Recently, I came across a document prepared by the Congressional Budget Office, which listed 85 different ways to raise revenue and cut federal spending, and so my question is why the Executive and Congressional branches of government have not read this document or are incorporating it into their current budget discussions? There is no question that we are at a very dangerous inflection point with respect to our national debt, and the fact that the current budget negotiations are targeting even larger deficits over the next ten years is threatening the validity of the U.S. dollar as the pre-eminent currency in the world and the “American Way of Life”.
The water-drip devaluation of the dollar since the first of the year has negative inflationary consequences for the average American and threatens our overall standard of living. The Congress and President may not know it yet, but we are in the fiscal fight of our lives, and all sectors and beneficiaries of Federal largesse will have to bear pain if we want to preserve the purchasing power of the U.S. dollar. I do not think it is hyperbole to compare this moment to other watershed events in American history where Americans buckled down, accepted sacrifice, and we made our way forward. We will have to do so again.
Some of the more financially impactful ideas put forward in the CBO document which would increase revenue and cut federal spending include: 1) Caps on Federal Spending on Medicaid, 2) Increase Premiums for Parts B and D of Medicare 3) Reduce the Department of Defense Budget 4) Increase Individual Income Tax Rates, 5) Eliminate Itemized Deductions 6)Tax Social Security the Same Way that Distributions from Defined Benefit Pension Plans are Taxed 7) Severely Curtail/Eliminate All Business Tax Credits 8) Increase the Payroll Tax Rate for Medicare and Social Security and Increase the Maximum Taxable Earnings for Social Security Payroll Tax 9) Impose a Tax on Greenhouse Gas Emissions and Financial Transactions and 10) Increase Corporate Taxes by 1%.
If a “State of War” is declared against the national debt, and the above ideas are enacted, resulting savings would amount to over $8 Trillion dollars, and we would actually be in a state of surplus at the Federal level.
We don’t need to cut $8 trillion, but we do need to cut $2 trillion or something close to that immediately to convince the world’s financial markets who are currently financing our debt that we are serious about ending our spendthrift ways. All Americans will have to endure some financial pain, but this is the only way that we can convince ourselves and the world that we are serious about preserving America’s financial legitimacy. It can be done!
Mike Meehan, CFA, MBA
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rayfusco68
The following changes can reduce costs while increasing government services:
Remove the cap on earnings for social security FICA which is currently 12.4% half from individual paychecks and half from the employer. This would increase Social Security revenue by over 1 Trillion dollars. This amount would not be needed so the FICA should be reduced putting more take home pay in workers paychecks and revenue in the employers’ business. The increased earnings would be subject to federal taxing adding revenue to the general fund but there is still a net gain for the employee and business.
Eliminate Medicare advantage plans. Medicare advantage plans are for profit insurance companies that cost Medicare more than traditional Medicare while lowering the quality of care.
Move Medicaid eligible people into Medicare and close that program. This will reduce both a State and Federal government expense. Medicaid is paid for 50% by the Federal government and 50% by the State.
Make all Medicare recipients eligible for the federal government's 340-B pharmacy program. This would dramatically reduce the cost of medications for Medicare recipients. This would eliminate for profit part d Medicare plans.
Move part B Medicare into part A, have one plan. This eliminates the cost of for profit part B supplemental plans.
Allow individuals and businesses to purchase Medicare plans directly from the government. The plans would be purchased with a 3% margin that would be used to offset FICA rates.
Make every bill passed by congress stand alone, eliminating the practice of tacking on irrelevant bills that would not pass on their own. Good bills should not be held hostage by bad bills.
Tuesday, June 17 Report this