Deficits matter

"Reagan proved that deficits don't matter."
--Karl Rove

Deficits do matter. They are not the end of the world. Since 1980, Republicans have run up huge annual deficits. Except for the last two years of Bill Clinton's presidency, when the federal government had a budget surplus and began paying down the national debt, Democrats haven't been able to offer a coherent solution.

There are only two ways to reduce the national debt: raise taxes or cut spending. Most politicians would like to promise us lower taxes without significant cuts in government services. There is no such animal.

Sunday, August 7, 2011

The T.A.N.S.T.A.A.F.L. Pledge for Democrats

Democrats are missing a great opportunity. If they could stop screeching about all the money being spent on lying campaign commercials by the Koch Brothers, by the Club for Growth, by the United States Chamber of Commerce, by Karl Rove, they could be winning votes that no television campaign commercials could take back. How? By telling voters the truth about the budget, the deficit, taxes and the national debt. This is one draft of what they might say. How many will have the courage to take this pledge?

All parties, and all interest groups, have been afraid to tell the American people the truth, the whole truth, and nothing but the truth, about spending, deficits, and debt.

There really ain’t no such thing as a free lunch.

Any government function or program worth having, must be paid for in revenue.

Every tax cut must be paid for by cutting government operations.

The national debt is an obligation, which must be paid, with interest. Once, paid, the revenue we are paying out as interest could be used to benefit the American people instead.

Deficit spending as a permanent budget measure is not sustainable.

When the United States of America borrows money, somewhere in the world there must be someone with accumulated savings to lend, either within the nation, or outside it. Whoever that is, whether American banks, private investors, or foreign banks, acquires an unholy influence over the policy of our government. Sooner or later, “the markets,” which means people with money to lend, begin dictating policy.

It is time to stop caterwauling about “no cuts” on the one hand, and “no tax increases” on the other hand. We cannot have our cake, and eat it too, on either end of that debate. What we want, we must pay for. What we don’t want to pay for, we cannot have.

There are times when borrowing is a prudent or necessary course. The United States of America could not have fought or won World War II without deficit spending, without borrowing, without massive sales of U.S. savings bonds as well as sale of Treasury bills.

When the entire economy is collapsing around us, deficit spending can cushion the impact on working families, and on the entire economy, to get us through the worst. Creating and retaining jobs is sometimes a higher priority than a balanced budget. But, that option will not be available, if we fail to pay down the debt, and save for a rainy day, during good times.

In 2000, the U.S.A. had a budget surplus, and was beginning to pay down the national debt for the first time in decades. We were doing something right.

By 2003, our congress and president offered “tax cuts” to “give the surplus back to the people” when The People were in hock for $5 trillion of debt. Our national government then proceeded to finance two wars by borrowing the money, much of it from overseas banks. There was no attempt to invite civilians to share, at least financially, in the sacrifices of soldiers risking their lives on the front lines. Buy savings bonds? Raise taxes to pay for body armor? Not on our radar screen!

In 2008, when we were on the edge of Great Depression 2.0, we had no surplus, our debt had doubled, and we had to add still more debt to stave off imminent disaster.

No matter who is responsible for what, we must bring our national budget into balance, and start paying down the $15 trillion debt we will certainly owe. That will be painful, and the pain must be distributed carefully, but everyone must share in the sacrifices.

Accordingly, we pledge:

