Increasing the Debt is Malfeasance

If I may be permitted to be crass, let me offer a quote from an unknown source, “any dumb ass can get elected saying they will reduce taxes.” I will let you be the judge at how successful this campaign approach is.

In the United States, we have about $20.5 trillion in debt, which is roughly $63,000 per person and $170,000 per taxpayer. With an annual budget of about $4 trillion, we had a deficit in our most recent fiscal year ending September 30, of roughly $650 billion. The deficit is predicted to only go up, if we do nothing which will in turn increase the debt by an estimated $10 trillion.

With the President’s encouragement, Congress has proposed doing something. But, it is in the wrong direction. The Republican majority has passed a budget that will allow for net tax reductions in the Tax Bill being considered that will increase the debt by an additional $1.5 trillion over the next ten years.

Again, that is on top of an estimated $10 trillion increase. By my math, that puts us at $32 trillion of debt in ten years. There is no other way to say this. This is malfeasance. It certainly is not good stewardship.

The bipartisan Simpson-Bowles Deficit Reduction Committee completed their findings and recommendations in the fall of 2010. That earnest and diligent effort recommended $2 worth of expense cuts for every $1 of tax increases. We simply cannot cut our way out of the problem. But, this well done report was shelved.

I have heard several members of Congress over the years tout a balanced budget, but that is not enough. We actually need more revenue than expenses. That must include tax increases along with spending cuts. It is that simple. We cannot make the math work otherwise.

If we continue to hide from this problem, like climate change, it will become a major obstacle. We must act now and we certainly do not need to cut taxes and revenue. People will not like this answer, but someone needs to shoot straight with our citizens. We all need to pitch in before it is too late and we leave ourselves, kids and grandkids a mountain of debt.

There are several groups that have been raising this alarm for some time now. “Fix the Debt” and “The Concord Coalition” are just two. Please check them out and let your Congress representative and senators know this is too important a problem to make worse. If they say the taxes will pay for themselves, tell them it does not work that way and they should know that. Let’s fix the debt, not make it worse.

A few ideas on the US deficit and debt

I have written in the past few years (and weeks) about the US deficit and building debt as it is a ticking time bomb. We failed to reach a grand bargain early in the Obama presidency after the marvelous efforts of the Simpson-Bowles Deficit Reduction Committee. And, that is unfortunate as it was a terrific model to start legislative conversations. While I think the President has done a pretty good job, I see shelving the Simpson-Bowles work as his biggest failure.

Recently, I cited the sixteen myths about our deficit and debt problem in the US, that I gleaned from a bipartisan organization called Fix the Debt which can be found at http://www.fixthedebt.org. As with the efforts of Simpson-Bowles, reducing the debt cannot be done by panacea and will require bipartisan trade-offs that include a mix of revenue increases and spending cuts. The Simpson-Bowles recommendations blended about 1/3 tax increases with 2/3 spending cuts to make huge strides in reducing the debt.

It will definitely not be accomplished by tax cuts as proposed by the two leading GOP candidates for president, who former GOP Senator Alan Simpson said would so significantly increase the deficit, that there are not enough spending cuts to bring the deficit down. Both leading candidates tax proposals have been scored unfavorably by The Concord Coalition, another bipartisan deficit and debt reduction group in this regard, which is a concern, especially with one of the candidates touting how much of a deficit hawk he is.

Solving this problem will require trade-offs and both political parties will need to check their baggage at the door. From an exercise called “Debt Busters, An Interactive Budget Education Exercise by The Concord Coalition” which can be found at http://www.concordcoalition.org, here are few examples of what can be done. This is not a complete list, but is indicative of the kinds of options that could be considered. Note, the numbers reflect the impact on the deficit over the next ten years as measured by the Congressional Budget Office.

Spending Cuts

It should be noted the three largest areas of spending are Medicare/ Medicaid, Social Security and Defense.
  • Reduce healthcare spending by adding a public option to the Affordable Care Act (ACA), limiting the subsidies to people making 3 x the poverty limit or less (it is currently 4 x)  and limiting malpractice suits = $327 Billion deficit decrease
  • Reform Medicare Part B premiums to be 35% of the cost (closer to the initial intent of 50%) and convert federal share of Medicaid payments to a fixed annual block grant = $749 Billion deficit decrease
  • Reduce specified defense spending deferring development of a long-range bomber and number of ballistic submarines = $41 Billion deficit decrease
  • Reduce domestic spending by reducing the size of the federal workforce through attrition = $49 Billion deficit decrease
  • Increase Social Security retirement age gradually to age 70 and calculate cost of living adjustments based on consumer good price changes = $217 Billion deficit decrease

Revenue Increases

Increasing revenue is something that has to be considered. Strong opinions flavor this discussion, but this is where the exercise earns its keep, as it let’s folks consider the trade-offs and priorities.

