The Budget Mess

As most folks in the US and elsewhere know the budget is a mess. If this were a normal company we would have replaced the management team a long time ago. Shareholders would not put up with this. The current problem is threefold:

1. Large unemployment reduces revenue

2. Large unemployment increases unemployment benefits

3. Massive increases in Government expenditures dwarf 1 and 2.

One need just look at the recent CBO report. Now we have a letter from a dozen or so former CEA heads. A real mix of republican and democrats including Romer who was at the heart of this mess. Strange to see here there since she most recently wanted us to blow through a few more trillion. They state: (see Politico)

The commission has proposed a mix of spending cuts and revenue increases. But even this requires  cuts in useful programs and entitlements, as well as tax increases for all but the most vulnerable. 

The commission’s specific proposals cover a wide range. It recommends cutting discretionary spending  substantially, relative to current projections. Everything is on the table, including security spending, which has grown rapidly in the past decade. 

It also urges significant tax reform. The key principle is to limit tax expenditures—tax breaks designed to encourage certain activities—and so broaden the tax base. It advocates using some of the resulting revenues for deficit reduction and some for lowering marginal tax rates, which can help encourage greater investment and economic growth.

 Now program must be cut. Take broadband to the moose. That is a waste of tens of billions. Then look at the other messes. Yes Medicare can be modified, namely increase the percent from 3% to 4% and reduce benefits pro rata to income, and increase the annual out of pocket and eliminate unnecessary treatments. Tax the hell out of carbs since you cannot tax people by the pound or BMI.

Social Security should be pegged at starting at say 10 years before average death, namely with a remaining rolling 10 year remaining life span for a retiree, yes women wait until later.

Reduce Corporate tax to attract business. Increase immigration of productive immigrants.

The list goes on! But stop the spending. They continue:

We know the measures to deal with the long-run deficit are politically difficult. The only way to accomplish them is for members of both parties to accept the political risks together. That is what the Republicans and Democrats on the commission who voted for the bipartisan proposal did.

It takes leadership, from the White House, not golf games!