  1. To vote for a balanced budgets beginning with the fiscal year that starts in October 2013. All spending that a majority of the American people are not willing to do without, will be paid for by higher tax rates; any taxes a majority of the American people are not willing to support, will be balanced by cutting programs.
  2. To keep the budget balanced for the next five years thereafter. We will never again finance “tax cuts” by borrowing the money from the National Bank of China.
  3. To borrow money on the credit of the United States as a specific measure to meet short-term cash flow requirements (as any business or bank does, and as families do when making prudent use of a credit card), or, for longer periods of time, to meet specific crises necessities, or long-term infrastructure development, not as a chronic means of financing the federal budget.
  4. To simplify the tax code, eliminating most credits and exemptions, while exempting from tax the first $20,000 of income for all Americans, and progressively taxing as necessary income above that level.
  5. To provide for prudent tax deductions that give the private sector its due, but not a blank check, which will exempt from taxation income that, in the same year it is earned, is invested directly in NEW TANGIBLE capital, creating new enterprises or expanding existing enterprises, producing new or expanded goods and services, and necessitating the long-term hiring of new employees: in short, investment which genuinely creates new jobs. Money used to purchase existing facilities or shares of stock will NOT be exempt. It is the net public benefit that merits consideration of exemption from income tax.
  6. To examine each existing federal program and office de novo, considering what purpose it serves, whether that purpose is valid, and is still being served, and whether it is worth continuing to pay for.
  7. To attach no earmarks to budget appropriations for the benefit of our own state or district, nor try to shield our own state or district from the impact of reduced government spending, which would merely shift some of the pain to some other of our fellow Americans.
  8. To require each lobbyist or advocate for any measure that requires government expenditure to provide a budget, and a proposal for how revenue will be raised or other costs reduced, as a condition of receiving consideration on any legislation. In short, if the lobbyist hasn’t done their homework, including an honest presentation of fiscal impact, we will not speak to them.
  9. Once the budget is balanced, to impose a special five year surtax beginning in 2013 dedicated to the specific purpose of paying down the national debt, as follows:
1% of all Adjusted Gross Income up to $50,000, 2% of all Adjusted Gross Income from $50,001 to $200,000, 3% of all Adjusted Gross Income from $200,001 to $500,000, 5% of all Adjusted Gross Income from $501,000 to $1,000,000, and 10% of all Adjusted Gross Income above $1,000,000. Reallocation of these funds to any other purpose shall require UNANIMOUS consent of both houses of congress.

  1. To allow the temporary tax reductions of 2001 to expire, EXCEPT for the measure creating a bracket taxed at 10%, rather than 15%, which will be made permanent.
  2. To approve new measures only if they are revenue neutral, or if the legislation includes explicit provision for raising the revenue necessary to pay all costs, OR, to cut an equal amount from another expenditure.
  3. To support prudent infrastructure development, which is necessary to sustain economic growth, or to sustain the life of American families, with careful attention to how each item will be paid for. Long-term bonds may and will be authorized for this purpose, in the same manner as state and local governments, with specific allocations for how and when they will be repaid.
  4. In times of economic crisis, if any financial institution is in fact “too big to fail,” such that default and bankruptcy would cause massive unemployment far beyond the individual enterprise, any federal rescue will treat such enterprises as having failed the test of free enterprise, and become wards of the state. They will be broken up into pieces that are NOT “too big to fail,” and sold off to compensate taxpayers for any investment temporarily necessary for the good of the people of the United States, to succeed or fail on their own dime in the future.
  5. We will not support an amendment to the federal constitution to require that each, every, and all federal budgets be balanced. There are times when the flexibility to borrow is appropriate, and beneficial to the long-term interests of the American people. There are times when the private sector does not create jobs on its own initiative. In those times, jobs are often a higher priority than balancing the federal budget. This flexibility can also be abused. The best way to prevent abuse is vigilant supervision by informed citizens, not a rigid constitutional requirement.
  6. Whenever new programs, tax cuts, or tax increases, are considered, we will present to the American people in general, and to our own constituents, at least three simple, informative options:

Plan A: What a new or expanded program will deliver for the people of the United States, how much it will cost, and what new tax revenue (or borrowed funds to be repaid from future tax revenue) will be required to fund it.

Plan B: What the government can honestly pay for if we balance the budget with no change in the tax base or tax rates.

Plan C: What programs will have to be permanently terminated or substantially reduced in scope in order to provide a substantial tax reduction without deficit financing.

We will neither raise nor lower taxes for the sake of raising or lowering taxes. When taxes are cut, we will provide specific information to the voters on what government functions we reduced or terminated in order to save money. When taxes are raised, we will provide specific information to voters on what the money is being used for, and why we thought it worthwhile. Voters, as always, will judge the results every two years.


Social security is not part of the general budget of the United States, nor is it an obligation on general tax revenues. Social security is, and always has been, sustained by a separate payroll tax, paid into a trust fund.

In social security, as in the general budget, there ain’t no such thing as a free lunch. The total money paid out in social security checks cannot exceed the total money paid in from the social security payroll tax and self-employment tax.

We cannot retire earlier, live longer, and expect to keep social security payments at the same level. If we pay in for fewer years, while looking forward to a nice check for more years, the money will run out. When it is gone, it is gone. It does not grow on trees.