  • Increase the Social Security Taxable Wage Base to $177,500 from its current limit of $118,500 which would draw in more FICA taxes = $672 Billion deficit decrease
  • Increase gas tax to 35 cents per gallon (or something equivalent in mileage tax) earmarked for Highway Trust Funding = $469 Billion deficit decrease

I purposefully stayed away from more tax increases, but reconfiguring our tax code to get more corporations to keep revenue taxed here and simplifying our individual tax code should be considered. Those ideas could be deficit neutral or deficit reducing, but we should think very hard about lowering tax revenue as we cannot afford it in my view and the view of the above bipartisan sources.

Please check out these websites and speak with your congressional representatives and senators. And, ask candidates pointed questions about their plans. Their failure to do something about an obvious problem, telling us what we want to hear via promised tax reductions, does not help us and is a reason our younger adults are frustrated. They will be the ones who have to bear the burden of our poor stewardship.

Fiscal FactChecker: 16 Budget Myths to Watch Out For in the 2016 Campaign

I have written several times that we need to do something about our debt crisis, as the problem is only going to get worse. I liken it to having a water problem in your house. If you don’t fix it now, it will get far worse later on.

In addition to The Concord Coalition who I have mentioned before, a sister nonpartisan group to their effort spawns from the Committee for Responsible Federal Budget called Fix the Debt. The Board of Directors of the Committee include some big names who served in various government, think-tank and business roles. The Fix the Debt group was founded by former Chief of Staff Erskine Bowles and former Senator Alan Simpson of the Simpson-Bowles Deficit Reduction Committee.

I will provide a link below, but wanted to summarize a piece called “Fiscal Fact Checker: 16 Budget Myths to Watch Out For in the 2016 Campaign” which is dated August 6, 2015. Those myths are:

Myths about the National Debt

  1. We can continue borrowing without consequences
  2. With Deficits falling, our debt problems are behind us (this is expected to reverse in 2015-16)
  3. There is no harm in waiting to solve our debt problems
  4. Deficit reduction is code for austerity, which will harm the economy

Myths about Taxes

  1. Tax cuts pay for themselves
  2. We can fix the debt solely by taxing the top 1%
  3. We can dramatically lower tax rates by closing a few egregious loopholes
  4. Any tax increases will cripple economic growth

Myths about Health Care and Social Security

  1. Medicare and Social Security are earned benefits and therefore should not be touched
  2. Repealing Obamacare will fix the debt
  3. The Health Care cost problem is solved
  4. Social Security’s shortfall can be closed simply by raising taxes on or means-testing benefits for the wealthy

Myths about easy fixes

  1. We can solve our debt situation by cutting waste, fraud, abuse, earmarks and /or foreign aid
  2. We can grow our way out of debt
  3. A Balanced Budget Amendment is all we need to fix the debt
  4. We can fix the debt solely by cutting welfare spending

In addition to the above, I wanted to reiterate two global trends that impact the US as well. First, per the World Health Organization, we are the most obese country in the world, as well as having the highest costing health care system in the world. The Affordable Care Act has helped, but we are over-tested, over-medicated and future train wrecks waiting to happen This will create continued cost pressures on Medicare, Medicaid and the subsidies under Obamacare.

Second, per the World Economic Forum, we are an aging population. We are not as bad off as places like Japan, Greece, Portugal, Spain, etc., but as we age cost pressures on Social Security and Medicare/ Medicaid will heighten. For people in their 60’s, the average cost of health care is roughly twice that of folks in their 30’s. The aging is actually hitting some of our states and municipalities with increased retirement liabilities relative to fewer workers being hired. Detroit, Stockton, and Birmingham have all filed for bankruptcy, with this being a contributing cause, plus states like Illinois, New Jersey, etc. are having significant retirement cost pressures.

Please check out these two websites and see who is involved in these nonpartisan efforts.

http://www.concordcoalition.org/

http://www.fixthedebt.org/

Also ask your Senators, Congressional representatives and Presidential candidates what they plan to do about this. Like climate change and the global water crisis, we can no longer wait on action.