"This fight for America’s soul must occur now" (UPDATED)

By Tom Flake

If we are going to do anything about the crushing debt we are leaving our children and grandchildren, why are we accepting Boehner's boner?  The $38 Billion cut is about two days spending.  Ryan’s proposal would cut $5 Trillion over ten years. (an average of $50 $500 Billion per year)  The President’s speech scheduled for tonight, has been reported to contain $4 Trillion in cuts over ten years. (an average of $40 $400 Billion per year) All of these efforts fall short and are paltry in comparison to what we as a country need to do before we become Greece or Ireland.  We need to get to a balanced budget, this means cutting 40% of the Federal Budget.  The $38 Billion came almost exclusively from "discretionary" spending in the recent congressional deal.  We need to cut $400 Billion this year, and $400 Billion next year and $400 Billion the year after and so on for five years. Because the cut in the first year repeats year after year and is added to by the cut in the second year, and so on, this represents a cut of $22 Trillion over ten years.  This really puts in perspective how insignificant and inadequate the cuts put forward by both the Republican’s and the Democrat’s really are. But this is what is really required to get to a balanced budget and begins to allow for us to pay down our debt.  To be sure some of those cuts need to come from discretionary spending, but they primarily need to come from Medicare, Medicaid and Department of Defense spending.  Nobody's plan (that I’ve heard proposed) comes close to this, but this is what is required.

Why is this feasible?  The private sector economy is creating about 200,000 jobs per month right now.  The cuts to the Federal budget that I would propose will necessitate laying some civil servants and some contract employees off.  If the number of employees required to be laid off reached 1MM, the private sector economy would absorb those people in about 5 months time.  From a smaller government is better government perspective, it would be a net gain to the economy from a tax base perspective.  The Federal government would stop competing with private industry for the $22 Trillion which would flow into private sector investments over the ten years.  That money would naturally flow to small business loans, home loans etc.  It would make everything in the private sector much easier, which in turn would create more jobs, which would grow the tax base, which might allow more government spending in the future.

Why now?   The political will is there now.  If the Republican's fail to seize it now, not only will we be another $1.7 Trillion in debt, the political tide that swept the Tea Party Republican's to power will ebb.   The incumbent Republicans and Democrats vowed to co-opt the Tea Party Republicans we sent to Washington in November.  Remember that?  I believe they will be able to after some period of time.  So this fight for America’s soul must occur now, while the idealist in among the Tea Party swing a big bat and before they are co-opted.

Currently our government is insane.  We borrow money from China to give arms and armament to Israel so that they can attack/defend against Lebanon/Hezbollah.  Once the attack is over we offer assistance to Lebanon/Hezbollah. Also with money borrowed from China.  Why don’t we simply, NOT give money to Israel and NOT give money to Lebanon?

The insanity doesn’t end there.  We recently pledged $2 Billion in assistance to Petrobras, the largest oil company in Brazil, to develop oil wells in the gulf of Mexico.  Keep in mind, we don’t have $2 BB, what that means is that we borrowed $2 Billion from the Chinese to give to Petrobras. (Welfare for American oil companies out, welfare for foreign oil companies developing wells in our territorial waters, in) But it gets better.  Petrobras has a contract with China to sell it ALL of the oil it produces! Let me translate in case you missed that.  America borrowed money from China to give to Petrobras to develop oil wells in the Gulf of Mexico to so that the oil can be sold to China!

The insanity reaches down into the typical and mundane.  Currently civil servants pay taxes from their pay which came from the government, back to the government, so that other civil servants can count and audit the amounts paid.  Seems like there must be some overhead in there somewhere.  Why not reduce Civil Servant pay by 20% and them exempt them from Federal income tax.  Reduce the IRS workforce by the percentage that civil servant represent in the economy and save money coming and going?

Politicians would position solving these problems as hard.  It isn’t hard, spending this much money took George Bush and Barak Obama three years.  It shouldn’t take much more than three years to get us to balance.  Along the way we will have to have meaningful discussions about the rightful role of government.  We will have to laud entrepreneurs and private enterprise.  We will have (some extent) shame civil servants.  We should never again have a President say that our best and brightest should go into public service.  I want our best and brightest to go into private industry.  I want them to make a boatload of money and I want them to create thousands of jobs.  In order to realize this vision, we have to change the debate.  Cuts must be ramped up several times, some taxes may need to be increased and the private sector should be espoused not the public sector.

UPDATE (By Rick): Mr. Flake's math was corrected above... Mr. Flake continues his arguments in the comments below.

Comments

[BroKen]

5 trillion divided by 10 years is 500 billion, not 50 billion. Sounds like Ryan's plan is about right.

[Tom Flake]

BroKen,

You are correct that $5 TT divided by 10 years is $500 BB. I respectfully disagree with the assessment that Ryan's plan is "about right". The calculations are complex, but there are several variables. Please take a look at when his budget gets to balance (2063). Then take a look at what the debt will be by that time ($28 TT). Then take a look at what percentage of the national budget interest payments will be. (About $1 TT per year). If you believe that paying $1 TT per year in interest to people who compete with us in various ways is a good thing and likely to make our grandkids more competitive than we are, then I simply don't agree.

I would take the argument a step further. As we shirk the tough decisions and put into office politicians who would steal our children's legacy and put them into paupers prison, we are complicit.

Do you remember Graham/Rudman/Hollings? That was our parents attempt to balance the budget, in fact, it simply put their debt onto us. I agree with those who are espousing a balanced budget, I disagree with Paul Ryan (and you) when you say that getting to a blanced budget can wait until 2063 when the debt is twice what it is today and interest payments are 2-3 times what they are today.

[BroKen]

Honestly, I haven't read Ryan's plan. I was just taking your statement, "We need to cut $400 Billion this year..." and applying it to the $500 billion per year of the Ryan plan. That seemed about right.

I see you want to keep cutting and cutting, five years to cut $2 trillion from the federal budget expenditures until the budget spends only $1.7 trillion per year (after 2016, right?) That might be necessary. But I doubt that it is politically doable. It might not even be prudent... (not at this juncture!)

I know Dave Ramsey advocates rice and beans for people facing staggering debt. I suspect there would be rioting in the streets if Washington attempted to end the "bread and circus" so quickly. It took us quite a while to get in this mess. It will probably take us even longer to get out.

[Tom Flake]

Current receipts to the Treasury are roughly $2 TT per year. Current practice is to borrow another $1.5+ TT. Addmitedly the fifth year cut may not be necessary or it may not need to be a full $500 BB. By that time the debt will still be close to
$17 TT. (14.25 +1.25 + .75 + .25 = $$16.5 TT)
The Ryan plan doesn't get us to balance until the Federal debt reaches $28TT. I would simply advocvate preparing the country for the worst case scenario and then not have it come true rather than do what Ryan and Obama are doing (admitedly to different degrees) which is to keep the party going at the expense of our grandkids.