HOW TO BRING AMERICA BACK FROM ECONOMIC RUIN
No one in political leadership has the courage to present a clear plan for achieving a balanced budget and restoring American solvency. They know that doing so will offend major constituencies. They also know that not doing so will destroy the United States. They are willing to risk the destruction of this nation so long as it occurs after their terms in office. What they do not yet appreciate is that their inaction offends the vast majority of Americans and that before the nation comes tumbling down, its political leaders will suffer ignominy and defeat.
In truth there is no way that the federal government can continue spending at the present rate without causing financial markets to collapse, without reigniting inflation, without causing ever rising rates of unemployment, and without bringing a halt to most federal government operations. While I would celebrate the last of these effects, I do not relish the notion that in a very short time we will be in the throes of a deep and long depression and I do not relish the notion of a chaotic and haphazard destruction of the government.
There is a way out of this mess, but getting there requires political courage and vision. President Obama has proven that he is incapable of exercising true leadership and, oddly, I am grateful for that because I loathe the state takeover of private enterprise that he finds so appealing. The leadership in the House and Senate has likewise proven itself incapable of leading. Without voting those rascals out, there is little hope that we will take America back from the brink. Instead, the leaderless nation on autopilot will accelerate into economic destruction.
In the midst of what may well be the greatest threat to the survival of the nation, those in power appear impotent. That impotence presents an opportunity for one with courage and vision to save the nation.
Consider the following approach that, if adopted now, would not only produce a balanced budget but would also create a sufficient budget surplus to permit elimination of the personal income tax while still maintaining a balanced budget (indeed, even permitting payment on the national debt). In short, we can within a very short time reverse the present course and raise the nation, Phoenix-like, out of this mess and into global financial leadership.
The national debt stands at $14.5 trillion and will reach about $25 trillion in just eight years. The nation’s unfunded liabilities for Medicare, Medicaid, and Social Security stand at $61 trillion; they will grow by trillions of dollars every year as the population eligible for these entitlements doubles in the next decade. Total 2011 federal revenues are $2.57 trillion and expenditures are $3.83 trillion, adding $1.27 trillion to the national debt. Projected deficits into the foreseeable future are all in excess of $1.2 trillion.
Changing this dismal outlook requires substantial cuts in spending, i.e., cuts that exceed the $1.27 deficit for 2011 and beyond so that sufficient funds are available to pay down the enormous $14.5 trillion debt that will be $17 trillion this coming year. Indeed, within the next two decades the cost of just social security, Medicaid, and Medicare will consume all discretionary spending, outstripping federal revenues by tens of trillions of dollars. Keeping social security, Medicaid, and Medicare “as we know it” (quoting the ne’er-do-well Senate Majority leader Harry Reid) is economically impossible. In other words, present entitlement spending is unsustainable. The truth is that we have no choice but to cut and cut substantially that spending, which means we must privatize those systems because were we to raise payroll taxes in an effort to bring in the tens of trillions needed to fund the programs “as we know them,” we would destroy the entire economy in the process. Only a move to cut discretionary and non-discretionary spending will work. Those cuts need to be substantial but need to be made intelligently, avoiding throwing individuals long promised federal benefits under the bus.
Here is how it can be done. We must immediately end U.S. military involvement in the Libyan conflict, Afghanistan, and Iraq. Doing so will save $150 billion per year. We must repeal Obamacare, the stimulus bill, the jobs bill, and the bail-out bills. Doing so will save $1.5 trillion. We must transform Social Security and Medicare into a needs based system, removing from the system those who have the financial wherewithal to support themselves. We need to provide everyone else an opportunity to opt out of the system, enabling them to be repaid what they have paid into it via payroll taxes in exchange for ending their reliance on the systems. They may then resort to private insurance for coverage. We should establish a system of tax credits that will provide a tax deduction dollar for dollar for every business that provides individuals in need of health care or welfare some or all of the financial support they require. Taking the foregoing measures would likely cut by three quarters those dependent on the old systems and would likely reduce federal spending on Social Security and Medicare by $500 billion. We need to eliminate the troubled asset relief fund, saving $11 billion. We need to eliminate the President’s jobs initiative, saving $25 billion. We need to repeal Medicare Part D, the prescription drug benefit, saving $37.3 billion. We need to dismantle Homeland Security and the Transportation Safety Administration and rely instead on the CIA, FBI, and local law enforcement to defend the nation from those who would destroy it, saving $23 billion. The total savings from the foregoing measures would be $2.39 trillion.
