Friday, March 8, 2013

What, really, could correct the US debt?

Pointing fingers and trying to assess blame is a waste of time and resources. The top priority for US debt reduction must focus on how to achieve more revenue and fewer expenditures
Pointing Fingers don't assess blame
First, citizens have to take responsibility for correcting the problem and demand that their representatives honor the people's priorities rather than special interests. Congress must give up their corporate subsidies and pass legislation that makes corporations merely businesses with no special standing as court-interpretted pseudo-people. The legislation should remove corporations from election financing and prohibit self-serving lobbying for their special benefit. Educational lobbying might continue with the proviso that any profits attributable to the lobbying effort would be taxed at a higher rate.
Cartoon: Corporation FatCats & WallStreet Pigs manipulating politician
On the income side, we need to address corporate obligations to the government. Businesses benefit from the government's education and infrastructure expenditures among many other programs that ensure a healthy business environment for the country. Not only must corporations pay their fair share to support our nation with a fair and equitable tax rate on their gross income but they must also be held accountable for their actions. There can be no future payments of government funds (that is income from us taxpayers) to corporations that did a bad job and lost money, that fired US workers to ship jobs overseas, that created crises in the economy. Congress often retrospectively changes the rules on Medicare and modifies the terms of the Social Security system. It could also retrospectively change its mind about the payments made to support corporations that made these bad decisions. We need to rescind the bailouts paid under duress and convert those payments into debt, demanding they be repaid, with interest as a cost of being helped to stay in business. Congress must also repeal all other corporate subsidies and if warranted replace them with interest-bearing debt obligations.
graph chart showing % at various income levels who are paying taxes
The second thing that must happen is to shore up the income tax code to also ensure that every citizen contributes a fair share for their support of our nation. This can be done simply: Charge the same percent in income tax (on all income, without exemptions, deductions, or any other adjustments) to everyone in multi-earner households grossing more than $50,000 and single adult-earner households grossing more than $30,000. (According to Wikipedia, in 2012, the national median household income was $44,389; in 2006, the median individual income was $23,535; in 2010, 45% of individuals earned less than $25,000.) For those earning less than the minimum, their share would be provided through hours of service to the nation.

For a simple example: Imagine the flat tax rate is 10% and the service equivalency is calculated at the rate of $10/hour. Then each adult earning less than the minimum would owe the government a minimum of 300 hours of work per year; this can be as little as 6 hours per week in addition to their normal hours of documented work, and if they are working less than 40 hours per week, the individual could be obligated to either provide double those hours (to 600 total) or submit evidence of 300 hours of training for future employment, and those unemployed but receiving government subsidies (welfare or aid to dependent children, for example) would be required to provide a service equivalent and training totaling 40 hours per week. Even unskilled or elderly individuals could provide childcare under government-approved supervision, though certainly those with documented physical and mental debility would of course be exempted. The service equivalency requirement would provide an incentive to those who are earning less than the minimum to increase their skills. Ultimately, the welfare expenditures would begin to decrease as those who earn less than the minimum are incentivized to increase their employment income. 
cartoon: retrospective approval of prior-year budgets
Once we are underway to solve the income problem, we can address the expenditure side. Last minute duress-induced cliff-hanging decisions are an ineffective way to reach reasonable resolutions of fiscal issues. To ensure duress measures aren't the choice of political resort, citizens must demand that the financially viable budget be set with a one-month lead before the fiscal year ends. To achieve this, there must be safeguards:

First, legislation must be enacted to ensure that all budget bills shall be presented and voted upon no later than ONE FULL MONTH before any budgetary deadline. Further, to ensure timely budget completion without game-playing, citizens must demand that, should the one-month deadline be missed, the full Congress shall meet continuously without stopping until the budget work is completed and voted into approval.

Second, a Line Item Veto program should be enacted. Every line item selected for veto would then be reviewed by an impartial citizen panel which may either concur with the veto or refer it, with specific questions and/or adjustment recommendations, to a special joint Congressional compromise committee for adjustment and resolution.

Third, legislation must be enacted to ensure that budgeted expenditures do not exceed income. This balanced budget requirement will undoubtedly mean some expenditures must be cut. To ensure that this is effectively evaluated, every program, including all defense and black ops agency expenditures must present open accounting of their use of taxpayer funds. No agency expenditures for one project or program would be funded under a different project or program. All the budget centers would be divided into three portions:
1) essential government spending,
2) discretionary projects and programs, and
3) special interest funding. 
The former essential spending would have priority processing in advance of the other two portions; special interest funding would optionally be considered after the formal two portions are approved; a full merit justification would be required for the latter two portions and a further independent review for special interest funding requests. Competitive bidding on all approved funding projects and programs would also be required unless the independent panel determined that to be unfeasible.

It's past time for wiser choices like these to prevail in Washington DC. Clearly, these are simple structural measures that could streamline the US budget process and enable fiscally conservative consideration of debt reduction measures. Maybe it's time for We the Real Constituents to call on Congress to crowdsource a truly workable solution.
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