Blogs 2
Balancing The US Budget

With all the talk the candidates’ are doing, neither is specifying how they will
balance the budget. Its not because they can’t per se, its just that they know that
balancing the US budget means making some fundamental changes in our foreign
and domestic policies that will make it a harder sell to the American public. And
the truth is that the public would rather be lied to then accept the truth and realize
that taxes need to be raised and government aid needs to be lowered. Yes pay
more and get less. These changes require politicians to come together and do
what is in the best long-term interest of the country. I can’t tell you how many
companies that I have been to that are so dysfunctional because managers look
after their division’s interests before the companies. In order to have the best
efficiency and effectiveness one must put the company, or in this case country
before their own. Suboptimization of one part (state or area) comes at the expense
of the whole. Well the same is happening in Congress, just take a look at all the
pork barreling that’s going on. Pork barrel spending is often allocated through last-
minute additions to appropriation bills. So when you have a group of members of
Congress that wants to pass an important bill and they talk to other members to get
their support, or vote, the other members say that they will vote for the bill if they
allocate a few dollars to their local cause for building a local bridge or whatever
they need to show their constituents that they are looking out for their best interest.
But again it comes at the expense of the country. Before I talk about how I believe
we should balance the budget let me first break down the income and expenses of
our nation.

The Income Side

The debt side really doesn’t mean much unless you take a look at the income side.
Why? Because if someone says that you owe $100 grand, on the onset your would
think that you’re in trouble but if you make $10 million a year than $100 grand isn’t
that bad…. Now onto the federal income, or cash inflow. So where does this
money come from…in one word…you! But to be more specific:

·        $1,163 billion - Individual Income Tax
·        $869.6 billion - Social Security and Other Payroll Taxes
·        $370.2 billion – Corporate Income Tax
·        $65.1 billion – Excise Taxes
·        $26.0 billion –Custom Duties
·        $26.0 billion – Estate and Gift Taxes
·        $47.2 billion – Other
The IRS estimated that there were about $345 billion in uncollected taxes. The total
income side comes to 2.4 trillion dollars.


The Expense Side

Ok so where do we currently spend our money? Here is the quick current spending
breakdown:

21.41% - Social Security
16.19% - Defense Spending
14.63% - Medicare
11.79% - Unemployment and welfare
9.10% - Medicaid and other health related
7.55%- Interest on debt
3.67 %- Education and training
2.49%- Transportation
2.0%- Veterans' benefits
11.17%- Other (Administration of Justice, Natural resources and environment,
Foreign affairs, Agriculture, Community and regional development, Science and
technology, Energy, General government)

The Debt Side

The current gross national debt (as of August 2, 2008) is 9.5 trillion dollars. What
most people don’t know is that not all of this debt is paid for by public debt. Public
debt is when the government sells treasury bonds to the public. These bonds are
considered risk-free to investors because the government has a very small
likelihood of defaulting on paying the money back. Some of this debt is paid for by
the social security trust (Income from your FICA payroll taxes), this isn’t good
because this money is used for benefits and disability. So the money that should
be set aside for the massive amount of baby boomers that are set to retire over the
next 10-15 years.....well we're spending that money to pay for stuff now. The other
money used to pay for this debt comes from other government trust funds like FICA
and gas taxes, this too isn’t good because this money is used for Medicare and
highways (does the collapsed Minnesota bridge come to mind?). So to put this
debt into perspective we are indebted to the tune of 9.5 trillion dollars, we borrow
2.3 trillion from the Social Security Trust, 3.8 trillion other government trust funds
and the other 5.7 trillion from public debt or government bonds.  


My Balancing Act

Let me start by saying that my goal is not to merely balance the budget, meaning spend
exactly what we take in, but to spend less than what we take in. I want to eliminate the
US debt over the course of 15 years. In order to balance the budget it means that we
need to review our role as a superpower in the world. From a military stand point, it is no
longer in our best interest to continue many of our military outpost in the world. Its time
to let NATO be the international police. These out posts are expensive and the US has
always had this ideology that we are entitled to the world and spread democracy
throughout. All of this comes at a cost that is too much for us to pay.

Dynasties in the past have crumbled from taking this stance; the main reason is
because it is not a sustainable policy, meaning that it is not a policy that we can
continue forever because of its expense. The Roman Empire had a large following from
its citizens when it started to grow; however, as it grew older and more successful, its
citizens became more interested in their own pursuits. They stopped joining the
Empire's fight, and the Empire had to rely on barbarians to fight in the army. Empires
begin to fall when its soldiers do not necessarily share the values of the empire. No
politician wants to admit this because their opponent would dub them as being weak or
“soft”, and we as voters fall for this.

Americans (in general) weren’t concerned with the costs of the war because in the
beginning it didn’t directly affect them, well as the cost kept rising, the dollar kept falling,
the economy kept slowing, the financial realities of the war started to set in on America
at home.

With that being said I now turn to what these fundamental changes mean to our
collecting and spending of taxes. First I would look into phasing out the IRS. Only a
small "skeleton crew" would be left to collect the unpaid taxes of the past. I would
implement the fair tax idea found at www.fairtax.org. The idea behind this
'fair tax" is that you get rid of the annual taxes that people and businesses have to do at
years end and the tax is added to sales tax. So if you were to buy a loaf of break that
normally cost 1.49 plus the local/state tax of 6% it would now be an additional 23%. One
of the reasons for going to this method on the income side is to reduce the estimated
$265 billion in compliance costs, which is almost half of the current federal deficit of 450
billion dollars. This also ads some stability to the tax base as shown in the chart below.
The red dotted line is the current revenue versus the revenue from using the fairtax
method.












Assuming a tax revenue of 2.4 trillion a year (there would be no more tax gap, or money
not collected because of tax payers that don't pay because if they don't have the money
they wouldn't be able to purchase whatever it is that they are buying, thus I am
assuming that we collect 99.75% of taxes under this new method(companies are given
one quarter of one percent for the collection of taxes). The big changes are a 40%
decrease in defense, 40% increase in veterans benefits (remember 3 out of 4 homeless
people are veterans and thats a shame), 100% increase in education and training,
200% increase in debt and interest of debt, 20% decease in social security and 3%
decrease in Medicare. The key will be to pass a comprehensive health care plan that
will reduce the transactions cost in health care and to make medicine more affordable.
Adding funds to health care prevention is also a part of spending in this budget. This
budget would not make me popular in Washington but it will put America back on track
to being fiscally responsible and putting more emphasis on the long-term stability of this
country. The decrease in healthcare spending would also come with asking seniors to
hold off 5 more years on retiring. I know this is asking alot but we need some sacrificing
from everyone.

Our expenses would look like this under my watch:
15% - Social Security
14% - Medicare
14% - Debt and Interest of debt
11% - Defense
9% - Unemployment and welfare
9%-  Medicaid and other health related
8%-  Education and training
4%-  Transportation
4%-  Veterans' benefits
8%-  Other (Administration of Justice, Natural resources and environment, Foreign affairs,
Agriculture, Community and regional development, Science and technology, Energy,
General government)
My name is Jamaal Harless and I
approved this message.