How to balance the massive U.S. federal government budget.

First of all, if you’re not certain why we should even try to balance the Federal Budget, you may find a previous artical of mine helpful.

After a couple of temporary funding bills, Congress has finally passed a budget to keep the government running for the rest of the fiscal year (about 6 months).  This was an important housekeeping measure that had been put off way too many times already by the previous Democrat controlled congress, but was still difficult for the Republicans to do, and get the spending cuts they wanted, because of the control the Democrats still have in the Senate, and White House.  While it’s hopeful they can now get down to taking care of other important business, it’s appalling to think they are calling this a success, when they only cut $38 Billion.  This is about 1% of the Federal Government’s budget for this year that was expected to be 3,818.8 Billion Dollars.

To put this into perspective, imagine if I asked to you put together a big and very important event for me and my kids, which is going to cost $3,818.80.  However, I really only have $2,173.70, but I promise that my kids will pay you the difference when they get old enough to have jobs.  To take some of this burden off of my kids I finally agree to cut $100.00 worth of the items I want for the party, but when it comes down to it, I can only agree on cutting a few things that amount to a measly, $38.00.  This leaves my kids responsible for paying you back, with interest (on a variable rate), the remaining amount of $1,607.10.  Of course I’ll cover just the interest portion for now (but at the lowest rates in history).  O, and this is going to continue to happen on an annual basis, and likely be more expensive each year.
Does this sound like a good deal for my kids?  I don’t think so, but if you take these numbers and multiple them by a million, you essentially get the same amounts in a spending bill that Congress finally agreed to.  Hopefully it also gives you an idea of why it’s important for us to do more to balance the budget as soon as possible.  So how do we do it?  Do we cut more, and leave behind “essential” social services like housing for the poor, health care and Social Security, or cut defense and let al-Qaeda and blood thirsty dictators run rampant around the world? Do we tax the richest of the rich of all their wealth, giving us not quite enough to balance the budget for almost a year, but taking all the wealth out of our economy in the process?

Before we know what we can do, we’ve got to know where we are, so here’s how it breaks down:

• 36.1% for Social Services (Welfare, Health Care, etc. – and with an aging population this is expected to grow substantially over the next few decades).
• 25.2% for Defense (I sure hope the Iraqi’s, and revolutionaries Libyans – if any of them survive – appreciate this because the Afganistans sure don’t seem to be).
• 20.8% for Pensions – the vast majority of which is for Social Security (more money for the aging population, which is also expected to grow substantially very soon, and because of the recession is already, sooner than expected, paying out more than it takes in from taxes).
• 5.4% just to pay the interest on the Federal Debt (our kids and grandkids, one way or another, will get to pay the actual principle for us).
• 3.4% for the Department of Education to force our States into teaching revisionist history, alternative lifestyles, and bog down our schools with bureaucracy.
• 2.5% to repair a few of our broken bridges, and prop-up unprofitable train and mass-transit projects.
• 6.6% left to cover all the other expenses of running a massive government empire.

So which one do we cut?  I say all of them, about a quarter to a third each, with one exception:

• Reduction in Social Services is the one I would focus on the most, as I’m not sure any of it should even been a Federal responsibility; rather, constitutionally speaking (see the 10^th amendment) it should be a State and local issue. Let’s phase out “The Projects” that only further encourage the poor to continue in their poor lifestyles, and get real about Health Care reform that actually reduces costs (not the Obama Care scam that will actually increase costs).
• Strategic reduction in Defense.  Let’s do what Bush wanted to do and get the Iraqi’s to provide our military with all its oil needs for the next decade or so.  Tell the UN and NATO that they are going to have to pick up a much bigger portion of the bill as we cannot do it anymore.  Finally, stop getting involved in undeclared wars, as we seem to have been doing ever since WW II ended.  If we’re going to go to war, let’s do it right and get everyone behind it via a straight forward well-defined congressional resolution.
• Reduction in “Pensions”.  Tell those Social Security recipients who don’t really need it, that they aren’t going to be getting it much longer.  Tell the Baby Boomers who are about to get it that they may not get as much as we had hoped they would, and those of us who are paying into it now, that we are really just making sure we don’t have a bunch of retirees out on the stress with more forecloses on the market, but that when it come to be our turn, we have better have gotten something else figured out because we aren’t likely to get any.
• About the only thing we can do on the interest payments is to pay down the balance, and make sure interest rates don’t go through the roof (even though they likely will); however if we can’t do that if we can’t even balance the budget to start with.
• Eliminate the Department of Education, and do the constitutionally correct thing in allowing the individual states to deal with Education on their own; with some basic standards and guidance provided by congress based on already established University Accreditation Standards.
• Sell off the U.S. Held Amtrak stocks (and any other held stocks, including GM’s), stop funding it, and tell the States they are on their own for maintaining their own infrastructure.  The fraction of what’s left can be used to maintain the interstate highways, and “Post Roads” as the constitution puts it.
• As for what’s left, see my next suggestion:

So where does the rest of the money we need to balance the budget come from?  25-33% isn’t enough to make up the 42% budget deficit. The solution should be one of the simplest of them all: Tax reform.  When addressing a budgeting shortfall, weather in your personal life or in government, cutting expenditures is really only one side of a two headed coin.  If we can increase our income, we can make it much easier to afford the things we need, while paying off the debts we owe.
By “simpliest” I mean we need to simplify our tax code, so we can lay-off 70% of the IRS since it will be so simple for everyone to do their taxes, doing audits, refunds and payments will be much easier (and could be compleatly automated). This of course would also help reduce the cost of enforcing our current tax code that is so complex that we in all reality don’t have an easy way to enforce it.  We need to make sure everyone is paying their fair share of taxes to insure we are all getting important and essential services from the government.  My suggestion is that we all get put into the same % bracket for how much taxes we pay (say 15-20% of our total income – including inheritance, retirement, investments, capital gains, etc.), and we also all get access to the same standard deductions that everyone else does: like the first $20,000 we make being tax free, deductions for having kids, the interest on the first mortgage of our primary residence (not for investment or vacation properties), and don’t forget charitable contributions to non-profit organizations; which we’ll need more of as we cut government sponsored Social Services, and get more of with a simplified tax code.
I believe this would cause the richest of the rich to start paying more in taxes, and help the poorest of the poor from needing to pay any taxes at all.  The net affect being increased revenue and large reductions in the time and costs for individuals, businesses, and cooperation’s to file their taxes; while at the same time reducing the cost for the government to processes those same taxes.