundable”
credits. I don’t know if these are good
or bad ideas, just start with an across the board cutback, so we can balance
the budget.
It is really not that complicated.
