As disaster draws near, the two crooked political parties that are controlled by corporate and banking interests spout their usual mantras. The Democratic solution is to tax the “rich” and spread the wealth around by squandering our tax dollars on stimulus programs, jobs programs, welfare programs, foreign wars and bailing out their banker masters. The Republican answer is to reduce taxes on the “rich”, boost defense spending, issue tax rebate checks, and frittering away our tax dollars on foreign wars, while bailing out their banker masters. The differences between the two parties are inconsequential. Neither party has ever reduced government spending and neither party will ever take on the military industrial complex or the entitlement system. These dishonest politicians have devastated the American dream. Sound fiscal, monetary and tax policy were discarded in 1913 with the creation of the Federal Reserve and the institution of the income tax. Politicians were given a green light to spend taxpayer money and borrowed money in order to get re-elected. The Federal Reserve has provided the liquidity by inflating away 97% of the value of the USD.
The chart below detailing the FY10 Federal budget clearly shows the dire circumstances we are in today. Mandatory spending on Social Security, Medicare, Medicaid, interest on the debt, and other social spending already exceed $2 trillion per year. These mandatory programs are sitting on the launch pad like the space shuttle ready to blast off into the stratosphere. When these costs blast off, with the mass retirement of Baby Boomers, we all know what happens next.
Military spending, and running all the other ineffectual government agencies total $1.5 trillion per year of “discretionary” spending. A rational reality based civil servant would look at this and honestly tell the American people that massive cuts in defense spending and social programs is absolutely necessary to save the country from bankruptcy and decline. If you are waiting for President Barack Obama to go on national TV and speak these words to the American public, you probably believe the new healthcare bill will reduce the National Debt, improve your healthcare, and reduce your premiums. Democrats and Republicans continue to live in their Washington DC fantasy world where increasing taxes will miraculously solve our problems according to Democrats and decreasing taxes to stimulate growth will solve our dilemmas according to Republicans. Both are delusional and dishonest.
Creating a New Model
"You never change the existing reality by fighting it. Instead, create a new model that makes the old one obsolete."
R. Buckminster Fuller
There is zero chance that my proposed modifications to our financial system would ever be implemented by either one of the existing political parties. There is a long shot chance that a 3rd party, using this new model as their platform, could get elected and implement these necessary changes. This is highly unlikely given that 50% of the country pays no taxes and sucks off the teat of state. These proposed alterations would require shared sacrifice, a decline in our standard of living, a conclusion to the welfare state, and an end to our colonial empire. Since no one in this “me first” selfish society would willingly vote for such a transformation, the existing corrupt structure will need to give way first. At that point, reasonable people will have a chance to choose a rational sound economic model. We may not have to wait long for our chance.
Taxing Situation
“When the federal government spends more each year than it collects in tax revenues, it has three choices: It can raise taxes, print money, or borrow money. While these actions may benefit politicians, all three options are bad for average Americans.”
Ron Paul
The Federal government has chosen all three. A family or business recognizes that it needs to spend less than its income in order to prosper over the long-term. The U.S. government is dependent upon individual income taxes to provide 64% of its receipts. The FY10 budgeted receipts are as follows:
Individual Income Tax $1.051 trillion
Corporate Income Tax $ 179 billion
Social Insurance $ 257 billion
Highway Taxes $ 38 billion
Tobacco & Alcohol Taxes $ 28 billion
Customs & Duties $ 24 billion
Estate Taxes $ 20 billion
Other Excise Taxes $ 52 billion
TOTAL RECEIPTS $1.649 trillion
· The 7,500 page Internal Revenue Code has been written to benefit politicians and special interests that pay politicians. This is how politicians repay their financial backers with tax breaks or deductions. The tax code is purposely indecipherable so that the general public is unable to recognize the payoffs for what they are. If the current tax code was scrapped and made so simple a Treasury Secretary could do their tax return properly, influence would be stripped from Congress. They will never willingly consent to this. The truth is that the top 1% of income earners pays 40% of the taxes. The top 10% of income earners pay 71% of all taxes. The bottom 50% of income earners pays virtually no taxes. Still, the rich and powerful are able to hire highly paid tax attorneys to avoid billions in taxes through loopholes provided by their Congressional concubines.
My proposal to reconstitute our corrupt tax system is a flat tax of 10% on all earned income. There would be absolutely no deductions or credits. Interest, dividends, and capital gains would not be taxed. Savings and investment should not be discouraged. Corporate income taxes would be eliminated. Taxes on corporations are just passed through to customers in higher prices. The biggest change to our tax system would be the implementation of a 15% Value Added Tax on all consumption, excluding food and clothing. Overconsumption is what got us into this predicament. It can help get us out of it. The simplicity of my system would make politicians, tax accountants, and special interest groups foam at the mouth like rabid dogs. Based on figures supplied by the Bureau of Economic Analysis, government receipts would be:
Flat Tax Receipts ($6.3 trillion x 10%) $ 630 billion
Value Added Tax Receipts ($9 trillion x 15%) $1.350 trillion
Social Insurance & Excise Taxes $ 320 billion
TOTAL RECEIPTS $2.300 trillion
Politicians wield immense amounts of power through the use of tax goodies. There is absolutely no reason for this complex system other than to pay back constituents and lobbyists for their votes and contributions. Simplicity would destroy their power base and shift control back to the people.
Don’t Cut My Program
"All initiation of force is a violation of someone else's rights, whether initiated by an individual or the state, for the benefit of an individual or group of individuals, even if it's supposed to be for the benefit of another individual or group of individuals.”