We should eliminate the following departments: the Department of Labor (saving $117 billion); the Department of Transportation (saving $75.3 billion); the Department of Education (saving $71 billion); the Department of Commerce (saving $9.1 billion); and the Department of Energy (saving $8.1 billion). We should also replace most manned fighters and bombers with unmanned aerial systems and emphasize reliance on unmanned ground systems in place of manned vehicles, permitting a $100 billion reduction in the defense budget. The total savings achieved by eliminating these departments and reforming Defense expenditure would be $380 billion.
We should eliminate the following agencies and commissions: the National Aeronautic and Space Administration (saving $18.7 billion); the Food and Drug Administration (creating in place of FDA a statutory system for university-based centers to determine in a blinded fashion the safety and efficacy of drugs. all financed by application fees) (saving $2.4 billion); the Small Business Administration (saving $1 billion); the Occupational Safety and Health Administration (saving $573 million); the Corporation for Public Broadcasting (saving $445 million); the Equal Employment Opportunity Commission (relying on the Department of Justice and states’ attorneys general to enforce laws against discrimination in employment) (saving $350 million); the Federal Communications Commission (creating in place of FCC a system that causes the operating parameters authorized in FCC licenses to be rendered by operation of law the property rights of the licensees, ending FCC ownership) (saving $335.8 million); the National Endowment for the Arts and Humanities (saving $168 million); Environmental Protection Agency programs under the Clean Air Act, Clean Water Act, and Superfund (saving $150 million); the Consumer Financial Protection Bureau (saving $143 million); the Consumer Product Safety Commission (saving $119 million); and the Federal Trade Commission (saving $100 million). The total savings achieved by eliminating these agencies and commissions would be $8.3 billion.
Adding the savings from all of the foregoing measures yields a total of $2.78 trillion in cost reductions. That would bring about a present budget surplus of $1.5 trillion. With that surplus, we could eliminate the individual income tax (which brings in $1.1 trillion) and still have a budget surplus of $400 billion that can be used to pay down the national debt.
Achieving a balanced budget through the cost cutting recommended here has the doubly beneficial effect of also removing from the market an enormous amount of stultifying regulation, thus permitting greater economic activity that will result in higher levels of employment and greater tax revenues. Eliminating the personal income tax will restore to the average taxpayer $12,500 per year and will permit accumulations of wealth necessary for savings and investment, helping to reduce interest rates and encourage the development of new businesses and lines of business that will decrease unemployment. Eliminating the personal income tax would cause an economic boom in America the likes of which we have never before seen, catapulting the nation out of the present recession and averting a depression. Unemployment would go down substantially, perhaps bringing about full employment.
We should also place a moratorium on the creation of any new regulation from the federal regulatory agencies. Regulations impose a substantial tax on business and are unaffordable in an economy that has very near to no growth, an almost zero increase above last year in the Gross Domestic Product. We should also enact legislation causing all existing federal regulation to be rendered null and void within twelve months unless passed into law by Congress, thus forcing Congress to evaluate the relative worth of regulation and eliminate those strictures that encumber economic growth. That move would also substantively restore the non-delegation and separation of powers doctrine.
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This agenda would permit the United States to regain fiscal stability and enable our people to enjoy freedom and prosperity once again. Since the 1930s the nation has been on a wayward course of removing sovereignty from the individual and vesting it in government. We have created a federal government that is gargantuan and presumes to define who may enter the market and how it may function, far beyond the limited role of simply restraining people from injuring one another that was the Founding Fathers’ ideal. By using the present crisis as an opportunity to strip the federal government of those illegitimate powers while cutting it back to an affordable size, we can restore liberty and with it prosperity while simultaneously freeing ourselves and future generations from overwhelming debt and the risk of economic ruin.
© 2011 Jonathan W. Emord - All Rights Reserved