Thursday, January 03, 2013

A Better Approach to Balancing the Budget

The biggest problem we face in trying to balance the budget is that neither political party actually puts a high value on balancing the budget. The Republicans like to talk about deficits until they are in power, at which point the Dick Cheney "deficits don't matter" philosophy takes hold and deficits explode. The Democrats want to preserve "social safety net" programs to a much greater degree than the Republicans, but left to their own devices the Republicans are more apt to expand those programs than to shrink them. When it comes to the major expenditures of the government, neither party is willing to propose cuts that have any chance of balancing the budget.

Our nation's deficits are primarily driven by health care costs. Once the recovery is complete, tax revenues will rise to historic levels and much of the annual deficit will go away "all by itself". If we could reduce our nation's healthcare expenditures to those typical of other nations, the deficit issue would largely vanish. But a Congress that chooses to tie Medicare's hands in negotiating bulk discounts in order to keep drug costs (and profits) high is not likely to address health costs in a meaningful way.

Let's approach the deficit from a different angle. Rather than talking about hypothetical (and sometimes imaginary) spending cuts or loophole closures, lets look solely at revenues. That is, let's have a discussion about what taxes we might create and raise in order to balance the budget with the least possible disruption to the economy. Such tax increases can be postponed until the economy is in a normal state - and perhaps avoided at that time - but if the spending cuts and tax loophole closures aren't there or if Congress isn't willing to implement them, the solution must come from new revenue.

Once the sources of additional revenue have been identified we can have the discussion: Do we in fact want the budget to be in perfect balance and, if not, how much new debt can we reasonably accrue and sustain? Are the new taxes and tax increases the best, most cost-effective, least painful and most efficient means of balancing the budget? If not, what spending cuts or loophole closures might be substituted?

If John Boehner believes a word of his statement,
The American Dream is in peril so long as its namesake is weighed down by this anchor of debt. Break its hold, and we begin to set our economy free. Jobs will come home. Confidence will come back.

We do this not just to boost GDP or reduce unemployment, but to secure for our children a future of freedom and opportunity. Nothing is more important.
He will be willing to live up to those words by putting aside his lesser concerns - including his party's pledges to special interest groups, his enforcement of the Hastert Rule and contempt for passing budget legislation on a bipartisan basis, his lust for special interest money, and the like, and get the job done by any means necessary. Personally, I don't think he believes a word of it, but I would love for him to prove me wrong.

Nothing should make the budget picture more clear to the average American than, "This is what your taxes will look like if we maintain current expenditures while balancing the budget." If the public says, "Then that's what we'll have to live with," then that's the answer. If the public says, "We prefer the cuts you propose as an alternative," then that's the answer. If the public says, "We prefer to run massive deficits," then its up to Congress to determine the extent to which they're willing to balance the budget despite those popular sentiments, and to take responsibility for the decisions it makes.

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