Ron Paul
The FY 2010 Federal Budget projects spending of $3.6 trillion. According to the sages that control the government purse strings, $1.4 trillion of this spending is discretionary, while $2.2 trillion is considered mandatory. In FY 2000 total government spending was under $1.9 trillion. Government expenditures have risen 89% in ten years. Over this same time frame receipts have risen 7%. That certainly sounds sustainable. Government spending needs to be slashed with a machete. If we can cut spending back to the levels of 2000, we can achieve a balanced budget. Once the initial slashing of the budget is complete, reinstitution of PAYGO rules would be essential. Politicians cannot be trusted to do what is right for the country. These rules would force them to cut other expenditures in order to institute new spending. The other absolute necessity would be the reinstitution of a sound money policy. A currency backed by a combination of limited metals such as gold, silver, platinum, and palladium would restrict politicians from reckless spending. The Federal Reserve has proven to be a political animal and has destroyed the value of the dollar. They cannot be trusted to act in the best interests of the people.
As far as I’m concerned, the term Mandatory means nothing. Politicians promised people benefits they could never deliver in order to get elected. It is time for a reality check. You will not receive the Social Security, Medicare, and Medicaid benefits you were promised. Al Gore was lying to you. There is no lockbox. The immoral politicians who skulk about the halls of Congress have already spent the Social Security funds that were supposed to be in a lockbox. The sooner Americans learn the truth about these programs, the sooner we can get this country back on a sound fiscal course. The FY 2010 Budget shows that the $3.5 trillion is spread around like Obama stash. We only need to slash the budget by $1.2 trillion in order to balance the Federal books. Do you think a few special interests, neo-cons, socialists, senior citizens, do-gooders, and welfare beneficiaries will be upset?
The major expenditures in the FY 2010 budget are as follows:
National Defense Related $822 billion
Social Security $696 billion
Medicare $458 billion
Medicaid $290 billion
Welfare Payments $153 billion
Social Tax Credits $141 billion
Federal Retirement Benefits $128 billion
Education $105 billion
Transportation $104 billion
Unemployment $ 89 billion
Health $ 67 billion
Housing $ 58 billion
International Affairs $ 53 billion
Justice $ 52 billion
Other $399 billion
TOTAL EXPENDITURES $3.615 trillion
In order to balance the budget, America’s far flung empire must be reined in. Overreach has previously bankrupted the Roman Empire and the British Empire. We need to recall the troops from Germany, Japan and every other outpost on the planet. We need to declare victory in Iraq and Afghanistan and withdraw our troops. The military industrial complex must be dismantled. We have enough bombs, fighter jets, bombers, submarines and aircraft carriers to blow up the earth three times over. The military will need to pick the essentials, as their budgets are slashed. Efficiency will be a blessing. These changes would cut $300 billion from the budget and put Defense spending all the way back to 2002 levels.
Social Security was created so that widows and orphans would not starve to death during the Great Depression. It morphed into an entitlement over the decades. The government cannot payout the amount it has committed. Either the tax rate needs to be increased from 6.2% to 8.2% or benefits need to be slashed. My choice is to slash benefits. Immediate means testing based on net worth should be implemented. Anyone over a reasonable threshold would not receive Social Security. The minimum age to receive benefits should be increased to 70 years old and increasing over time. Anyone less than 50 years old would have half their contributions go into their own self managed investment account. They would receive reduced benefits at retirement. New employees into the workforce would not receive any benefits at retirement. Their investment account would be their sole government pension. These changes would immediately save $250 billion per year and save trillions in the future.
Both Democrats and Republicans have harped on the fraud in waste in the Medicare and Medicaid programs. For once, they are right. Fraud, waste, defensive medicine, malpractice lawsuits, and lack of competition combine to cost $400 billion per year in unnecessary expenditures. Instead of adding a new healthcare entitlement to an already bankrupt system, we need to fix the existing system. Medicare needs to be completely reconstituted. It also needs to be means tested. If you can afford your own insurance, you don’t go on Medicare.
The insurance portion should only be for catastrophic illness. Each Medicare recipient should receive a fixed amount of funds in a health savings account to use for their basic medical needs. All doctors and hospitals would be required to publish their rates for service, tests, and procedures. Laser eye surgery has not been covered by medical insurance and doctors have had to compete on price and quality. Prices have come down dramatically over time. By limiting malpractice awards, allowing competition across state lines, actually stopping fraud and introducing price competition, we can ring $400 billion out of these costs. Instead, the government will criminalize not having medical insurance.
“The only power any government has is the power to crack down on criminals. Well, when there aren't enough criminals, one makes them. One declares so many things to be a crime that it becomes impossible for men to live without breaking laws.”
Ayn Rand
The various tax credits would be eliminated with the new simple tax system. This would eliminate $141 billion of expenditures. The remaining $1.2 trillion of expenditures would need to be cut by 10% in order to save another $120 billion. The cumulative savings would be $1.2 trillion and the Federal Budget would be in balance. Virtually no one in this country would vote for anyone proposing such drastic changes. The implementation of these cuts would surely result in a deep recession. It would be a chosen path back to reality. It would be a courageous and noble act of adults taking the bitter medicine today so that our children and grandchildren will have a tomorrow. I have no hope that anyone in government today would be willing to tell the American public the bitter truth about our economic future and propose anything close to what I have proposed. This leads me to the logical conclusion that we will continue on the current path until our empire collapses under the weight of debt, political corruption and grand illusions. |
