Reining in the debt and should there be more taxes – My thoughts

As the political games continue in Washington, us poor old Americans continue to be lead around like sheep. A Congress calling for real cuts and getting $38.5B only to later learn it really was only $350M, the rest were things we were going to do but decided not to.

Also, as gas prices sky rocket, hitting the average American harder than any other tax promulgated from the political class, Congress decides to play sleight of hand and calls for hearings to see if “evil speculators” are causing this latest rise, when any economically educated, CNBC University, person can tell you that since oil is priced in dollars and the dollar is collapsing, dollar denominated commodities will rise in price. Look at gold, copper, cotton, etc. Yes, some of the excess price jump is due to concern over future supply, but that wasn’t the case two years ago when the price started its’ climb…it is the debt stupid. Everyone is questioning the solvency of the US economy and it is being reflected in the value of our currency.

Sure the easy answer, and the one the Obama Whitehouse cannot make, is to exploit ALL of our available domestic sources of energy…I heard yesterday that the Alaska Pipeline is operating at only 1/3 capacity, what a shame.

However, while that is most definitely something we should do, unless we get control over the debt we will be forever in the downward spiral. We were able to avoid the effects of it initially because we were deemed as less risky than the problems in Europe, in essence the queen of the pigs, but since then Europe has taken the bitter austerity pill, now the spotlight is on us.

So what to do? When your household has tapped out the credit card, do you request raising your credit limit and continue to make the minimum monthly payments, no you look hard at your budget and get rid of things that you may like but cannot afford right now. You may need to still ask for that limit extension just to have an emergency buffer, but you cut your budget and start paying down your bills. You also, start putting some money away for a rainy day…pay yourself first as Suzie Orman always says.

So how does this play at a Washington scale? I think Congressman Ryan and his Committee have made a good start but there are several additions I would add.

1. Make the Social Security Trust Fund into a “real” trust fund and get the money out of the grubby little hands of Congress. Pass a Constitutional Amendment creating this that is very actuarially tight , so no assumptions on unrealistic returns, and insure that it is fully funded now and forever.

2. Real healthcare cost reform. Obamacare started out talking about saving money, but for the sole purpose of providing healthcare to everyone. Let’s get back to cutting healthcare costs…see my previous thoughts on this here,

3. Start to eliminate Federal Agencies and combine functions together. We do not need the National Institute of Health, or the Department of Education, or the EPA, or NASA. The functions can all be performed by the private sector. Also, there seem to be many areas where there is overlap, look at Intelligence, with the CIA, NSA, DIA, or in law enforcement, with the FBI, the Secret Service (non-presidential details), and ATF. Combine them so you bring down the number of bureaucracies.

4. We need to do more to pay down the debt. I would propose setting up a completely ringfenced fund, that Congress cannot touch, where every dollar is used to pay off the principle on the debt. This would be funded by a separate voluntary line item on your tax returns and a mandatory 3% surcharge on incomes over $1M that sunsets when the debt principle is paid off. (I hate the thought of any more taxes but I think we are at a point where it is unavoidable, I just do not want to give that money to Congress to be wasted).

I believe the time for half-measures is over.  We need to get our house in order for the sake of our daily existence both for ourselves and our future generations.  I do not believe the political class will do any of this without being pushed kicking and screaming.  Also, while there are things that I have a hard time stomaching, like raising any taxes, I believe we must act and decisively.  If we do, I believe you will start to see results almost immediately when you fill up at the pump.

My 2 cents


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One Response to Reining in the debt and should there be more taxes – My thoughts

  1. jimmyc1955 says:

    In a world where politicians are intent on guiding the nation to economic health – this plan makes sense – unfortunately our politicians are motivate by campaign dollars rather than service for their country.

    I am convinced we need a second election, just like 2010, that will re-enforce to every Washingtonian that the “fly over country” is serious and watching. For the first time in a very long time the electorate is doing their job – running the nation.

    With respect to Social Security – to be blunt – there is no money in there now. What is in there is a huge pile of IOUs from the treasury department to the SS fund. Those IOUs are so worthless that government accountants won’t put them into the asset column in our national worth. Simply put – the poorest portion of the government owes the neediest entitlement ever dime the entitlement is supposed to have. There is nothing to ring fence – and there is nothing in the treasury to pay those IOUs – hence the massive borrowing. Frankly I would love to prosecute every politician who voted for budgets that took the money from SS to fund more pork for theft of government services – but we don’t have the money to pay the lawyers.

    We will need to raise taxes AS we cut spending – brutally I believe. And until we have a congress with the courage to do what is right rather than spend all its time positioning for the next election (which is all these bottom feeding, posturing, pusillanimous excuses for leaders we elected do) we will not directly attack this issues. The likes of John Bohner who tells us one thing and then pulls that BS of a “cut” has got to go. That lying just has to end.

    I will vote for the first politican who will tell me, in plain, direct language what our REAL problems are – I don’t even want the solution – I just want somebody honest enough to say what nobody wants to hear.

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