Accordingly we pledge:

  1. To remove the cap on social security payroll tax, which applies the tax only to income under $105,000. All earned income should be subject to social security tax.
  2. To continue measures to encourage voluntary later retirement, by decreasing monthly payments for earlier retirement, and increasing monthly payments for later retirement.
  3. To provide for increase in the social security payroll tax when the trust fund falls below a level necessary to sustain payments for the next fifteen years, allowing for anticipated revenue during that period.
  4. To provide for benefits to be available five to ten years earlier to individuals who have spent the previous fifteen or more years, or at least two thirds of their working years, in physically taxing and hazardous occupations, including but not limited to underground mining, construction, agricultural harvesting, and direct physical contact with poisonous chemicals.


Medical care represents the largest single segment of federal government expenditure, and the portion of the budget that is growing most rapidly.

It is sheer hypocrisy to call for reduced spending and lower taxes, while denouncing any effort to control spending for Medicare and Medicaid as “death panels.” Either the money is worth spending – in which case it is worth paying taxes for – or it is not worth spending. There is no such thing as high spending, on low taxes, with no deficit. The “incredible shrinking voucher” is no more and no less than a Silent Death Panel, an automatic one, saving its author from acknowledging the blood on his own hands.

We need to control costs in a manner which is even-handed, and allows for maximum individual choice, avoiding the onerous burden of submitting every medical decision to bureaucrats in either the public or private sector to second-guess individual decisions and medical diagnoses.

The measure which will generate the most substantial cost savings in the immediate future is to provide that when a patient is chronically or permanently incapable of giving informed consent, then, and then only, no Medicare or Medicaid funds will be paid for any form of invasive surgery, artificial heart-lung machines, dialysis, or specialized long-term pharmaceutical treatment. Palliative treatment, pain control, and topical antibiotics should still be covered. There will be no restrictions on private or charitable payment for any procedure at any time.

If necessary, the next measure should provide that any treatment costing more than $10,000 should have a reasonable probability of prolonging life for at least one year, or of alleviating a painful or debilitating condition (that is not life-threatening) for at least six months, in order to qualify for Medicare or Medicaid payment.

More important, and more difficult, but worth the effort, we must provide incentives to restructure medical care delivery, so that every patient has a primary care physician, and so that preventive care is more rewarding to the individual practitioner than piling up the largest number of billable procedures when a patient is ill.

These prudent measures – not hysterical half-baked caterwauling about cutting taxes and spending – will restore our nation’s long-term fiscal stability, create and sustain jobs, bring the national budget within our national means, while fulfilling our constitutional duty to “form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity.”

Tuesday, February 22, 2011

All Health Care Has to be Paid For

One of the great American myths is that we can have something for nothing. Sarah Palin indulges in it, so does Nancy Pelosi. Voters demand it of them. What is missing from the health care debate is, it all has to be paid for by someone.

If every visit to a doctor's office is covered by medical insurance, then monthly premiums have to include enough money to pay for the office visit, and the lab tests. INSURANCE originally meant a small payment to share the risk of an unlikely event. If one out of every one hundred people will have a heart attack, in thirty years, then the premiums paid by one hundred people over thirty years have to be enough to pay for the full cost of treating one heart attack: ambulance, emergency room, CCU, ICU, hospital bed, medications, lab work... We don't know which of those 100 people will get the heart attack, so everyone pays 1/30th of 1% of the estimated cost each year, and whoever is "the lucky one" is covered.

If it doesn't come out of premiums, then it is paid for out of pocket by patients at time of service (deductibles and copays), from tax revenue, or medical staff pay for it by taking a cut in their compensation, or the insurance company eats the difference. It is in the nature of insurance companies to charge premiums that provide them more revenue than the total cost of all the bills they pay. That's how they make money. If they are making too much, we need to know the numbers.

If Sarah Palin chooses to denounce every cost-saving on "end of life" care as "death panels," she should be honest about the burden she is asking taxpayers to carry. If Barack Obama wants to outlaw lifetime caps on medical insurance coverage, he should offer facts and figures on how much this will cost insurers, and whether their current operating profit is larger than the new costs. If the money isn't there, how much are taxpayers on the line for? Maybe it is the right thing to do, but let's be up front about what we are each willing to pay.